As filed with the Securities and Exchange Commission on May 16, 2011
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THE GYMBOREE CORPORATION
(Exact name of registrant as specified in its charter)
See Schedule A for additional registrants
Delaware | 2300 | 94-2615258 | ||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
500 Howard Street
San Francisco, California 94105
(415) 278-7000
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Matthew K. McCauley
Chief Executive Officer
The Gymboree Corporation
500 Howard Street
San Francisco, California 94105
(415) 278-7000
(Name, address, including zip code, and telephone number, including area code, of agent for service)
With a copy to:
Kimberly Holtz MacMillan The Gymboree Corporation (415) 278-7228 |
Joel F. Freedman, Esq. (617) 951-7309 |
Howard S. Glazer, Esq. (415) 315-2347 |
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effective date of this registration statement.
If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ¨
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. ¨
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. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||||||
Non-accelerated filer | x | (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ¨
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ¨
CALCULATION OF REGISTRATION FEE
Title of each class of securities to be registered |
Amount to be registered |
Proposed maximum offering price per unit |
Proposed maximum aggregate offering price (1) |
Amount of registration fee | ||||
9.125% Senior Notes due 2018 |
400,000,000 | 100% | 400,000,000 | $46,440 | ||||
Guarantees of 9.125% Senior Notes due 2018(2) |
(3) | (3) | (3) | (3) | ||||
(1) | Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(f) under the Securities Act of 1933, as amended (the Securities Act). |
(2) | See Schedule A on the inside facing page for table of additional registrant guarantors. |
(3) | Pursuant to Rule 457(n) under the Securities Act, no separate fee is payable for the registration of the guarantees. |
The registrants hereby amend this registration statement on such date or dates as may be necessary to delay its effective date until the registrants shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) under the Securities Act, or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
SCHEDULE AADDITIONAL REGISTRANT GUARANTORS
Exact Name of Registrant as |
State or Other |
Primary Standard Industrial Classification Code Number |
I.R.S. Employer Identification Number |
Address, including Zip Code and | ||||
Gymboree Manufacturing, Inc. | California | 2300 | 94-3206464 | 500 Howard Street, San Francisco, CA 94105 (415)-278-7000 | ||||
Gym-Mark, Inc. | California | 2300 | 94-3206459 | 500 Howard Street, San Francisco, CA 94105 (415)-278-7000 | ||||
Gymboree Operations, Inc. | California | 2300 | 94-3206463 | 500 Howard Street, San Francisco, CA 94105 (415)-278-7000 | ||||
Gymboree Play Programs, Inc. | California | 2300 | 94-3206460 | 500 Howard Street, San Francisco, CA 94105 (415)-278-7000 | ||||
Gymboree Retail Stores, Inc. | California | 2300 | 94-3206461 | 500 Howard Street, San Francisco, CA 94105 (415)-278-7000 | ||||
S.C.C. Wholesale, Inc. | California | 2300 | 27-3336588 | 500 Howard Street, San Francisco, CA 94105 (415)-278-7000 | ||||
Gym-Card, LLC | Virginia | 2300 | 26-3845720 | 500 Howard Street, San Francisco, CA 94105 (415)-278-7000 |
The information in this preliminary prospectus is not complete and may be changed. We may not exchange these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to exchange these securities, and is not soliciting an offer to exchange these securities, in any jurisdiction where the exchange is not permitted.
PROSPECTUS |
Subject to Completion, Dated May 16, 2011 |
The Gymboree Corporation
Exchange Offer
for
9.125% Senior Notes due 2018
We are offering to exchange $400,000,000 in aggregate principal amount of our 9.125% Senior Notes due 2018 registered under the Securities Act of 1933, as amended (the Securities Act), for $400,000,000 in aggregate principal amount of our existing issued and outstanding 9.125% Senior Notes due 2018. In this prospectus, the term exchange notes refers to our 9.125% Senior Notes due 2018 offered hereby, and the term existing notes refers to our existing issued and outstanding 9.125% Senior Notes due 2018 that we issued on November 23, 2010.
| The terms of the exchange notes are substantially identical to those of the existing notes, except that the transfer restrictions and registration rights relating to the existing notes will not apply to the exchange notes, and the exchange notes will not provide for the payment of additional interest in the event of a registration default. |
| The exchange offer expires at 5:00 p.m., New York City time, on , 2011, unless extended. |
| Subject to the satisfaction or waiver of specified conditions, we will exchange your validly tendered unregistered existing notes that have not been withdrawn prior to the expiration of the exchange offer for an equal principal amount of exchange notes that have been registered under the Securities Act. |
| You may withdraw your tender of the notes at any time before the exchange offer expires. |
| We will not receive any proceeds from the exchange offer. |
| The exchange notes will not be traded on any national securities exchange or automated quotation system. |
See Risk Factors beginning on page 18 of this prospectus for a discussion of risks that you should consider carefully before participating in the exchange offer.
Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. The letter of transmittal relating to the exchange offer states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the Securities Act. This prospectus, as amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for existing notes that were acquired by such broker-dealer as a result of market-making or other trading activities. We have agreed that for a period of up to 180 days after the expiration of the exchange offer, we will make this prospectus available to broker-dealers for use in connection with any such resales.
Neither the Securities and Exchange Commission (SEC) nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2011.
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F-1 |
This prospectus is part of a registration statement that we have filed with the SEC. This prospectus does not contain all of the information included in the registration statement. The registration statement filed with the SEC includes exhibits that provide more details about the matters discussed in this prospectus. You should carefully read this prospectus, the related exhibits filed with the SEC, any prospectus supplement and any documents incorporated by reference into this prospectus or any such prospectus supplement. Statements contained in this prospectus concerning the provisions of any document filed as an exhibit to the registration statement are not necessarily complete and, in each instance, reference is made to the copy of such document filed as an exhibit to the registration statement or otherwise filed with the SEC. Each such statement is qualified in its entirety by such reference.
This prospectus incorporates important business and financial information about us that is not included or delivered with this prospectus. This information is available without charge to security holders upon written or oral request. Requests for copies should be directed to The Gymboree Corporation, 500 Howard Street, San Francisco, CA 94105, Attention: Investor Relations, Telephone: (415) 278-7000. To obtain timely delivery, security holders must request the information no later than five business days before , 2011, the date they must make their investment decision.
You should rely only on the information contained in or incorporated by reference into this prospectus and any accompanying prospectus supplement. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. You should assume that the information appearing in this prospectus, any prospectus supplement and any other document incorporated by reference is accurate only as of the date on the front cover of those documents. We do not imply that there has been no change in the information contained in this prospectus or in our affairs since that date by delivering this prospectus.
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. You can identify forward-looking statements because they contain words such as believe, expect, may, will, should, could, seek, intend, plan, estimate, or anticipate or similar expressions that concern our strategy, plans or intentions. All statements we make relating to: future sales, costs and expenses and gross profit percentages; the continuation of historical trends; our ability to operate our business under our capital and operating structure; and the sufficiency of our cash balances and cash generated from operating and financing activities for future liquidity and capital resource needs are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we had expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.
Important factors that could cause actual results to differ materially from our expectations (cautionary statements) are disclosed under Risk Factors and elsewhere in this prospectus including, without limitation, in conjunction with the forward-looking statements included in this prospectus. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some of the factors that we believe could affect our results include:
| our substantial indebtedness and potential additional future indebtedness; |
| restrictions in our debt agreements that limit our flexibility in operating our business; |
| our ability to generate cash to service our indebtedness; |
| general economic conditions; |
| decline in our sales and earnings; |
| the impact of consumer product safety laws, regulations or related legal actions; |
| our ability to anticipate and timely respond to changes in trends and consumer preferences; |
| competitive market conditions; |
| our ability to attract and retain key personnel and other qualified team members; |
| additional U.S. regulation of foreign trade or delays caused by additional U.S. customs requirements; |
| increased production and commodity costs (including cotton prices) and labor costs; |
| interruption in the operation of our distribution facility; |
| negative publicity or liability arising from our manufacturers violations of labor laws or unethical conduct; |
| the loss of a key buying agent; |
| third parties failure to provide services to us; |
| damage to our computer systems; |
| security breaches of our databases containing customer or other personal information; |
| our ability to implement new information technology systems; |
| success in meeting merchandise delivery targets; |
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| disruptions to our online businesses; |
| our ability to expand internationally and the effect of franchising and similar arrangements; |
| our ability to locate new stores and relocate existing stores; |
| our ability to protect our intellectual property rights; |
| the impact of litigation on our business; |
| fluctuations in our tax obligations and effective tax rate; |
| changes in seasonal consumer spending patterns; |
| our ability to successfully open new stores; |
| customer traffic in shopping malls; |
| our ability to acquire and successfully integrate businesses into our organization; and |
| other factors as set forth in this prospectus, particularly in Risk Factors. |
We refer to more detailed descriptions of these and other risks and uncertainties in the section entitled Risk Factors below. We encourage you to read those descriptions carefully. We caution investors not to place substantial reliance on the forward-looking statements contained in this prospectus. These statements, like all statements in this prospectus, speak only as of the date of this prospectus (unless another date is indicated), and we undertake no obligation to update or revise the statements in light of future developments, except as otherwise required by law.
NOTE REGARDING TRADEMARKS AND SERVICE MARKS
In the United States, we are the owner of a number of trademarks and service marks, including the trademarks and service marks Gymboree, Janie and Jack, Crazy 8 and Gymboree Play & Music, and the trademarks Gymbo and Gymbucks. The mark Gymboree is also registered, or is the subject of pending applications, in approximately 95 foreign countries. All other trademarks or service marks appearing in this prospectus that are not identified as marks owned by us are the property of their respective owners.
Industry and market data, including all market share data, used throughout this prospectus was obtained from our own research and estimates and certain independent third-party sources. While we believe our internal estimates and third-party information are reliable and market definitions are appropriate, they have not been verified by any other independent sources and neither we nor the initial purchasers of the existing notes make any representations as to the accuracy or completeness of such estimates and information.
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This summary provides an overview of selected information and does not contain all the information you should consider. Before making a decision whether to participate in the exchange offer and to invest in the exchange notes, you should carefully read the entire prospectus, including the section entitled Risk Factors and the financial data starting on page F-1 of this prospectus. As part of the transactions described below under The Transactions, on November 23, 2010 Giraffe Acquisition Corporation merged with and into The Gymboree Corporation, with The Gymboree Corporation as the surviving corporation, which we refer to in this prospectus as the Acquisition.
In this prospectus, the terms we, us, our, Gymboree and Company refer to The Gymboree Corporation, the subsidiary guarantors and its other subsidiaries, unless expressly stated otherwise or the context otherwise requires, in particular, with respect to the historical financial information of The Gymboree Corporation, and the term Issuer refers to The Gymboree Corporation only, unless expressly stated otherwise or the context otherwise requires. The term Holding refers to Giraffe Holding, Inc., our indirect parent company. Unless we indicate otherwise or the context otherwise requires, information identified in this prospectus as pro forma gives effect to the consummation of the Transactions, as described under The Transactions, as if they had occurred on January 31, 2010. References in this prospectus to years are to our fiscal years, which end on the Saturday closest to January 31. Fiscal 2010, fiscal 2009 and fiscal 2008, which included 52 weeks, ended on January 29, 2011, January 30, 2010 and January 31, 2009, respectively.
Operating results for the year ended January 29, 2011 were calculated as the mathematical addition of our operating results for the predecessor period from January 31, 2010 to November 22, 2010 and the successor period from November 23, 2010 to January 29, 2011. As a result of the Acquisition on November 23, 2010 and the application of purchase accounting, a new basis of accounting began on November 23, 2010. This addition of the predecessor and successor amounts is not consistent with GAAP and may yield results that are not strictly comparable on a period-to-period basis due to the changes of accounting basis during these periods.
Our Company
We are one of the largest childrens apparel specialty retailers in North America, offering collections of high-quality apparel and accessories. We have an internationally recognized brand with a highly loyal customer base. We believe our customer loyalty and brand strength are the foundation of a business model that has generated consistent cash flows and strong performance across economic cycles over the past five years.
Our vision is to reach every mom in America and moms around the world with branded assortments of wholesome, age-appropriate products made for children. To achieve this vision, we have developed the following retail brands: Gymboree, Janie and Jack and Crazy 8. We operate retail stores in the United States, Puerto Rico, Canada and Australia, primarily in regional shopping malls and in selected suburban and urban locations. In addition, as of January 29, 2011, a franchisee operated two stores in Dubai, UAE that opened in the third quarter of fiscal 2010. We also operate three online stores at www.gymboree.com, www.janieandjack.com and www.crazy8.com. Additionally, we offer play programs for children under our fourth brand, Gymboree Play & Music, both in the United States and abroad.
Gymboree: Gymboree stores offer fashionable, age-appropriate apparel and accessories for boys and girls characterized by mix and match colors, patterns and graphics, complex embellishments, comfort, functionality and durability in sizes newborn through 12. Gymboree Outlet stores provide similar high-quality mix-and-match childrens apparel and accessories in the same size ranges but at outlet prices. As of January 29, 2011, we operated 785 Gymboree stores (including 150 Gymboree Outlet stores), consisting of 743 stores (including 149 Gymboree Outlet stores) in the United States, 37 stores in Canada, three stores in Puerto Rico (including one
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Gymboree Outlet store) and two stores in Australia, as well as an online store at www.gymboree.com. In addition, as of January 29, 2011, a franchisee operated two Gymboree stores in Dubai, UAE that opened in the third quarter of fiscal 2010.
Janie and Jack: Janie and Jack shops offer distinctive, finely crafted clothing and accessories for boys and girls in sizes newborn through 12. Lush fabrics, a hand-made quality and details such as hand-embroidery, smocking and vintage prints are utilized to create classic looks. Shops have a European style reminiscent of a small Parisian boutique. As of January 29, 2011, we operated 123 Janie and Jack shops in the United States, including six Janie and Jack outlets, as well as an online shop at www.janieandjack.com.
Crazy 8: Crazy 8 stores provide wholesome age-appropriate fashion for boys and girls at price points approximately 25% to 30% lower than Gymboree. Through merchandise design, product presentation, store environment, customer service and packaging, Crazy 8 stores reflect an upscale store experience at value prices. Crazy 8 apparel is offered in sizes newborn through 14 and is intended to address a broader customer base than Gymboree. As of January 29, 2011, we operated 157 Crazy 8 stores in the United States, as well as an online store at www.crazy8.com.
Gymboree Play & Music: Gymboree Play & Music offers children ages newborn through five the opportunity to explore, learn and play in an innovative parent-child program. Gymboree Play & Music offers an array of classes developed by early childhood experts as well as birthday parties and developmental toys, books and music. As of January 29, 2011, Gymboree Play & Music programs were offered at 222 franchised and Company-operated Gymboree Play & Music centers in the United States and 466 franchised Gymboree Play & Music centers in 36 other countries.
Our online stores at www.gymboree.com, www.janieandjack.com and www.crazy8.com offer the entire Gymboree, Janie and Jack and Crazy 8 product offerings, respectively. We fully integrate online stores with retail stores by offering the same products, pricing and promotions. We also have a Save the Sale policy, whereby retail stores order merchandise for customers from the online stores. In addition, customers may return merchandise purchased online at traditional retail stores and vice versa.
The majority of our apparel is manufactured to our specifications by over 300 independent manufacturers located primarily in Asia (principally China (41%), Indonesia (16%), Thailand (10%), India (8%) and Bangladesh (8%) for the fiscal year ended January 29, 2011). We purchase all products in U.S. dollars. One buying agent manages a substantial portion of our inventory purchases (approximately 80% for the fiscal year ended January 29, 2011). We have no long-term contracts with suppliers and typically transact business on an order-by-order basis. Our factories undergo annual audits for social accountability by an independent third party. In addition, all products undergo a quality audit performed by independent third parties.
Industry Overview
For the year ended December 31, 2009, personal expenditures in the U.S. apparel market reached $264 billion according to the U.S. Bureau of Economic Analysis (BEA). We believe that the U.S. children and infants apparel market amounted to an attractive $34 billion segment of the $264 billion U.S. apparel market in 2009. Childrens apparel consists of clothing, excluding footwear, sold to consumers for children and infants. Clothing is primarily sold via retailers at shopping malls, department stores, independent clothing stores and online. According to the BEA, the children and infants clothing segment of the apparel market has grown at a 4.5% CAGR from 1980 to 2009. This sub-segment has also been resilient during challenging economic periods. According to the BEA, the children and infants segment has experienced negative growth in only two years from 1980 to 2009 and, despite the recession, grew at a CAGR of 1.7% from 2004 to 2009.
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We believe that the children and infants apparel market is attractive for several reasons. First, the childrens market has been stable through multiple economic cycles, which we believe is due to parents reluctance to reduce spending on their children, shorter replacement cycles (children continue to grow) and lower cost per item than adult apparel. Second, the growth of the market is supported by stable demographic trends, such as new births. The U.S. Census Bureau forecasts the population of children ages newborn to eight to grow at a CAGR of 0.9% from 2010 to 2015, which is similar to the 1.0% CAGR from 2005 to 2010. Third, we believe childrens apparel is less dependent on fashion trends than adult apparel, which mitigates the risk of dramatic market share changes over a short period of time.
Competitive Strengths
Well-Established Gymboree Brand with a Highly Loyal Customer Base. The Company has developed a widely recognized brand that we believe inspires trust and fosters loyalty in our customers, who look to Gymboree to provide high-quality, age-appropriate fashion for their children. The Gymboree brand was first established in 1976 with the founding of Gymboree Play & Music, which had 688 locations in 37 countries as of January 29, 2011. Gymborees apparel business was launched in 1986 to take advantage of the strength of the Gymboree brand and has grown to be one of the largest childrens apparel specialty retailers in North America. We believe we have a highly loyal customer base. For example, when customers were asked how likely they are to recommend a retailer to a friend purchasing childrens apparel, Gymborees customers were significantly more inclined to recommend Gymborees brands and stores than those of its competitors.
Healthy and Predictable Operating Cash Flows. The Company has delivered consistently growing net sales and cash flow from operations over the past five years despite challenging economic conditions. From fiscal 2005 to fiscal 2010, the Company increased cash flow from operations from $97 million to $112 million (a CAGR of 3%) and increased net sales from $667 million to $1.1 billion (a CAGR of 10%). We believe we have multiple operational and financial alternatives, including reducing payroll costs, inventory management, lease renegotiations and the short-term cessation of store renovation and new store expansion, that would enhance our ability to maintain consistent cash flow, even through periods of prolonged economic weakness.
Compelling, Differentiated Competitive Position. We believe our three-tier brand strategy is unique among childrens apparel specialty retailers and provides us with a broad demographic reach, appealing to customers at a range of different price points (value, better, best). Our designs focus on collections of coordinated outfits and accessories centered on wholesome, classic childrens themes. Our product lines are designed by experienced in-house design teams focused on childrens apparel, which enables us to create original, unique and age-appropriate fashions. The Gymboree brand offers approximately 24 different merchandise collections annually (or approximately two new sets every month), compared to the approximately eight to ten collections per year we believe are typically offered by other childrens apparel specialty retailers. With many Gymboree collections featuring over 100 distinct matching pieces, we believe our collections are broader than those of our competitors. We believe this wide range of products and styles differentiates us in the apparel industry and also helps to limit our exposure to any single line or collection, reducing the risk associated with excess inventory.
Robust and Durable Business Model. All of our concepts have attractive 4-wall economics. Stores perform consistently across brands with a very limited number of low 4-wall contribution stores. The Company has demonstrated strong performance across economic cycles over the past five years. From fiscal 2005 to fiscal 2010, Gymboree increased net sales by a 10% CAGR. Comparable store net sales grew at an average rate of 3% annually from fiscal 2005 to fiscal 2010. Gymboree also performed well during the recent economic downturn. The Companys comparable store net sales declined 4% and 2% during fiscal 2009 and fiscal 2010, respectively, which we believe was less than the average decline experienced by our retail apparel peers.
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Crazy 8 is a Proven Concept Achieving Compelling Economics. We have developed the Crazy 8 concept to reach the larger value-conscious segment of the children and infants apparel market. The concept adapts our approach to collections at a lower price point, in a space that is primarily dominated by retailers focusing on key items, adult dress-down or trendy designs. As of January 29, 2011 we operated 157 Crazy 8 stores, and we estimate the ultimate opportunity for the Crazy 8 concept at approximately 800 stores, assuming our current roll out plan continues to be successful. Crazy 8 stores are generating attractive 4-wall economics at a level slightly below our other concepts. Stores opened in fiscal 2009 and fiscal 2010 have generally been among the concepts strongest performers, as we continue to improve and refine the model. The concept also allows us to further leverage our existing, largely fixed corporate overhead. New Crazy 8 store openings require upfront investment in line with Gymboree brand stores.
Experienced and Dedicated Management Team. Our management team has extensive experience in the retail industry and has navigated the Company through a challenging economic period with industry-leading financial results. The management team is led by Matthew McCauley, who has served as CEO since 2006. Mr. McCauley joined Gymboree in 2001 as Director of Allocation and was named Vice President of Planning and Allocation in 2003, Senior Vice President and General Manager in February 2005 and President in June 2005. Prior to joining Gymboree, he served in a variety of positions at the Gap Inc. Our executive officers have an average of 16 years of retail industry experience. See Management for more information.
Our Strategy
Capitalize on Strong Brands. We intend to continue to capitalize upon the strength of our brands, customer relationships and operational effectiveness to further build each of our retail concepts and drive profitable growth. We plan to continue to support our differentiated strategy of delivering best-in-class apparel collections for our customers at various price points. We will continue to focus on optimizing our promotional strategies. We expect that our new customer relationship management system will enable us to better understand and track our customers and enable us to tailor a more meaningful message through multiple channels, including e-mail, direct mail, branded promotions, loyalty programs, marketing partnerships and print advertisements.
Continue to Leverage Current Business Platform. We plan to continue to leverage our existing, largely fixed corporate infrastructure to expand our product offerings and reach new customers. Potential opportunities include expansion of the Crazy 8 brand as well as continued expansion of our core Gymboree brand in the United States and in select international markets. We believe that the Crazy 8 brand is a proven concept that offers a differentiated product aimed at the large value-conscious segment of the population. The Companys Gymboree Play & Music brand has a strong global presence with 688 locations in 37 countries as of January 29, 2011. We believe this global footprint creates strong brand awareness and customer loyalty outside of North America that provides a platform should the Company choose to grow the retail business in select international markets.
Focus on Efficiency and Operational Excellence. Our management has demonstrated an ability to deliver consistent earnings growth over the past five years. From a sourcing perspective, we have executed several initiatives, including increased collaboration between merchants and designers, a redefined fabric negotiation process and expanding the number of countries from which products are sourced. Additionally, we have focused on actively managing our inventory via an advanced allocation system and style-level markdowns. We have also implemented payroll initiatives including regular monitoring of staffing hours and wage rate compliance, which have helped to reduce average store payroll expenses while we simultaneously improved customer service scores.
The Transactions
On October 11, 2010, we entered into an Agreement and Plan of Merger with Giraffe Holding, Inc. (Holding) and Giraffe Acquisition Corporation, an indirect 100%-owned subsidiary of Holding (Acquisition Sub), referred to in this prospectus as the Merger Agreement. Acquisition Sub and Holding are Delaware
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corporations formed by investment funds sponsored by Bain Capital Partners, LLC (Bain Capital or the Sponsor) solely for the purposes of completing the Acquisition and the other transactions described in this prospectus.
Pursuant to the Merger Agreement, Acquisition Sub accepted for payment all outstanding shares of the Companys common stock at a cash purchase price of $65.40 per share (the Offer Price). Acquisition Sub was merged with and into the Company on November 23, 2010 in accordance with the short-form merger provisions available under Delaware law, upon which the Company became an indirect 100%-owned subsidiary of Holding. In connection with the Acquisition, each issued and outstanding share was converted into the right to receive the Offer Price.
The total amount of the consideration payable in connection with the Acquisition was approximately $1.9 billion. The Acquisition and the related fees, expenses and original issue discount were financed with:
| the proceeds from the initial offering of the existing notes of approximately $400 million; |
| equity investments of $508 million from certain investment funds sponsored by Bain Capital, certain co-investors and certain members of the Company management team (see Certain Relationships and Related Party TransactionsSubscription Agreements for more information); |
| initial borrowings of $850 million in the aggregate under the senior secured credit facilities, which we refer to in this prospectus as Senior Credit Facilities, consisting of (i) $820 million of borrowings under a $820 million senior secured term loan and (ii) $30 million of borrowings under a $225 million senior secured asset-based revolving credit facility; and |
| approximately $165 million of available cash from the Companys balance sheet. |
The closing of the offering of the existing notes and the Senior Credit Facilities occurred substantially concurrently with the closing of the Acquisition on November 23, 2010. Effective February 11, 2011, we amended the terms of the $820 million senior secured term loan facility to, among other things, lower the interest rate by 50 basis points and remove select financial covenants.
The offering of the existing notes, the initial borrowings under the Senior Credit Facilities, the cash equity investment in Holding by investment funds sponsored by Bain Capital, the Acquisition, and other related transactions are collectively referred to in this prospectus as the Transactions.
Corporate Structure
We were organized in October 1979 as a California corporation and re-incorporated as a Delaware corporation in June 1992. Our headquarters is located at 500 Howard Street, San Francisco, California. Our corporate website address is www.gymboree.com. Our website and the information contained on our website are not part of this prospectus.
Overview of Sponsor
Bain Capital, LLC is a global private investment firm whose affiliates, including Bain Capital Partners, LLC, manage several pools of capital, including private equity, venture capital, public equity, capital products and absolute return, with approximately $65 billion in assets under management. Bain Capital has a team of approximately 360 professionals dedicated to investing and to supporting its portfolio companies. Since its inception in 1984, funds sponsored by Bain Capital have made private equity investments and add-on acquisitions in more than 300 companies in a variety of industries around the world. Bain Capital private equity investments have included such leading businesses as Toys R Us, Bright Horizons Family Solutions, Michaels Stores, Dollarama, Burlington Coat Factory, Dunkin Brands and Lilliput Kidswear. Headquartered in Boston, Bain Capital has offices in New York, Chicago, London, Munich, Hong Kong, Shanghai, Tokyo and Mumbai.
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Summary of the Exchange Offer
The following summary contains the principal terms of the exchange offer and is not intended to be complete. It does not contain all of the information that is important to you. For a more detailed description of the exchange offer, please refer to the section entitled The Exchange Offer in this prospectus.
Background |
On November 23, 2010, we issued $400,000,000 aggregate principal amount of our 9.125% Senior Notes due 2018 (CUSIP Nos. 37611V AA2 and U37633 AA9; ISIN Nos. US37611VAA26 and USU37633AA99) in an offering not registered under the Securities Act. At the time the offering was consummated, we entered into a registration rights agreement with Morgan Stanley & Co. Incorporated and Credit Suisse Securities (USA) LLC, in which we agreed to offer to exchange the existing notes for exchange notes that have been registered under the Securities Act. This exchange offer is intended to satisfy that obligation. |
The Exchange Offer |
We are offering to exchange $400,000,000 aggregate principal amount of our 9.125% Senior Notes due 2018 for $400,000,000 aggregate principal amount of the existing 9.125% Senior Notes due 2018. The terms of the exchange notes are identical in all material respects to the terms of the existing notes, except that the exchange notes have been registered under the Securities Act and will not contain transfer restrictions, registration rights or additional interest provisions. You should read the discussion set forth under Description of the Exchange Notes for further information regarding the exchange notes. In order to be exchanged, an existing note must be properly tendered and accepted. All existing notes that are validly tendered and not withdrawn will be exchanged. We will issue and deliver the exchange notes promptly after the expiration of the exchange offer. |
Required Representations |
In order to participate in this exchange offer, you will be required to make certain representations to us in a letter of transmittal, including that: |
| any exchange notes will be acquired by you in the ordinary course of your business; |
| you have not engaged in and do not intend to engage in, and do not have an arrangement or understanding with any person to participate in, a distribution of the exchange notes; |
| you are not an affiliate of ours, as that term is defined in Rule 405 under the Securities Act; and |
| if you are a broker-dealer registered under the Securities Act, that you will receive the exchange notes for your own account in exchange for the existing notes that were acquired as a result of market-making activities or other trading activities and that you will comply with the applicable provisions of the Securities Act (including the prospectus delivery requirements in connection with any resale of the exchange notes). |
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Resale of the Exchange Notes |
Based on interpretations by the SECs staff, as detailed in a series of no-action letters issued to third parties unrelated to us, we believe that the exchange notes issued in the exchange offer may be offered for resale, resold or otherwise transferred by you without compliance with the registration and prospectus delivery requirements of the Securities Act as long as: |
| you, or the person or entity receiving the exchange notes, acquires the exchange notes in the ordinary course of business; |
| neither you nor any such person or entity receiving the exchange notes is engaging in or intends to engage in a distribution of the exchange notes within the meaning of the federal securities laws; |
| neither you nor any such person or entity receiving the exchange notes has an arrangement or understanding with any person or entity to participate in any distribution of the exchange notes; and |
| neither you nor any such person or entity receiving the exchange notes is an affiliate of ours, as that term is defined in Rule 405 under the Securities Act. |
We have not submitted a no-action letter to the SEC, and we cannot assure that the SEC would make a similar determination with respect to this exchange offer. If you do not meet the conditions described above, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with the resale of the exchange notes. If you fail to comply with these requirements you may incur liabilities under the Securities Act, and we will not indemnify you for any such liabilities. |
Expiration Date |
The exchange offer will expire at 5:00 p.m., New York City time, on , 2011, unless extended, in which case the term expiration date means the latest date and time to which we extend the exchange offer. |
Withdrawal Rights |
You may withdraw your tender of existing notes at any time prior to 5:00 p.m., New York City time, on the expiration date. |
Conditions to the Exchange Offer |
The exchange offer is subject to certain customary conditions, some of which may be waived by us. See The Exchange OfferConditions for more information. |
Exchange Offer Procedures |
If you wish to tender existing notes, you must (a)(1) complete, sign and date the letter of transmittal, or a facsimile of it, according to its instructions and (2) send the letter of transmittal, together with your existing notes to be exchanged and other required documentation, to the exchange agent at the address provided in the letter of transmittal; or (b) tender through The Depository Trust Company, or DTC, pursuant to DTCs Automated Tender Offer Program, or ATOP. The letter of transmittal or a valid agents message through ATOP must be received by the exchange agent by 5:00 p.m., New York City |
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time, on the expiration date. See The Exchange OfferExchange Offer Procedures and The Exchange OfferBook-Entry Transfer. Please do not send letters of transmittal and certificates representing existing notes to us; send these documents only to the exchange agent. See The Exchange OfferExchange Offer Procedures for more information. |
Each broker-dealer that is issued exchange notes for its own account in exchange for existing notes that were acquired by such broker-dealer as a result of market-making or other trading activities also must acknowledge that it has not entered into any arrangement or understanding with us or any of our affiliates to distribute the exchange notes and will deliver a prospectus in connection with any resale of the exchange notes issued in the exchange offer. See Plan of Distribution. |
Special Procedures for Beneficial Owners |
If you are the beneficial owner of book-entry interests and your name does not appear on a security position listing of DTC as the holder of the book-entry interests or if you are a beneficial owner whose existing notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender your outstanding notes in the exchange offer, you should contact the registered holder promptly and instruct the registered holder to tender on your behalf. If you are a beneficial owner and wish to tender on your own behalf, you must, before completing and executing the letter of transmittal and delivering your existing notes, either make appropriate arrangements to register ownership of the existing notes in your name or obtain a properly completed bond power from the registered holder. See The Exchange OfferProcedure if the Outstanding Notes Are Not Registered in Your Name and The Exchange OfferBeneficial Owner Instructions to Holders of Existing Notes. The transfer of registered ownership may take considerable time. |
Guaranteed Delivery Procedures |
If you wish to tender existing notes and time will not permit the documents required by the letter of transmittal to reach the exchange agent prior to the expiration date, or the procedure for book-entry transfer cannot be completed on a timely basis, you must tender your existing notes according to the guaranteed delivery procedures described under The Exchange OfferGuaranteed Delivery Procedures. |
Acceptance of Existing Notes and Delivery of Exchange Notes |
Subject to the conditions described under The Exchange OfferConditions, we will accept for exchange any and all existing notes which are validly tendered in the exchange offer, and not withdrawn, prior to 5:00 p.m., New York City time, on the expiration date. |
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Certain Material U.S. Federal Income Tax Considerations |
For a discussion of the material U.S. federal income tax considerations relating to the exchange of existing notes for the exchange notes as well as the ownership and disposition of the exchange notes, see Certain Material U.S. Federal Income Tax Considerations. |
Exchange Agent |
Deutsche Bank Trust Company Americas is acting as the exchange agent. The address, telephone number and facsimile number of the exchange agent are set forth in this prospectus under the heading The Exchange OfferExchange Agent. |
Consequences of Failure to Exchange the Existing Notes |
If you do not exchange your existing notes for exchange notes, you will continue to be subject to the restrictions on transfer provided in the existing notes and in the indenture governing the existing notes. In general, the unregistered existing notes may not be offered or sold, unless they are registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act. In addition, after the consummation of the exchange offer, it is anticipated that the outstanding principal amount of the existing notes available for trading will be significantly reduced. The reduced float may adversely affect the liquidity and market price of the existing notes. A smaller outstanding principal amount of existing notes available for trading may also tend to make the price more volatile. |
Use of Proceeds |
We will not receive any proceeds from the issuance of the exchange notes. |
Fees and Expenses |
We will bear all expenses related to the exchange offer. See The Exchange OfferFees and Expenses. |
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The Exchange Notes
The following summary contains basic information about the exchange notes and is not intended to be complete. It does not contain all of the information that is important to you. For a more detailed description of the exchange notes, please refer to the section entitled Description of the Exchange Notes in this prospectus.
Issuer |
The Gymboree Corporation |
Securities Offered |
$400,000,000 aggregate principal amount of 9.125% Senior Notes due 2018. |
The exchange notes will evidence the same debt as the existing notes and will be issued under, and will be entitled to the benefits of, the same indenture. The terms of the exchange notes are identical to the terms of the existing notes in all material respects, except that the exchange notes: |
| will be registered under the Securities Act; |
| will bear different CUSIP/ISIN numbers than the existing notes; |
| will not include rights to registration under the Securities Act or rights to additional interest in the event of a specified registration default; and |
| will not contain transfer restrictions applicable to the existing notes. |
Maturity |
December 1, 2018. |
Ranking |
The exchange notes will be our senior unsecured obligations and will: |
| rank pari passu in right of payment to all of our existing and future senior indebtedness (including the Senior Credit Facilities); |
| rank senior in right of payment to any of our existing and future subordinated indebtedness; |
| be effectively subordinated to all of our secured indebtedness (including the Senior Credit Facilities) to the extent of the value of the assets securing such indebtedness; |
| be guaranteed on a senior unsecured basis by each of the guarantors thereof; and |
| be structurally subordinated to obligations (including trade payables) of our subsidiaries that do not guarantee the notes. |
As of January 29, 2011, we had $1.2 billion in outstanding indebtedness on our consolidated balance sheet, of which $820.0 million was secured and effectively ranked senior to the existing notes and would have effectively ranked senior to the exchange notes. In addition, we had no outstanding indebtedness and approximately $148.4 million of undrawn availability under our ABL Facility. Any indebtedness under the ABL Facility will also be secured and will effectively rank senior to the exchange notes. |
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The guarantee of each guarantor of the exchange notes will be an unsecured senior obligation of such guarantor and will: |
| rank pari passu in right of payment to all existing and future senior indebtedness of such guarantor (including its guarantee of the Senior Credit Facilities); |
| rank senior in right of payment to any of such guarantors existing and future subordinated indebtedness; and |
| be effectively subordinated to all secured indebtedness of such guarantor (including its guarantee of the Senior Credit Facilities) to the extent of the value of the assets of such guarantor securing such secured indebtedness. |
As of January 29, 2011, the non-guarantor subsidiaries had no outstanding indebtedness and $14.9 million of other liabilities outstanding, including trade payables. See Risk FactorsRisks Relating to the Exchange NotesYour claims to our assets will be structurally subordinated to all of the creditors of any non-guarantor subsidiaries. |
Subsidiary Guarantees |
The exchange notes will be guaranteed on a senior unsecured basis by each of our present and future direct and indirect domestic subsidiaries that is a guarantor or obligor under our Senior Credit Facilities. See Description of the Exchange NotesGuarantees. |
Interest |
Interest on the exchange notes will be payable semi-annually on June 1 and December 1 of each year, commencing , 2011. |
Optional Redemption |
We may redeem any of the exchange notes beginning on December 1, 2014, at the redemption prices set forth in this prospectus under Description of the Exchange NotesOptional Redemption. We may also redeem any of the exchange notes at any time prior to December 1, 2014 at a redemption price of 100% of their principal amount plus a make-whole premium and accrued interest. In addition, at any time prior to December 1, 2013, we may redeem up to 35% of the aggregate principal amount of the exchange notes with the net cash proceeds of certain equity offerings at a redemption price of 109.125% of their principal amount plus accrued interest. See Description of the Exchange NotesOptional Redemption. |
Repurchase at the Option of Holders Upon a Change of Control Triggering Event |
If we experience certain kinds of changes of control, we must offer to purchase the exchange notes at 101% of their principal amount plus accrued and unpaid interest. See Description of the Exchange NotesRepurchase at the Option of HoldersChange of Control. |
Asset Sale Proceeds |
If we or our subsidiaries engage in asset sales, we generally must either invest the net cash proceeds from such sales in our business within a period of time, prepay senior secured debt or make an offer |
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to purchase a principal amount of the exchange notes equal to the excess net cash proceeds, subject to certain exceptions. The purchase price of the exchange notes will be 100% of their principal amount, plus accrued and unpaid interest. See Description of the Exchange NotesRepurchase at the Option of HoldersAsset Sales. |
Certain Covenants |
The indenture contains covenants that limit, among other things, our ability and the ability of our restricted subsidiaries to: |
| incur additional indebtedness or issue preferred stock; |
| pay dividends or distributions on our capital stock or repurchase our capital stock; |
| repurchase subordinated indebtedness; |
| issue preferred stock of subsidiaries; |
| create certain liens; |
| sell assets; |
| make certain investments; |
| issue or sell equity interests in subsidiaries; |
| create dividend or other payment restrictions affecting subsidiaries; |
| engage in transactions with affiliates; |
| create unrestricted subsidiaries; and |
| consolidate, merge or transfer all or substantially all of our assets or the assets of our subsidiaries. |
These covenants are subject to important exceptions and qualifications described under the heading Description of the Exchange NotesCertain Covenants. |
Denomination |
The exchange notes will be issued only in denominations of $2,000 and higher integral multiples of $1,000. |
Risk Factors |
Investing in the exchange notes involves risks. In deciding whether to participate in the exchange offer, you should consider carefully the information set forth under Risk Factors, along with other matters discussed or referred to in this prospectus. |
Trustee |
Deutsche Bank Trust Company Americas. |
Governing Law |
The exchange notes will be governed by the laws of the State of New York. |
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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL AND OTHER DATA
The Predecessor and Successor periods presented relate to the periods preceding the Transactions and the period beginning on the date of the Transactions (November 23, 2010 to January 29, 2011), respectively.
The following table sets forth summary historical and unaudited pro forma condensed consolidated financial and other data of our business at the dates and for the periods indicated. The summary condensed historical consolidated statements of operations and condensed consolidated statements of cash flows data for the fiscal years ended January 31, 2009 (Predecessor) and January 30, 2010 (Predecessor) and for the periods from January 31, 2010 to November 22, 2010 (Predecessor) and November 23, 2010 to January 29, 2011 (Successor), and the summary historical condensed consolidated balance sheet data as of January 30, 2010 (Predecessor) and January 29, 2011 (Successor), have been derived from our historical audited consolidated financial statements included elsewhere in this prospectus. The summary historical condensed consolidated balance sheet data as of January 31, 2009 (Predecessor) have been derived from our historical audited consolidated financial statements not included in this prospectus.
The summary unaudited pro forma condensed consolidated statement of operations information gives effect to the Transactions as if they had occurred on January 31, 2010. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. The summary unaudited pro forma condensed consolidated financial data is for informational purposes only and does not purport to represent what our results of operations actually would be if the Transactions had occurred at any date, nor does such data purport to project the results of operations for any future period.
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The information below should be read in conjunction with the sections entitled The Transactions, Unaudited Pro Forma Condensed Consolidated Financial Information, Selected Historical Consolidated Financial Data, Managements Discussion and Analysis of Financial Condition and Results of Operations and with our consolidated financial statements and the notes thereto contained elsewhere in this prospectus.
Predecessor | Successor | Pro
Forma Fiscal Year Ended January 29, 2011 |
||||||||||||||||||||||
Fiscal Year Ended | January 31, 2010 to November 22, 2010 |
November 23, 2010 to January 29, 2011 |
||||||||||||||||||||||
January 31, 2009 |
January 30, 2010 |
|||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Statement of operations data: |
||||||||||||||||||||||||
Net sales: |
||||||||||||||||||||||||
Retail (a) |
$ | 987,859 | $ | 1,001,527 | $ | 814,863 | $ | 244,287 | $ | 1,054,018 | ||||||||||||||
Play & Music |
12,819 | 13,384 | 10,847 | 2,814 | 13,661 | |||||||||||||||||||
Other |
| | 1,173 | 447 | 1,620 | |||||||||||||||||||
Total net sales |
1,000,678 | 1,014,911 | 826,883 | 247,548 | 1,069,299 | |||||||||||||||||||
Cost of goods sold, including buying and occupancy expenses |
(524,477 | ) | (535,005 | ) | (431,675 | ) | (184,483 | ) | (570,326 | ) | ||||||||||||||
Gross profit |
476,201 | 479,906 | 395,208 | 63,065 | 498,973 | |||||||||||||||||||
Selling, general and administrative expenses |
(327,893 | ) | (316,268 | ) | (307,361 | ) | (78,843 | ) | (345,453 | ) | ||||||||||||||
Operating income (loss) |
148,308 | 163,638 | 87,847 | (15,778 | ) | 153,520 | ||||||||||||||||||
Interest income |
1,690 | 728 | 295 | 36 | | |||||||||||||||||||
Interest expense |
(208 | ) | (243 | ) | (248 | ) | (17,387 | ) | (91,375 | ) | ||||||||||||||
Other (expense) income, net |
(151 | ) | 610 | 119 | 53 | 172 | ||||||||||||||||||
Income (loss) before income taxes |
149,639 | 164,733 | 88,013 | (33,076 | ) | 62,317 | ||||||||||||||||||
Income tax (expense) benefit |
(56,159 | ) | (62,814 | ) | (36,449 | ) | 10,032 | (29,295 | ) | |||||||||||||||
Net income (loss) |
$ | 93,480 | $ | 101,919 | $ | 51,564 | $ | (23,044 | ) | $ | 33,022 | |||||||||||||
Cash flows: |
||||||||||||||||||||||||
Net cash provided by operating activities |
$ | 155,024 | $ | 176,595 | $ | 90,951 | $ | 21,080 | $ | 68,839 | ||||||||||||||
Net cash used in investing activities |
(56,114 | ) | (39,579 | ) | (43,452 | ) | (1,833,408 | ) | (1,876,860 | ) | ||||||||||||||
Net cash provided by (used in) financing activities |
9,728 | (21,535 | ) | (110,655 | ) | 1,648,690 | 1,538,035 | |||||||||||||||||
Purchases of property and equipment |
(56,114 | ) | (39,579 | ) | (42,214 | ) | (5,054 | ) | (47,268 | ) |
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Predecessor | Successor | Pro
Forma Fiscal Year Ended January 29, 2011 |
||||||||||||||||||||||
Fiscal Year Ended | January 31, 2010 to November 22, 2010 |
November 23, 2010 to January 29, 2011 |
||||||||||||||||||||||
January 31, 2009 |
January 30, 2010 |
|||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
(in thousands, except operating data) | ||||||||||||||||||||||||
Balance sheet data |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 140,472 | $ | 257,672 | $ | * | $ | 32,124 | $ | * | ||||||||||||||
Accounts receivable, net |
18,735 | 9,911 | * | 13,669 | * | |||||||||||||||||||
Working capital |
180,040 | 287,348 | * | 113,936 | * | |||||||||||||||||||
Property and equipment, net |
204,227 | 205,461 | * | 212,491 | * | |||||||||||||||||||
Total assets |
520,581 | 636,130 | * | 2,088,125 | * | |||||||||||||||||||
Total debt |
| | * | 1,215,991 | * | |||||||||||||||||||
Stockholders equity |
334,275 | 438,753 | * | 485,811 | * | |||||||||||||||||||
Selected operating data: |
||||||||||||||||||||||||
Number of stores at end of period |
886 | 953 | 1,062 | 1,065 | 1,065 | |||||||||||||||||||
Net sales per gross square foot at period-end (b) |
564 | 529 | 380 | 114 | 493 | |||||||||||||||||||
Net sales per average store (c) |
$ | 1,105,000 | $ | 1,043,000 | $ | 762,000 | $ | 229,000 | $ | 990,000 | ||||||||||||||
Comparable store net sales increase (decrease) (d) |
0 | % | (4 | %) | * | * | (2 | %) | ||||||||||||||||
Rent expense |
$ | 101,294,000 | $ | 112,830,000 | $ | 99,708,000 | $ | 24,644,000 | $ | 122,690,000 | ||||||||||||||
Other financial data: |
||||||||||||||||||||||||
Adjusted EBITDA (e) |
$ | 203,309 | $ | 221,348 | $ | 179,040 | $ | 57,912 | $ | 236,953 | ||||||||||||||
Ratio of earnings to fixed charges (f) |
7.6x | 7.6x | 5.0x | | 1.5x |
* | Information not presented. |
(a) | Net retail sales include revenues from the Companys retail stores, online stores and the Gymboree Visa program. |
(b) | Equals net sales from the Companys retail stores and online stores, divided by total square feet of store space as of each date presented. |
(c) | Equals net sales from the Companys retail stores and online stores, divided by stores open as of each date presented. |
(d) | A comparable store is one that has been open for a full 14 months. Stores that are relocated or expanded by more than 15% of their original square footage become comparable 14 months after final relocation or the completion of the expansion project. Comparable stores net sales include net sales from the Companys online stores. Comparable store net sales were calculated on a 52 week basis for all periods presented. |
(e) | We have presented Adjusted EBITDA (which is defined as net income (loss) before interest (income) expense, income tax (expense) benefit, and depreciation and amortization (EBITDA) adjusted for the other items described in the notes below), which is considered a non-GAAP financial measure. We present Adjusted EBITDA in this prospectus because we consider it an important supplemental measure of our performance and believe it is frequently used by securities analysts, investors, management and other |
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interested parties in the evaluation of companies in our industry. Adjusted EBITDA is calculated in substantially the same manner as EBITDA under the indenture governing the existing notes (which will also govern the exchange notes) and Consolidated EBITDA under the Senior Credit Facilities, as further described in the sections Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources, Description of the Exchange Notes and Description of Other Indebtedness. We believe that the inclusion of supplementary adjustments applied to EBITDA in presenting Adjusted EBITDA are appropriate to provide additional information to investors about certain non-cash items and unusual or non-recurring items that we do not expect to continue in the future and to provide additional information with respect to our ability to meet our future debt service and to comply with various covenants in documents governing our indebtedness. However, Adjusted EBITDA is not a presentation made in accordance with GAAP, and our computation of Adjusted EBITDA may vary from others in our industry. Adjusted EBITDA should not be considered an alternative to operating income or net income (loss), as a measure of operating performance or cash flow, or as a measure of liquidity. Adjusted EBITDA has important limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. For example, Adjusted EBITDA: |
| does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; |
| does not reflect changes in, or cash requirements for, our working capital needs; |
| does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; |
| excludes income tax payments that represent a reduction in cash available to us; |
| does not reflect any cash requirements for assets being depreciated and amortized that may have to be replaced in the future; and |
| does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations. |
The following table is a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA for the periods indicated:
Predecessor | Successor | Pro
Forma Fiscal Year Ended January 29, 2011 |
||||||||||||||||||||||
Fiscal Year Ended | January 31, 2010 to November 22, 2010 |
November 23, 2010 to January 29, 2011 |
||||||||||||||||||||||
January 31, 2009 |
January 30, 2010 |
|||||||||||||||||||||||
($ in thousands) | (unaudited) | |||||||||||||||||||||||
Net income (loss) |
$ | 93,480 | $ | 101,919 | $ | 51,564 | $ | (23,044 | ) | $ | 33,022 | |||||||||||||
Interest (income) expense |
(1,482 | ) | (485 | ) | (47 | ) | 17,351 | 91,375 | ||||||||||||||||
Income tax expense (benefit) |
56,159 | 62,814 | 36,449 | (10,032 | ) | 29,295 | ||||||||||||||||||
Depreciation and amortization |
34,854 | 37,302 | 32,550 | 10,250 | 54,764 | |||||||||||||||||||
EBITDA |
183,011 | 201,550 | 120,516 | (5,475 | ) | 208,456 | ||||||||||||||||||
Adjustments to EBITDA: |
||||||||||||||||||||||||
Non-cash share-based compensation expense (i) |
$ | 19,850 | $ | 18,462 | $ | 41,042 | $ | 482 | $ | 13,853 | ||||||||||||||
Loss on disposal/impairment on assets (ii) |
448 | 1,336 | 880 | 1,150 | 2,030 | |||||||||||||||||||
Add-back of sponsor management fee (iii) |
| | | 1,062 | 3,000 | |||||||||||||||||||
Deferred income effects eliminated in purchase accounting (iv) |
| | | 995 | 6,127 | |||||||||||||||||||
Purchase accounting adjustments (v) |
| | | 47,223 | 3,487 | |||||||||||||||||||
Transaction costs (vi) |
| | 16,602 | 12,475 | ||||||||||||||||||||
Adjusted EBITDA |
$ | 203,309 | $ | 221,348 | $ | 179,040 | $ | 57,912 | $ | 236,953 | ||||||||||||||
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(i) | Represents the non-cash share-based compensation expense associated with the vesting of restricted stock and restricted stock units. The pro forma fiscal year ended January 29, 2011 excludes the non-recurring effect of $27.7 million related to acceleration of deferred management share-based compensation that was incurred at the closing date. |
(ii) | Represents non-cash losses on disposal of assets as well as asset impairment expense of non-performing stores. |
(iii) | Represents the annual management fee to be paid to an affiliate of the Sponsor. See Certain Relationships and Related Party Transactions. |
(iv) | This pro forma adjustment includes the income associated with co-branded credit card fee income which was deferred, and recognized into income, over the five-year average customer life. This deferred credit is eliminated in purchase accounting and thus the income that would have been recognized absent purchase accounting has been added back. |
(v) | Purchase accounting adjustments in the period from November 23, 2010 to January 29, 2011 include: (1) $45.5 million in amortization related to the step-up in inventory and (2) $1.6 million in additional rent expense recognized due to the elimination of deferred rent and construction allowances in purchase accounting. Purchase accounting adjustments for the pro forma fiscal year ended January 29, 2011 include: (1) $3.0 million in additional rent expense recognized due to the elimination of deferred rent and construction allowances in purchase accounting and (2) $0.5 million in amortization of the fair value adjustment related to the Companys gift card and merchandise credit liabilities. |
(vi) | Transaction costs include legal, accounting and other costs related to the Transactions. |
(f) | For purposes of calculating the ratio of earnings to fixed charges, earnings represents pre-tax income from continuing operations plus fixed charges. Fixed charges consist of interest expense on all indebtedness plus amortization of debt issuance costs and the portion of rental expense that we believe is representative of the interest component of rental expense. With respect to the period from November 23, 2010 to January 29, 2011, our earnings were insufficient to cover fixed charges by $10.5 million. |
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You should carefully consider the risks described below before making a decision whether to participate in the exchange offer. You should also consider the other information included or incorporated by reference in this prospectus before making a decision to invest in the exchange notes. Our future operating results could differ materially from the results described in this prospectus or any document incorporated herein by reference due to the risks and uncertainties related to our business, including those discussed below. In addition, these factors represent risks and uncertainties that could cause actual results to differ materially from those implied by forward-looking statements. We refer you to our Note Regarding Forward-Looking Statements, which identifies forward-looking statements in this prospectus. The risks described below are not the only risks we face. Additional risk and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, financial condition or results of operations, and may have a material impact on your investment in the exchange notes.
Risks Relating to the Exchange Offer
Holders who fail to exchange their existing notes will continue to be subject to restrictions on transfer.
If you do not exchange your existing notes for exchange notes in the exchange offer, you will continue to be subject to the restrictions on transfer of your existing notes described in the legend on your existing notes. The restrictions on transfer of your existing notes arise because we issued the existing notes under exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, you may only offer or sell the existing notes if they are registered under the Securities Act and applicable state securities laws, or are offered and sold under an exemption from these requirements. We do not plan to register the existing notes under the Securities Act. The restrictions on transferability may adversely affect the price that third parties would pay for such notes.
Broker-dealers or holders of existing notes may become subject to the registration and prospectus delivery requirements of the Securities Act.
Any broker-dealer that:
| exchanges its existing notes in the exchange offer for the purpose of participating in a distribution of the exchange notes or |
| resells exchange notes that were received by it for its own account in the exchange offer |
may be deemed to have received restricted securities and may be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction by that broker-dealer. Any profit on the resale of the exchange notes and any commission or concessions received by a broker-dealer may be deemed to be underwriting compensation under the Securities Act. In addition to broker-dealers, any holder of notes that exchanges its existing notes in the exchange offer for the purpose of participating in a distribution of the exchange notes may be deemed to have received restricted securities and may be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction by that holder.
You may suffer adverse consequences if you do not exchange your existing notes.
The existing notes that are not exchanged for exchange notes have not been registered with the SEC or in any state. Unless the existing notes are registered, they may only be offered and sold pursuant to an exemption from, or in a transaction that is not subject to, the registration requirements of the Securities Act. Depending upon the percentage of existing notes exchanged for exchange notes, the liquidity of the existing notes may be adversely affected, which may have an adverse affect on the price of the existing notes.
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Your existing notes will not be accepted for exchange if you fail to follow the exchange offer procedures.
We will issue the exchange notes pursuant to this exchange offer only after a timely receipt of your existing notes, a properly completed and duly executed letter of transmittal and all other required documents. Therefore, if you want to tender your existing notes, please allow sufficient time to ensure timely delivery. If we do not receive the required documents by the expiration date of the exchange offer, we will not accept your existing notes for exchange. We are under no duty to give notification of defects or irregularities with respect to the tenders of existing notes for exchange. If there are defects or irregularities with respect to your tender of existing notes, we will not accept your existing notes for exchange.
Risks Related to Our Indebtedness and Certain Other Obligations
Our substantial 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 to the extent of our variable rate debt and prevent us from meeting our obligations under the exchange notes.
As a result of the Transactions, we are highly leveraged. The following chart shows our level of indebtedness as of January 29, 2011:
January 29, 2011 | ||||
($ in millions) | ||||
Senior secured term loan (1) |
$ | 820 | ||
Senior secured asset-based revolving credit facility (1) |
| |||
Existing notes |
400 | |||
Total indebtedness |
$ | 1,220 | ||
(1) | The Senior Credit Facilities are comprised of a $820 million senior secured term loan and a $225 million senior secured asset-based revolving credit facility (the ABL Facility.) Amounts available under the ABL Facility are subject to customary borrowing base limitations and are reduced by letter of credit utilization. The Senior Credit Facilities also allow an aggregate of $200 million in uncommitted incremental facilities, the availability of which is subject to our meeting certain conditions, including, in the case of any incremental term facility, applicable financial ratios. No incremental facilities are currently in effect. See Description of Other Indebtedness. |
Our high degree of leverage could have important consequences for you. For example, it could:
| make it more difficult for us to make payments on the exchange notes; |
| increase our vulnerability to general economic and industry conditions; |
| require a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities; |
| expose us to the risk of increased interest rates as the borrowings under our Senior Credit Facilities will be at variable rates of interest; |
| restrict us from making strategic acquisitions or cause us to make non-strategic divestitures; |
| limit our ability to obtain additional financing for working capital, capital expenditures, research and development, debt service requirements, acquisitions and general corporate or other purposes; and |
| limit our ability to adjust to changing market conditions and place us at a competitive disadvantage compared to our competitors who are less highly leveraged. |
For the fiscal year ended January 29, 2011, on a pro forma basis after giving effect to the offering and the consummation of the other Transactions, our cash interest expense would have been approximately $83.2 million. See Unaudited Pro Forma Condensed Consolidated Financial Information. At January 29, 2011,
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we had $820.0 million of debt outstanding under our Senior Credit Facilities, which bore interest based on a floating rate index. A 0.125% increase in these floating rates applicable to the indebtedness outstanding under our Senior Credit Facilities would have increased our annual interest expense by approximately $1.0 million.
Despite current indebtedness levels and restrictive covenants, we and our subsidiaries may incur additional indebtedness in the future. This could further exacerbate the risks associated with our substantial financial leverage.
The terms of the indenture governing the existing notes (which will also govern the exchange notes) and the Senior Credit Facilities permit us to incur a substantial amount of additional debt, including secured debt. Any additional borrowings under the Senior Credit Facilities, and any other secured debt, would be effectively senior to the exchange notes and any guarantees thereof to the extent of the value of the assets securing such indebtedness. If new debt is added to our and our subsidiaries current debt levels, the risks that we now face as a result of our leverage would intensify. See Description of Other Indebtedness.
Our debt agreements contain restrictions that limit our flexibility in operating our business.
Our Senior Credit Facilities and the indenture governing the existing notes (which will also govern the exchange notes) contain various covenants that limit our ability to engage in specified types of transactions. These covenants limit our and our restricted subsidiaries ability to, among other things, incur or guarantee additional indebtedness, pay dividends on, or redeem or repurchase, our capital stock, make certain acquisitions or investments, enter into sale-leaseback transactions, materially change our business, incur or permit to exist certain liens, enter into transactions with affiliates or sell our assets to, or merge or consolidate with or into, another company. In addition, under certain circumstances, the ABL Facility requires us to satisfy a financial test. Our ability to satisfy this test may be affected by events outside of our control.
Upon the occurrence of an event of default under the Senior Credit Facilities, the lenders could elect to declare all amounts outstanding under the Senior Credit Facilities to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders under the Senior Credit Facilities could proceed against the collateral granted to them to secure that indebtedness. We have pledged substantially all of our assets as collateral under the Senior Credit Facilities. If the lenders under the Senior Credit Facilities accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay the Senior Credit Facilities, as well as our other secured and unsecured indebtedness, including the exchange notes.
To service our indebtedness, we require a significant amount of cash and our ability to generate cash depends on many factors beyond our control.
Our ability to make cash payments on and to refinance our indebtedness, including the exchange notes, and to fund planned capital expenditures depend on our ability to generate significant operating cash flow in the future. This ability is, to a significant extent, subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
Our business may not generate sufficient cash flow from operations, and future borrowings may not be available under our Senior Credit Facilities, in an amount sufficient to enable us to pay our indebtedness, including the exchange notes, or to fund our other liquidity needs. In any such circumstance, we may need to refinance all or a portion of our indebtedness, including the exchange notes, on or before maturity. We may not be able to refinance any of our indebtedness, including the Senior Credit Facilities and the exchange notes, on commercially reasonable terms or at all. If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional equity or reducing or delaying capital expenditures, strategic acquisitions and investments. Any such action, if necessary, may not be effected on commercially reasonable terms or at all. Our Senior Credit Facilities and the indenture governing the existing notes (which will also govern the exchange notes) restrict our ability to sell assets and use the proceeds from such sales.
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If we are unable to generate sufficient cash flow or are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants in the instruments governing our indebtedness (including covenants in our Senior Credit Facilities and the indenture governing the existing notes, which will also govern the exchange notes), we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under our Senior Credit Facilities could elect to terminate their commitments thereunder, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to obtain waivers from the required lenders under our Senior Credit Facilities to avoid being in default. If we breach our covenants under our Senior Credit Facilities and seek a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under our Senior Credit Facilities, the lenders could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation.
Risks Related to the Exchange Notes
We are controlled by the Sponsor, whose interests as an equity holder may conflict with yours as creditor.
Investment funds sponsored by the Sponsor indirectly own over 95% of our equity. Accordingly, the Sponsor controls the election of our directors and thereby has power to control our affairs and policies, including the appointment of management, the issuance of additional stock and the declaration and payment of dividends. The Sponsor will not have any liability for any obligations under the exchange notes and its interests may be in conflict with yours. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the Sponsor may pursue strategies that favor equity investors over debt investors. In addition, our equity holders may have an interest in pursuing acquisition, divestitures, financing or other transactions that, in their judgment, could enhance their equity investments, even though such transactions may involve risk to you as a holder of the exchange notes. Additionally, the Sponsor may make investments in businesses that directly or indirectly compete with us, or may pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. For information concerning our arrangements with the Sponsor, see Certain Relationships and Related Party Transactions.
Your right to receive payments on the exchange notes is effectively junior to those lenders who have a security interest in our assets.
Our obligations under the exchange notes and our guarantors obligations under their guarantees of the exchange notes are unsecured, but our obligations under our Senior Credit Facilities and each guarantors obligations under its guarantee of the Senior Credit Facilities are secured by a security interest in substantially all of our tangible and intangible assets, including the stock and assets of certain of our current and certain future subsidiaries. If we are declared bankrupt or insolvent, or if we default under our Senior Credit Facilities, the lenders thereunder could declare all of the funds borrowed under our Senior Credit Facilities, together with accrued interest, immediately due and payable. If we were unable to repay such indebtedness, the lenders could foreclose on the pledged assets to the exclusion of holders of the exchange notes, even if an event of default exists under the indenture governing the exchange notes at such time. Furthermore, if the lenders foreclose and sell the pledged equity interests in any subsidiary guarantor under the exchange notes, then that guarantor will be released from its guarantee of the exchange notes automatically and immediately upon such sale. In any such event, because the exchange notes will not be secured by any of our or our subsidiaries assets, including the equity interests in subsidiary guarantors, it is possible that there would be no assets remaining from which your claims could be satisfied or, if any assets remained, they might be insufficient to satisfy your claims fully. See Description of Other Indebtedness. As of January 29, 2011, we had $1.2 billion in outstanding indebtedness on our consolidated balance sheet, of which $820.0 million was secured and effectively ranked senior to the existing
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notes and would have effectively ranked senior to the exchange notes. In addition, we had no outstanding indebtedness and approximately $148.4 million of undrawn availability under our ABL Facility. Any indebtedness outstanding under the ABL Facility will also be secured and will effectively rank senior to the exchange notes.
The indenture governing the existing notes (which will also govern the exchange notes) permits us and our restricted subsidiaries to incur substantial additional indebtedness in the future, including additional senior secured indebtedness.
Our ability to service and repay our debt, including the exchange notes, is dependent in part on the cash flow generated by its subsidiaries.
Repayment of our indebtedness, including the exchange notes, depends in part on our subsidiaries generation of cash flow and our subsidiaries ability to make such cash available to us, by dividend, debt repayment or otherwise. Unless they are guarantors, our subsidiaries will not have any obligation to pay amounts due on the exchange notes or to make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted to, make distributions or debt repayments to enable us to make payments in respect of our indebtedness, including the exchange notes. Each such subsidiary is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from them. While the Senior Credit Facilities and the indenture governing the existing notes (which will also govern the exchange notes) limit the ability of our guarantor subsidiaries to incur consensual encumbrances that include restrictions on their ability to pay dividends or make other intercompany payments to us, these limitations are subject to certain qualifications and exceptions. In the event that we do not receive cash from our subsidiaries, we will be unable to make required principal, premium, if any, and interest payments on our indebtedness, including the exchange notes.
Your claims to our assets will be structurally subordinated to all of the creditors of any non-guarantor subsidiaries.
The exchange notes will only be guaranteed by our present and future direct and indirect domestic subsidiaries that serve as a guarantor or obligor under our Senior Credit Facilities. Our other subsidiaries are not required to guarantee the exchange notes and will have no obligation, contingent or otherwise, to pay any amount due pursuant to the exchange notes, or to make any funds available therefor, whether by dividends, loans, distributions or other payments. Accordingly, claims of holders of the exchange notes will be structurally subordinated to the claims of creditors of these non-guarantor subsidiaries, including trade creditors. All obligations of our non-guarantor subsidiaries, including trade payables, will have to be satisfied before any of the assets of such subsidiaries would be available for distribution, upon a liquidation or otherwise, to us or a guarantor of the exchange notes.
If we default on our obligations to pay our indebtedness, we may not be able to make payments on the exchange notes.
Any default under the agreements governing our indebtedness, including a default under the Senior Credit Facilities, that is not waived by the required lenders, and the remedies sought by the holders of such indebtedness, could prevent us from paying principal, premium, if any, and interest on the exchange notes and substantially decrease the market value of the exchange notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness (including covenants in our Senior Credit Facilities and the indenture governing the existing notes (which will also govern the exchange notes)), we could be in default under the terms of the agreements governing such indebtedness, including our Senior Credit Facilities and the indenture governing the exchange notes. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with
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accrued and unpaid interest, the lenders under our Senior Credit Facilities could elect to terminate their commitments thereunder, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to obtain waivers from the required lenders under our Senior Credit Facilities to avoid being in default. If we breach our covenants under our Senior Credit Facilities and seek a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under our Senior Credit Facilities, the lenders could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation.
We may not be able to repurchase the exchange notes upon a change of control.
Upon the occurrence of specific kinds of change of control events, we will be required to offer to repurchase all outstanding exchange notes at 101% of their principal amount plus accrued and unpaid interest. The source of funds for any such purchase of the exchange notes will be our available cash or cash generated from our subsidiaries operations or other sources, including borrowings, sales of assets or sales of equity. We may not be able to repurchase the exchange notes upon a change of control because we may not have sufficient financial resources to purchase all of the exchange notes that are tendered upon a change of control. Further, we are contractually restricted under the terms of our Senior Credit Facilities from repurchasing all of the exchange notes tendered by holders upon a change of control. Accordingly, we may not be able to satisfy our obligations to purchase the exchange notes unless we are able to refinance or obtain waivers under our Senior Credit Facilities. Our failure to repurchase the exchange notes upon a change of control would cause a default under the indenture governing the exchange notes and a cross default under the Senior Credit Facilities. The Senior Credit Facilities also provide that a change of control will be a default that permits lenders to accelerate the maturity of borrowings thereunder. Any of our future debt agreements may contain similar provisions.
You may not be able to determine when a change of control giving rise to your right to have the exchange notes repurchased by us has occurred following a sale of substantially all of our assets.
A change of control, as defined in the indenture governing the existing notes (which will also govern the exchange notes), will require us to make an offer to repurchase all outstanding exchange notes. The definition of change of control includes a phrase relating to the sale, lease or transfer of all or substantially all of our assets. There is no precisely established definition of the phrase substantially all under applicable law. Accordingly, the ability of a holder of exchange notes to require us to repurchase their exchange notes as a result of a sale, lease or transfer of less than all of our assets to another individual, group or entity may be uncertain.
The lenders under the Senior Credit Facilities will have the discretion to release the guarantors under the Senior Credit Facilities in a variety of circumstances, which will cause those guarantors to be released from their guarantees of the exchange notes.
While any obligations under the Senior Credit Facilities remain outstanding, any guarantee of the exchange notes may be released without action by, or consent of, any holder of the notes or the trustee under the indenture governing the notes offered hereby, at the discretion of lenders under the Senior Credit Facilities, if the related guarantor is no longer a guarantor of obligations under the Senior Credit Facilities. See Description of the Exchange Notes. The lenders under the Senior Credit Facilities will have the discretion to release the guarantees under the Senior Credit Facilities in a variety of circumstances. You will not have a claim as a creditor against any subsidiary that is no longer a guarantor of the exchange notes, and the indebtedness and other liabilities, including trade payables, whether secured or unsecured, of those subsidiaries will effectively be senior to claims of noteholders.
Because each guarantors liability under its guarantees may be reduced to zero, avoided or released under certain circumstances, you may not receive any payments from some or all of the guarantors.
You have the benefit of the guarantees of the subsidiary guarantors. However, the guarantees by the subsidiary guarantors are limited to the maximum amount that the subsidiary guarantors are permitted to
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guarantee under applicable law. As a result, a subsidiary guarantors liability under its guarantee could be reduced to zero, depending upon the amount of other obligations of such subsidiary guarantor. Further, under the circumstances discussed more fully below, a court under federal and state fraudulent conveyance and transfer statutes could void the obligations under a guarantee or further subordinate it to all other obligations of the guarantor. See Federal and state fraudulent transfer laws may permit a court to void the guarantees, and, if that occurs, you may not receive any payments on the exchange notes. In addition, you will lose the benefit of a particular guarantee if it is released under certain circumstances described under Description of the Exchange NotesGuarantees.
Federal and state fraudulent transfer laws may permit a court to void the guarantees, and, if that occurs, you may not receive any payments on the exchange notes.
Federal and state fraudulent transfer and conveyance statutes may apply to the issuance of the notes and the incurrence of the guarantees. Under federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary from state to state, the exchange notes or guarantees could be voided as a fraudulent transfer or conveyance if (1) we or any of the guarantors, as applicable, issued the existing notes or the exchange notes or incurred the guarantees with the intent of hindering, delaying or defrauding creditors or (2) we or any of the guarantors, as applicable, received less than reasonably equivalent value or fair consideration in return for either issuing the existing notes or the exchange notes or incurring the guarantees and, in the case of (2) only, one of the following is also true at the time thereof:
| we or any of the guarantors, as applicable, were insolvent or rendered insolvent by reason of the issuance of the existing notes or the exchange notes or the incurrence of the guarantees; |
| the issuance of the existing notes or the exchange notes or the incurrence of the guarantees left us or any of the guarantors, as applicable, with an unreasonably small amount of capital to carry on the business; |
| we or any of the guarantors intended to, or believed that we or such guarantor would, incur debts beyond our or such guarantors ability to pay as they mature; or |
| we or any of the guarantors were a defendant in an action for money damages, or had a judgment for money damages docketed against us or such guarantor if, in either case, after final judgment, the judgment is unsatisfied. |
As a general matter, value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is secured or satisfied. A debtor will generally not be considered to have received value in connection with a debt offering if the debtor uses the proceeds of that offering to make a dividend payment or otherwise retire or redeem equity securities issued by the debtor.
We cannot be certain as to the standards a court would use to determine whether or not we or the guarantors were solvent at the relevant time or, regardless of the standard that a court uses, that the exchange notes or the guarantees would not be subordinated to our or any of our guarantors other debt. In general, however, a court would deem an entity insolvent if:
| the sum of its debts, including contingent and unliquidated liabilities, was greater than the fair saleable value of all of its assets; |
| the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or |
| it could not pay its debts as they became due. |
If a court were to find that the issuance of the existing notes, the exchange notes or the incurrence of the guarantee was a fraudulent transfer or conveyance, the court could void the payment obligations under such notes or such guarantee, or subordinate such notes or such guarantee to presently existing and future indebtedness of
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ours or of the related guarantor, or require the holders of the notes to repay any amounts received. In the event of a finding that a fraudulent transfer or conveyance occurred, you may not receive any payment on the exchange notes. Further, the voidance of the existing notes or the exchange notes could result in an event of default with respect to our and our subsidiaries other debt that could result in acceleration of such debt.
Your ability to transfer the exchange notes may be limited by the absence of an active trading market, and an active trading market for the notes may not develop.
The exchange notes are securities for which there is no established public market. We do not intend to have the exchange notes listed on a national securities exchange or to arrange for quotation on any automated dealer quotation systems. The initial purchasers of the existing notes have previously advised us that they intend to make a market in the exchange notes, as permitted by applicable laws and regulations; however, the initial purchasers of the existing notes are not obligated to make a market in exchange notes, and they may discontinue their market-making activities at any time without notice. Therefore, an active market for the exchange notes may not develop, and if a market for the exchange notes does develop, that market may not continue. Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the exchange notes. The market, if any, for any of the exchange notes may be subject to similar disruptions, and any such disruptions may adversely affect the prices at which you may sell your exchange notes. In addition, the exchange notes may trade at a discount from the initial offering price, depending upon prevailing interest rates, the market for similar notes, our performance and other factors.
Risks Related to the Business
Global economic conditions may adversely affect our financial performance.
During the recent economic recession, global financial markets experienced extreme volatility, disruption and credit contraction. The volatility and disruption to the capital markets significantly adversely affected global economic conditions, resulting in additional significant recessionary pressures and declines in employment levels, consumer and business confidence, disposable income and actual and perceived wealth. Although there have been some recent improvements, continuing or worsened adverse economic conditions, including higher unemployment, energy and health care costs, interest rates and taxes and tighter credit, could continue to affect consumer confidence and discretionary consumer spending adversely and may adversely affect our sales, cash flows and results of operations. Additionally, renewed financial turmoil in the financial and credit markets could adversely affect our costs of capital and the sources of liquidity available to us and could increase our pension funding requirements.
Further, we work with a large number of small vendors, some of whom have been or may be significantly impacted by any of the factors described above. If a number of these vendors fail, the delays and costs that we would likely incur in replacing them and in finding replacement goods and services could have a material adverse effect on our business, financial condition and operating results.
Our results may be adversely affected by our failure to anticipate and respond to changes in consumer preferences in a timely manner.
Our sales and profitability depend upon the continued demand by customers for our apparel and accessories. We believe that our success depends in large part upon our ability to anticipate, gauge and respond in a timely manner to changing consumer demands and preferences and upon the appeal of our products. Further, current economic conditions and levels of discretionary spending also affect consumer preferences. We may not be able to anticipate, gauge and respond effectively to changes in consumer preferences, and the demand for our apparel or accessories may decline as a result. In addition, since much of our inventory is sourced from vendors located outside the United States, we usually must order merchandise and enter into contracts for the purchase and manufacture of such merchandise, up to nine months in advance of the applicable selling season and frequently
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before trends are known. A decline in demand for our apparel and accessories or a misjudgment could, among other things, lead to lower sales, excess inventories and higher markdowns, each of which could have a material adverse effect on our business, financial condition and operating results.
Increased production costs (including the rising prices of cotton) may adversely affect our results.
We are affected by inflation and changing prices primarily through purchasing products from our global suppliers, increased operating costs and expenses, and fluctuations in interest rates. Labor costs and commodity costs are currently increasing in some of the countries where our products are manufactured. For example, prices for cotton, a key input of our apparel products, have risen to a level significantly higher than the long-term average. The price increase is attributable to supply and demand factors, which include reductions in the 2010 global production as a result of floods and poor harvests in certain parts of the world, including Asia. We anticipate increases in the cost of production for our vendors in the current year, including increases in cotton prices and labor rates. If our customers are resistant to paying higher prices for our products, and if we are unable to absorb increased costs of goods by reducing our manufacturing or supply chain costs or lowering our overall cost structure, our profitability may be materially adversely affected.
We may not be able to continue our current level of sales and earnings, which could have an adverse effect on our results of operations and financial condition.
In recent years, we realized substantial growth in sales, including growth during the economic downturn. Our growth, if any, may not continue at the historical rates. Our performance is dependent on and affected by many factors. We expect that future increases in net sales and net income, if any, will be dependent on our ability, among other factors, to expand our newer growth concept, Crazy 8, and improve its financial performance; to expand all of our retail concepts internationally; to generate more sales to existing customers in the core Gymboree division through growth of the Boy department business; and to attract new customers and increase sales to existing customers by leveraging the Companys loyalty program, direct mail campaigns and other marketing efforts. Other factors that could impact our sales and earnings growth are discussed elsewhere in this section and in this prospectus. Any decline in our sales or earnings could have a material adverse effect on our results of operations and financial condition.
Our business may be negatively impacted by consumer product safety laws, regulations or related legal actions.
Our products are subject to consumer product safety laws, as well as regulations and standards with respect to product quality and safety set by various governmental authorities, including the Consumer Product Safety Commission. New consumer product safety laws or changes to existing laws and regulations may make certain products unsalable or require us to incur significant compliance costs, which could have a material adverse effect on our earnings. Our inability, or that of our vendors or manufacturers, to comply on a timely basis with such laws and regulatory requirements could result in significant fines or penalties, which could adversely affect our reputation and earnings.
Although we currently test products sold in our stores and at our Gymboree Play & Music sites, we have in the past and may in the future need to recall products that we may later determine may present safety issues. If we or the Consumer Product Safety Commission recall a product sold in our stores, we could experience negative publicity and product liability lawsuits, which could have a material adverse effect on our reputation, financial position and earnings.
Our business may be harmed by additional U.S. regulation of foreign trade or delays caused by additional U.S. customs requirements.
Our business is subject to the risk that the United States may adopt additional regulations relating to imported apparel products, including quotas, duties, taxes and other charges or restrictions on imported apparel. We cannot predict whether additional U.S. quotas, duties, taxes or other charges or restrictions will be imposed
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upon the importation of our products in the future, or what effect any such actions would have on our business, financial position and operating results. If the U.S. government imposes any such charges or restrictions, our supply of products could be disrupted and their cost could substantially increase, either of which could have a material adverse effect on our operating results. Unforeseen delays in customs clearance of any goods could have a material adverse effect on our ability to deliver complete shipments to our stores in a timely manner, which in turn could have a material adverse effect on our business and operating results.
Competition and the strength of our competitors may impair our ability to maintain or grow our sales and adversely affect our operating results.
The apparel segment of the specialty retail industry is highly competitive. The principal factors of competition for retail sales are product design, product quality, brand image, customer service and pricing. Our Gymboree, Janie and Jack and Crazy 8 brands compete on a national level with BabyGap and GapKids (divisions of Gap Inc.), certain leading department stores operating in malls, outlet centers or street locations, certain discount retail chains such as Old Navy (a division of Gap Inc.), The Childrens Place, Wal-Mart, Target and Carters, as well as a wide variety of local and regional specialty stores, certain other retail chains, and childrens retailers that sell their products by mail order, online or through outlet malls. Many of these competitors are larger than us and have substantially greater financial, marketing and other resources. Increased competition may reduce sales and gross margins, and increase operating expenses, each of which could have a material adverse effect on our operating results.
We may not be able to successfully operate if we lose key personnel, are unable to hire qualified additional personnel, or experience turnover of our management team.
Our continued success is largely dependent on the individual efforts and abilities of our senior management team and certain other key personnel and on our ability to retain current management and to attract and retain qualified key personnel in the future. The loss of certain key employees or our inability to continue to attract and retain other qualified key employees could have a material adverse effect on our growth, operations and financial position.
Because we purchase our products abroad, our business is sensitive to risks associated with international business.
Our products are currently manufactured to our specifications by independent factories located primarily in Asia. As a result, our business is subject to the risks generally associated with doing business abroad, such as foreign governmental regulations, currency fluctuations, adverse conditions such as epidemics, natural disasters, wars, acts of terrorism, social or political unrest, disruptions or delays in transportation or customs clearance, local business practices and changes in economic conditions in countries in which our suppliers are located. We cannot predict the effect of such factors on our business relationships with foreign suppliers or on our ability to deliver products into our stores in a timely manner. If even a small portion of our current foreign manufacturing sources or textile mills were to cease doing business with us for any reason, such actions could have a material adverse effect on our operating results and financial position. If we experience significant increases in demand or need to replace an existing vendor, there can be no assurance that additional manufacturing capacity will be available when required on terms that are acceptable to us, or at all, or that any vendor would allocate sufficient capacity to us in order to meet our requirements.
In addition, even if we are able to expand existing or find new manufacturing sources, we may encounter delays in production and added costs as a result of the time it takes to train our vendors in our methods, products, quality control standards, and environmental, labor, health, and safety standards. Moreover, in the event of a significant disruption in the supply of the fabrics or raw materials used by our vendors in the manufacture of our products, our vendors might not be able to locate alternative suppliers of materials of comparable quality at an acceptable price, or at all. Any delays, interruption, or increased costs in the manufacture of our products could have an adverse effect on our ability to meet consumer demand for our products and result in lower sales and net
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income. In addition, we are currently pursuing strategies to reduce product costs. These strategies may result in sourcing products from factories from which we have not previously purchased products and which may be in countries in which we have not done business before and may subject us to additional risk.
Currency exchange rate fluctuations may adversely affect our business and operating results.
There has been significant volatility in the value of the U.S. dollar against other foreign currencies in the recent past. While our business is primarily conducted in U.S. dollars, we purchase substantially all of our products overseas (primarily from China, Indonesia, Thailand and India). Cost increases caused by currency exchange rate fluctuations could make our products less competitive or have an adverse effect on our profitability. Currency exchange rate fluctuations could also disrupt the business of the third-party manufacturers that produce our apparel by making their purchases of raw materials more expensive and more difficult to finance. Such fluctuations could have a material adverse effect on our business and earnings as a result.
We are dependent on one facility for distribution of products to all of our stores.
We handle merchandise distribution for all of our stores from a single facility in Dixon, California. Any significant interruption in the operation of this distribution facility due to natural disasters, accidents, system failures or other unforeseen causes could delay or impair our ability to distribute merchandise to our stores, which could cause sales to decline and have a material adverse effect on our earnings and financial position.
In addition, we use an automated unit sortation system to manage the order processing for all of our direct-to-consumer businesses. In the event that this unit sortation system becomes inoperable for any reason, we would not be able to ship all direct-to-consumer orders in the timely manner that our customers expect. As a result, we could experience a reduction in our direct-to-consumer business, which could negatively impact sales and profitability.
We may be subject to negative publicity or be sued if our manufacturers violate labor laws or engage in practices that our customers believe are unethical.
We require our independent manufacturers to operate their businesses in compliance with the laws and regulations that apply to them. Our sourcing personnel periodically visit and monitor the operations of our independent manufacturers, but we cannot control their business or labor practices. We also rely on independent third parties to audit our factories for compliance with safety and labor laws on an annual basis. If one of our independent manufacturers violates or is suspected of violating labor laws or other applicable regulations, or if such manufacturer engages in labor or other practices that diverge from those typically acceptable in the United States or any of the other countries in which we operate, we could in turn experience negative publicity or be sued. Negative publicity or legal actions regarding our manufacturers or the production of our products could have a material adverse effect on our reputation, sales, business, financial position and operating results.
The loss of a key buying agent could disrupt our ability to deliver our inventory supply in a timely fashion, impacting its value.
One buying agent manages a substantial portion of our inventory purchases (approximately 80% for the fiscal year ended January 29, 2011). Although we believe that other buying agents could be identified and retained to place our required foreign production, the loss of this buying agent could result in delays in procuring inventory, which could result in a material adverse effect on our business and operating results.
We are dependent on third parties for critical business functions, and their failure to provide services to us could have a material adverse effect on our business and operating results.
We rely on third parties for critical functions involving credit card processing and store communications. These third parties may experience financial difficulties and unforeseen business disruptions that could adversely affect their ability to perform their contractual obligations to us, including their obligations to comply with
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Payment Card Industry (PCI) data security standards. Any such failure to provide services to us or to comply with PCI security requirements could impact our internal communications systems, including our ability to accept payment cards, which could have an adverse impact on business operations and lead to lower sales. Although we believe that other vendors could be identified and retained to provide these services, a change in vendors would take time and could result in a material adverse effect on our business and operating results and adverse publicity to us.
Damage to our computer systems could severely impair our ability to manage our business.
Our operations depend on our ability to maintain and protect the computer systems we use to manage our purchase orders, store inventory levels, web applications, accounting functions and other critical aspects of our business. Our systems are vulnerable to damage from fire, floods, earthquakes, power loss, telecommunications failures and similar events. We have computer systems in each of our stores, with the main database servers for our systems located in San Francisco, California, which is located on or near known earthquake fault zones. An earthquake or other disaster could have a material adverse impact on our business and operating results not only by damaging our stores or corporate headquarters, but also by damaging our main servers, which could disrupt our business for an indeterminate length of time.
Our business may be harmed if our or our vendors computer network security or any of the databases containing customer or other personal information maintained by us or our third-party providers is compromised.
The protection of customer, employee and company data in the information technology systems we utilize (including those maintained by third-party providers) is critical. Despite the efforts by us and our vendors to secure computer networks utilized for our business, security could be compromised, confidential information, such as customer credit card numbers or other personally identifiable customer information we or our vendors collect, could be misappropriated, or system disruptions could occur. Any of these events could lead to costly investigations and litigation, as well as potential regulatory or other actions by governmental agencies. As a result of any of the foregoing, we may experience adverse publicity, loss of sales, the cost of remedial measures, and/or significant expenditures to reimburse third parties for damages, which could adversely impact our results of operations.
We believe that we are currently compliant with PCI data security standards, which require annual audits by independent qualified security assessors to assess compliance. Failure by us or our vendors to comply with the security requirements or rectify a security issue may result in fines and the imposition of restrictions on our ability to accept payment cards, which could adversely affect our operations. There can be no assurance that we will be able to continue to satisfy PCI security standards. In addition, PCI is controlled by a limited number of vendors who have the ability to impose changes in PCIs fee structure and operational requirements without negotiation. Such changes in fees and operational requirements may result in our failure to comply with PCI security standards, as well as significant unanticipated expenses.
Our ability to successfully implement significant information technology systems is critical to our business.
We plan to continue to upgrade our information technology infrastructure. Such technology systems changes are complex and could cause disruptions that may adversely affect our business. While management strives to ensure the orderly implementation of various information technology systems, we may not be able to successfully execute these changes without potentially incurring a significant disruption to our business. Even if we are successful with implementation, we may not achieve the expected benefits from these initiatives, despite having expended significant capital. We may also determine that additional investment is required to bring our systems to their desired state; this could result in a significant additional investment of time and money and increased implementation risk. Furthermore, we intend to rely on third parties to fulfill contractual obligations related to some of these system upgrades. Failure of these third parties to fulfill their contractual obligations could lead to significant expenses or losses due to a disruption in business operations.
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We must timely and effectively deliver merchandise to our stores and customers.
We cannot control all of the various factors that might affect our fulfillment rates for online sales and timely and effective merchandise delivery to our stores. We rely upon third-party carriers for our merchandise shipments to and from stores and reliable data regarding the timing of those shipments. In addition, we are heavily dependent upon two carriers for the delivery of our merchandise to online customers. Labor disputes, union organizing activity, inclement weather, natural disasters and acts of terrorism could affect those carriers ability to provide delivery services to meet our shipping needs. Failure to deliver merchandise in a timely and effective manner could damage our reputation and sales.
Our online businesses face distinct operating risks.
The successful operation of our online businesses depends on efficient and uninterrupted operation of our order-taking and fulfillment operations. Disruptions or slowdowns in these areas could result from disruptions in telephone service or power outages, inadequate system capacity, system issues, computer viruses, human error, changes in programming, natural disasters or adverse weather conditions. Our online businesses are generally vulnerable to additional risks and uncertainties associated with the Internet, including changes in required technology and other technical failures, as well as changes in applicable federal and state regulation, security breaches and consumer privacy concerns. Problems in any of these areas could result in a reduction in sales, increased costs and damage to our reputation and brands.
We may acquire businesses in the future to support long-term growth. We have no experience acquiring and integrating businesses into our organization and we may not be successful.
We regularly evaluate businesses as potential acquisition targets to support our long-term growth. The Company has not acquired businesses in the past and has no experience acquiring, integrating and growing existing businesses. The acquisition of a business would divert managements attention from our existing brands and operations, require significant operational support and increase demands on systems and staffing. All of these effects could negatively impact our existing business. In addition, the acquisition and integration of an acquired business could result in significant additional costs that could negatively impact our working capital position, cash flow and operating results.
Our growth would be hampered if we are unable to locate new stores and relocate existing stores in appropriate retail venues and shopping areas.
Our stores must be located in appropriate retail spaces in areas with demographic characteristics consistent with our customer base. These locations tend to be limited to malls and similar venues where the market for available space has historically been very competitive. The location of acceptable store sites and the negotiation of acceptable lease arrangements require considerable time, effort and expense. Our ability to lease desirable retail space for expansion and relocation of stores, and to renew our existing store leases, on favorable economic terms is essential to our revenue and earnings growth. Approximately 13 and 89 store leases will come up for renewal during the remainder of fiscal 2011 and 2012, respectively. We are also in the process of negotiating lease terms for approximately 30 stores, which are currently operating under month-to-month terms. There can be no assurance that we will be able to achieve our store expansion goals, effectively manage our growth, successfully integrate the planned new stores into our operations, or profitably operate our new and remodeled stores. Failure to obtain and renew leases for a sufficient number of stores on acceptable terms would have a material adverse effect on our revenues and operating results.
We may be unable to protect our trademarks and other intellectual property rights.
We believe that our trademarks and service marks are important to our success and our competitive position due to their name recognition with our customers. We devote substantial resources to the establishment and protection of our trademarks and service marks on a worldwide basis. We are not aware of any material claims of infringement or material challenges to our right to use any of our trademarks and service marks in the
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United States or abroad. Nevertheless, the actions we have taken to establish and protect our trademarks and service marks may not be adequate to prevent imitation of our products by others or to prevent others from seeking to block sales of our products as a violation of the trademarks, service marks and proprietary rights of others, particularly as we continue to expand our business outside the United States. Also, others may assert rights in, or ownership of, trademarks and other proprietary rights of ours and we may not be able to successfully resolve these types of conflicts to our satisfaction. In addition, the laws of certain foreign countries may not protect proprietary rights to the same extent as do the laws of the United States.
We are, and may continue to be in the future, a party to legal proceedings that could result in unexpected adverse outcomes.
We were named as a defendant in certain lawsuits relating to the Acquisition that sought to enjoin the Acquisition and/or to compel the parties to the Merger Agreement to supplement the public filings that they made in connection with the Acquisition. These lawsuits alleged various wrongdoings, including that Gymborees Board of Directors breached its fiduciary duties to Gymboree stockholders in connection with the Acquisition and that Bain Capital aided and abetted that breach. On November 12, 2010, Gymboree and the other defendants in these litigations entered into an agreement in principle with the plaintiffs to settle these litigations. The agreement, which was negotiated at arms length between and among the parties, resolved all allegations by the plaintiffs in connection with the Acquisition. Pursuant to the agreement, the defendants agreed to make certain supplemental public disclosures related to the Acquisition. The parties are negotiating the final terms and conditions of a corresponding formal stipulation of settlement. Any such stipulation of settlement would remain subject to court approval. See BusinessLegal Proceedings.
From time to time, we are a party to other legal proceedings, including matters involving personnel and employment issues, personal injury and other proceedings arising in the ordinary course of business. In addition, there are an increasing number of cases being filed in the retail industry generally that contain class action allegations, such as such those relating to privacy and wage and hour laws. We evaluate our exposure to these legal proceedings and establish reserves for the estimated liabilities in accordance with generally accepted accounting principles. Assessing and predicting the outcome of these matters involves substantial uncertainties. Although not currently anticipated by management, unexpected outcomes in these legal proceedings, or changes in managements evaluations or predictions and accompanying changes in established reserves, could have a material adverse impact on our financial results.
We may experience fluctuations in our tax obligations and effective tax rate.
We are subject to income taxes in substantially all tax jurisdictions in the United States, Canada, Puerto Rico and Australia. We record tax expense based on our estimates of future payments, which include reserves for estimates of uncertain tax positions. At any time, many tax years are subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may impact the ultimate settlement of these tax positions. As a result, we expect that there could be ongoing variability in our quarterly tax rates as taxable events occur and exposures are re-evaluated. Further, our effective tax rate in a given financial statement period may be materially impacted by changes in the mix and level of earnings.
We are also subject to sales and use taxes, as well as other local taxes, in substantially all tax jurisdictions in the United States, Canada, Puerto Rico and Australia. At any time, many tax years are subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may adversely impact the ultimate settlement of these tax positions and our financial results.
Our performance is dependent on attracting and retaining a large and growing number of qualified team members.
Many of those team members are in entry-level or part-time positions with historically high rates of turnover. Our ability to meet our labor needs while controlling our costs is subject to external factors such as unemployment levels, minimum wage legislation, health care legislation and changing demographics. In
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addition, our labor costs are influenced by health care and workers compensation costs, both of which have been rising in recent years. If we cannot hire enough qualified employees, or if there is a disruption in the supply of personnel we hire from third-party providers, especially during our peak season or certain high-volume events, our customer service levels and our operations could be negatively impacted.
Changes in seasonal consumer spending patterns that are beyond our control could harm our business.
Historically, a significant portion of our retail sales have been realized during the holiday season in November and December. We have also experienced periods of increased sales activity in the early spring, during the period leading up to the Easter holiday, and in the early fall, in connection with back-to-school sales. Changes in seasonal consumer spending patterns for reasons beyond our control could result in lower-than-expected sales during these periods. For example, the nature and pace of the recovery from the global economic downturn may have unanticipated effects on consumer spending patterns. Such circumstances could cause us to have excess inventory, necessitating markdowns to dispose of these excess inventories, which would reduce our profitability. Any failure by us to meet our business plan for, in particular, the third or fourth quarter of any fiscal year would have a material adverse effect on our earnings, which in all likelihood would not be offset by satisfactory results achieved in other quarters of the same fiscal year in which sales are less concentrated. Also, because we typically spend more in labor costs during the holiday season to hire temporary store employees in anticipation of holiday spending, a shortfall in expected sales during that period could result in a disproportionate decrease in our net income.
Our growth would be hampered if we are unable to successfully open new stores.
Our growth depends in large part on our ability to successfully open new stores in both the United States and abroad, which in turn is dependent on a number of factors, including our ability to hire and train skilled store operating and management teams, secure appropriate retail space, and complete construction within planned timelines and budgets. There can be no assurance that we will successfully open the number of stores we plan, and the resulting impact on our growth rate could have an adverse effect on our results of operations and financial condition.
Our performance is dependent on customer traffic in shopping malls.
We are dependent upon the continued popularity of malls as a shopping destination and the ability of shopping mall anchor tenants and other attractions to generate customer traffic. A sluggish recovery of the United States economy or an uncertain economic outlook could continue to lower consumer spending levels and cause a decrease in shopping mall traffic, each of which would adversely affect our growth, sales, and profitability. Further, any terrorist act, natural disaster, or public health concern, including infectious diseases, that decreases the level of mall traffic or other shopping traffic, or that affects our ability to open and operate stores in affected areas, could have a material adverse effect on our business.
In addition, we lease a large number of our stores in malls owned and operated by highly leveraged real estate development companies. The inability of any one of these companies to refinance its debt when it comes due could result in mall closures or in foreclosures and distress sales of the mall properties. The closure of a mall or a change of ownership that results in changes or disruptions in mall operations, changes in tenant mix or that otherwise impacts the character of the mall could affect our stores in those malls and could in turn have a material adverse effect on our business, financial condition and operating results.
Our efforts to expand internationally through franchising and similar arrangements may not be successful and could impair the value of our brands.
We have entered into a franchise agreement with an unaffiliated third party to operate stores in certain countries in the Middle East. Under this agreement, third parties will operate stores that sell apparel, purchased from us, under the Gymboree name. We have no experience managing an apparel retail franchise relationship
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and this arrangement may not be successful. While we expect that this will be a small part of our business in the near future, we plan to continue to increase these types of arrangements over time as part of our efforts to expand internationally. The effect of these arrangements on our business and operating results is uncertain and will depend upon various factors, including the demand for our products in new markets and our ability to successfully identify appropriate third parties to act as franchisees, distributors, or in a similar capacity. In addition, certain aspects of these arrangements are not directly within our control. Other risks that may affect these third parties include general economic conditions in specific countries or markets, changes in diplomatic and trade relationships, and political instability. Moreover, while the agreements we have entered into and plan to enter into in the future provide us with certain termination rights, to the extent that these third parties do not operate their stores in a manner consistent with our requirements regarding our Gymboree brand identity and customer experience standards, the value of our Gymboree brand could be impaired. A failure to protect the value of our Gymboree brand or any other harmful acts or omissions by a franchisee could have an adverse effect on our operating results and our reputation.
Our efforts to expand internationally through 100%-owned operations may not be successful.
We currently operate retail stores in the United States, Canada, Puerto Rico and Australia. In addition to our international expansion through franchising and similar arrangements, we also plan for direct international expansion in the future, starting with the two Gymboree retail stores we opened in Australia in fiscal 2010. We have no prior experience operating retail stores in Australia. In addition, we operated retail stores in the United Kingdom and Ireland in the past, which were ultimately unsuccessful, and we may not be successful executing our international expansion strategy through 100%-owned operations. Our success will depend on our ability to, among other factors, secure leases for retail spaces with demographic characteristics consistent with our customer base, hire qualified personnel and tailor our marketing messages and product to reflect the customs of the countries in which we intend to operate. Failure to successfully expand internationally through 100%-owned operations could have a significant impact on our growth rate and have an adverse effect on our results of operations and financial condition.
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We will not receive any cash proceeds from the issuance of the exchange notes. In consideration for issuing the exchange notes as contemplated in this prospectus, we will receive in exchange existing notes in like principal amount. The existing notes surrendered in exchange for exchange notes will be retired and canceled. Issuance of the exchange notes will not result in a change in the amount of our outstanding debt.
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Purpose of the Exchange Offer
Concurrently with the consummation of the Transactions, we entered into a registration rights agreement with Morgan Stanley & Co. Incorporated and Credit Suisse Securities (USA) LLC, as representatives of the initial purchasers of the existing notes, in which we agreed, among other things, to:
| use our commercially reasonable efforts to file a registration statement with the SEC with respect to the exchange of the existing notes for the exchange notes on or prior to 250 days after the date of the consummation of the Acquisition; and |
| use our commercially reasonable efforts to cause the exchange offer registration statement to be declared effective by the SEC under the Securities Act, to consummate the exchange offer on or before the 250th day after the date of the consummation of the Acquisition and to cause the exchange offer registration statement to remain effective until such consummation. |
We are making the exchange offer to satisfy certain of our obligations under the registration rights agreement. A copy of the registration rights agreement has been filed as an exhibit to the registration statement of which this prospectus is a part, and this summary of the material provisions of the registration rights agreement does not purport to be complete and is qualified in its entirety by reference to the complete registration rights agreement.
Each broker-dealer that receives exchange notes for its own account in exchange for existing notes, where the existing notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. See Plan of Distribution.
Resale of Exchange Notes; Representations
Under existing interpretations of the Securities Act by the staff of the SEC contained in several no-action letters to third parties, we believe that the exchange notes will generally be freely transferable by holders who have validly participated in the exchange offer without further registration under the Securities Act (assuming the truth of certain representations required to be made by each holder of notes, as set forth below). For additional information on the staffs position, we refer you to the following no-action letters: Exxon Capital Holdings Corporation, available April 13, 1988; Morgan Stanley & Co. Incorporated, available June 5, 1991; and Shearman & Sterling, available July 2, 1993. However, any purchaser of existing notes who is an affiliate of ours of any guarantor or who intends to participate in the exchange offer for the purpose of distributing the exchange notes or who is a broker-dealer who purchased existing notes from us to resell pursuant to Rule 144A or any other available exemption under the Securities Act:
| will not be able to tender its existing notes in the exchange offer; |
| will not be able to rely on the interpretations of the staff of the SEC; and |
| must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the existing notes unless such sale or transfer is made pursuant to an exemption from these requirements. |
If you wish to exchange existing notes for exchange notes in the exchange offer, you will be required to make representations in a letter of transmittal which accompanies this prospectus, including that:
| you are not an affiliate of ours or any guarantor (as defined in Rule 405 under the Securities Act); |
| any exchange notes to be received by you will be acquired in the ordinary course of your business; |
| you not engaged in, and do not intend to engage in, and have no arrangements or understanding with any person to participate in, a distribution (within the meaning of the Securities Act) of the exchange notes in violation of the provisions of the Securities Act; and |
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| if you are a broker-dealer, you acquired the existing notes for your own account as a result of market-making or other trading activities (and, as such, you are a participating broker-dealer), you have not entered into any arrangement or understanding with us or any of our affiliates to distribute the exchange notes and you will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of the exchange notes. |
Rule 405 under the Securities Act provides that an affiliate of, or person affiliated with, a specified person, is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified.
The SEC has taken the position that participating broker-dealers may be deemed to be underwriters within the meaning of the Securities Act, and, accordingly, may fulfill their prospectus delivery requirements with respect to the exchange notes, other than a resale of an unsold allotment from the original sale of the notes, with the prospectus contained in the exchange offer registration statement. Under the registration rights agreement, we have agreed to make available for a period of up to 180 days after consummation of the exchange offer a prospectus meeting the requirements of the Securities Act to any participating broker dealer and any other persons with similar prospectus delivery requirements for use in connection with any resale of the exchange notes.
Terms of the Exchange Offer
This prospectus and the accompanying letter of transmittal contain the terms and conditions of the exchange offer. Upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal, we will accept for exchange all existing notes that are properly tendered and not withdrawn on or prior to 5:00 p.m., New York City time, on the expiration date. After authentication of the exchange notes by the trustee or an authentication agent, we will issue and deliver $1,000 principal amount of exchange notes in exchange for each $1,000 principal amount of outstanding existing notes accepted in the exchange offer. Holders may tender some or all of their existing notes in the exchange offer in denominations of $2,000 and higher integral multiples of $1,000.
The form and terms of the exchange notes are identical in all material respects to the form and terms of the existing notes, except that:
(1) the offering of the exchange notes has been registered under the Securities Act;
(2) the exchange notes generally will not be subject to transfer restrictions or have registration rights; and
(3) certain provisions relating to additional interest on the existing notes in the event of specified registration defaults will be eliminated.
The exchange notes will evidence the same debt as the existing notes. The exchange notes will be issued under and entitled to the benefits of the indenture.
In connection with the issuance of the existing notes, we made arrangements for the existing notes to be issued and transferable in book-entry form through the facilities of DTC, acting as a depositary. The exchange notes will also be issuable and transferable in book-entry form through DTC.
The exchange offer is not conditioned upon any minimum aggregate principal amount of existing notes being tendered. However, our obligation to accept existing notes for exchange pursuant to the exchange offer is subject to certain customary conditions that we describe under Conditions below.
Holders who tender existing notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the conditions described in the instructions to the letter of transmittal, transfer taxes with respect to the exchange of existing notes pursuant to the exchange offer. See Fees and Expenses for more detailed information regarding the expenses of the exchange offer.
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By executing or otherwise becoming bound by the letter of transmittal, you will be making the representations described under Exchange Offer Procedures below.
Expiration Date; Extensions; Amendments
The term expiration date will mean 5:00 p.m., New York City time, on , 2011, unless we, in our sole discretion, extend the exchange offer, in which case the term expiration date will mean the latest date and time to which we extend the exchange offer.
To extend the exchange offer, we will:
| notify the exchange agent of any extension orally or in writing (if orally to be promptly confirmed in writing); and |
| notify the registered holders of the existing notes by means of a press release or other public announcement, each before 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. |
We reserve the right, in our reasonable discretion:
| to delay accepting any existing notes; |
| to extend the exchange offer; or |
| if any conditions listed below under Conditions are not satisfied, to terminate the exchange offer by giving oral or written notice of the delay, extension or termination to the exchange agent. |
We will follow any delay in acceptance, extension or termination as promptly as practicable by oral or written notice to the registered holders. If we amend the exchange offer in a manner we determine constitutes a material change, we will promptly disclose the amendment in a prospectus supplement that we will distribute to the registered holders.
Interest on the Exchange Notes
Interest on the exchange notes will accrue from the last interest payment date on which interest was paid on the existing notes surrendered in exchange for exchange notes or, if no interest has been paid on the existing notes, from December 1, 2010. Interest on the exchange notes will be payable semi-annually on June 1 and December 1 of each year, commencing on , 2011.
Exchange Offer Procedures
Except as stated under Book-Entry Transfer, to tender your existing notes in the exchange offer, you must:
| complete, sign and date the enclosed letter of transmittal, or a copy of it; |
| have the signature on the letter of transmittal guaranteed if required by the letter of transmittal or transmit an agents message in connection with a book-entry transfer; and |
| mail, fax or otherwise deliver the letter of transmittal or copy to the exchange agent at the address set forth below under Exchange Agent before the expiration date. |
In addition, either:
| the exchange agent must receive (i) a timely confirmation of a book-entry transfer of your existing notes, if that procedure is available, into the account of the exchange agent at DTC, the book-entry transfer facility, under the procedure for book-entry transfer described below before the expiration date or (ii) certificates for your existing notes, the letter of transmittal and other required documents before the expiration date; or |
| you must comply with the guaranteed delivery procedures described below. |
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For your existing notes to be tendered effectively, the exchange agent must receive a valid agents message through DTCs Automated Tender Offer Program (ATOP) or a letter of transmittal and other required documents before the expiration date. Delivery of the existing notes shall be made by book-entry transfer in accordance with the procedures described below. Confirmation of the book-entry transfer must be received by the exchange agent before the expiration date.
The term agents message means a message, transmitted by a book-entry transfer facility to, and received by, the exchange agent forming a part of a confirmation of a book-entry, which states that the book-entry transfer facility has received an express acknowledgment from the participant in the book-entry transfer facility tendering the outstanding securities that the participant has received and agrees:
| to participate in ATOP; |
| to be bound by the terms of the letter of transmittal; and |
| that we may enforce the agreement against the participant. |
If you do not withdraw your tender before the expiration date, it will constitute an agreement between you and us in compliance with the terms and conditions in this prospectus and in the letter of transmittal.
THE METHOD OF DELIVERY OF YOUR EXISTING NOTES, A LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK. INSTEAD OF DELIVERY BY MAIL, WE RECOMMEND THAT YOU USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. PLEASE DO NOT SEND A LETTER OF TRANSMITTAL OR OUTSTANDING NOTES DIRECTLY TO US. YOU MAY REQUEST YOUR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO MAKE THE EXCHANGE ON YOUR BEHALF.
Each broker-dealer that receives exchange notes for its own account in exchange for existing notes, where the existing notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. See Plan of Distribution.
Procedure if the Existing Notes Are Not Registered in Your Name
If you are a beneficial owner whose existing notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you want to tender your existing notes, you should contact the registered holder promptly and instruct the registered holder to tender on your behalf. If you want to tender on your own behalf, you must, before completing and executing a letter of transmittal and delivering your existing notes, either make appropriate arrangements to register ownership of the existing notes in your name or obtain a properly completed bond power or other proper endorsement from the registered holder. We urge you to act immediately since the transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration date.
Book-Entry Transfer
The exchange agent will make requests to establish accounts at the book-entry transfer facility for purposes of the exchange offer promptly after the date of this prospectus. If you are a financial institution that is a participant in the book-entry transfer facilitys systems, you may make book-entry delivery of your existing notes being tendered by causing the book-entry transfer facility to transfer your existing notes into the exchange agents account at the book-entry transfer facility in compliance with the appropriate procedures for transfer. However, although you may deliver your existing notes through book-entry transfer at the book-entry transfer facility, you must transmit, and the exchange agent must receive, a letter of transmittal or copy of the letter of transmittal, with any required signature guarantees and any other required documents, except as discussed in the
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following paragraph, on or before the expiration date or the guaranteed delivery procedures outlined below must be complied with. Tender will not be deemed made until such documents are received by the exchange agent. Delivery of documents to the book-entry transfer facility does not constitute delivery to the exchange agent.
DTCs ATOP is the only method of processing the exchange offer through DTC. To accept the exchange offer through ATOP, participants in DTC must send electronic instructions to DTC through DTCs communication system instead of sending a signed, hard copy letter of transmittal. We understand DTC is obligated to communicate those electronic instructions to the exchange agent. To tender your existing notes through ATOP, the electronic instructions sent to DTC and transmitted by DTC to the exchange agent must contain the participants acknowledgment of its receipt of and agreement to be bound by the letter of transmittal for your existing notes.
Beneficial Owner Instructions to Holders of Existing Notes
Only a holder whose name appears on a DTC security position listing as a holder of existing notes, or the legal representative or attorney-in-fact of such a holder, may execute and deliver the letter of transmittal.
Holders of existing notes who are not registered holders of, and who seek to tender, existing notes should (1) obtain a properly completed letter of transmittal for such existing notes from the registered holder with signatures guaranteed by an eligible guarantor institution, as defined in Rule 17Ad-15 under the Exchange Act, and obtain and include with such letter of transmittal existing notes properly endorsed for transfer by the registered holder thereof or accompanied by a written instrument or instruments of transfer or exchange from the registered holder with signatures on the endorsement or written instrument or instruments of transfer or exchange guaranteed by an eligible guarantor institution or (2) effect a record transfer of such existing notes and comply with the requirements applicable to registered holders for tendering existing notes before 5:00 p.m., New York City time, on the expiration date. Any existing notes properly tendered before 5:00 p.m., New York City time, on the expiration date accompanied by a properly completed letter of transmittal will be transferred of record by the registrar either prior to or as of the expiration date at our discretion. We have no obligation to transfer any existing notes from the name of the registered holder of the note if we do not accept these existing notes for exchange.
Issuance of exchange notes in exchange for existing notes will be made only against deposit of the tendered existing notes.
We will decide all questions as to the validity, form, eligibility, acceptance and withdrawal of tendered existing notes, and our determination will be final and binding on you. We reserve the absolute right to reject any and all existing notes not properly tendered or reject any existing notes which would be unlawful in the opinion of our counsel. We also reserve the right to waive any defects, irregularities or conditions of tender as to particular existing notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in a letter of transmittal, will be final and binding on all parties. You must cure any defects or irregularities in connection with tenders of existing notes as we determine. Although we intend to notify you of defects or irregularities with respect to tenders of your existing notes, we, the exchange agent or any other person will not incur any liability for failure to give any notification. Your tender of existing notes will not be deemed to have been made until any defects or irregularities have been cured or waived. Any of your existing notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the exchange agent to you, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date.
Guaranteed Delivery Procedures
If you wish to tender your existing notes but your existing notes are not immediately available, or time will not permit your existing notes or other required documents to reach the exchange agent before the expiration date, or the procedure for book-entry transfer cannot be completed on a timely basis, you may affect a tender if:
| the tender is made through an eligible guarantor institution; |
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| prior to the expiration date, the exchange agent receives from such eligible guarantor institution a properly completed and duly executed notice of guaranteed delivery, by facsimile transmittal, mail or hand delivery, that (i) states the name and address of the holder, the certificate number(s) of such holders existing notes and the principal amount of such existing notes tendered; (ii) states that the tender is being made thereby; and (iii) guarantees that, within three New York Stock Exchange trading days after the expiration date, the letter of transmittal, or a facsimile thereof, together with the certificate(s) representing the existing notes to be tendered in proper form for transfer, or confirmation of a book-entry transfer into the exchange agents account at DTC of existing notes delivered electronically, and any other documents required by the letter of transmittal, will be deposited by the eligible guarantor institution with the exchange agent; and |
| such properly completed and executed letter of transmittal, or a facsimile thereof, together with the certificate(s) representing all tendered existing notes in proper form for transfer, or confirmation of a book-entry transfer into the exchange agents account at DTC of existing notes delivered electronically and all other documents required by the letter of transmittal are received by the exchange agent within three New York Stock Exchange trading days after the expiration date. |
Upon request, the exchange agent will send to you a notice of guaranteed delivery if you wish to tender your existing notes according to the guaranteed delivery procedures described above.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may withdraw tenders of existing notes at any time prior to the expiration date. For a withdrawal to be effective, the exchange agent must receive a written or facsimile transmission notice of withdrawal at its address set forth in this prospectus prior to the expiration date. Any such notice of withdrawal must:
| specify the name of the person who deposited the existing notes to be withdrawn; |
| identify the existing notes to be withdrawn, including the certificate number or number and principal amount of such existing notes or, in the case of existing notes transferred by book-entry transfer, the name and number of the account at DTC to be credited; and |
| be signed in the same manner as the original signature on the letter of transmittal by which such existing notes were tendered, including any required signature guarantee. |
We will determine in our sole discretion all questions as to the validity, form and eligibility, including time of receipt, of such withdrawal notices, and our determination shall be final and binding on all parties. We will not deem any properly withdrawn existing notes to have been validly tendered for purposes of the exchange offer, and we will not issue exchange notes with respect those existing notes unless you validly retender the withdrawn existing notes. You may retender properly withdrawn existing notes following one of the procedures described above under Exchange Offer Procedures at any time prior to the expiration date.
Conditions
Notwithstanding any other term of the exchange offer, we will not be required to accept for exchange, or exchange the exchange notes for, any existing notes, and may terminate or amend the exchange offer as provided in this prospectus before the acceptance of the existing notes, if:
| the exchange offer violates applicable law, rules or regulations or an applicable interpretation of the staff of the SEC; |
| an action or proceeding has been instituted or threatened in any court or by any governmental agency which might materially impair our ability to proceed with the exchange offer; |
| any stop order is threatened or in effect with respect to either (1) the registration statement of which this prospectus forms a part or (2) the qualification of the Indenture governing the existing and exchange notes under the Trust Indenture Act of 1939, as amended; |
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| there has been proposed, adopted or enacted any law, rule or regulation that, in our reasonable judgment would impair materially our ability to consummate the exchange offer; or |
| all governmental approvals which we deem necessary for the completion of the exchange offer have not been obtained. |
If we determine in our reasonable discretion that any of these conditions are not satisfied, we may:
| refuse to accept any existing notes and return all tendered existing notes to you; |
| extend the exchange offer and retain all existing notes tendered before the exchange offer expires, subject, however, to your rights to withdraw the existing notes; or |
| waive the unsatisfied conditions with respect to the exchange offer and accept all properly tendered existing notes that have not been withdrawn. |
If the waiver constitutes a material change to the exchange offer, we will promptly disclose the waiver by means of a prospectus supplement that we will distribute to the registered holders of the existing notes.
We are currently not aware of any governmental or regulatory approvals that are required in order to complete the exchange offer, other than the declaration of effectiveness of the registration statement of which this prospectus forms a part by the SEC.
Exchange Agent
We have appointed Deutsche Bank Trust Company Americas, the trustee under the indenture, as the exchange agent for the exchange offer. You should send all executed letters of transmittal to the exchange agent at one of the addresses set forth below. In such capacity, the exchange agent has no fiduciary duties and will be acting solely on the basis of our directions. You should direct questions, requests for assistance and requests for additional copies of this prospectus or of the letter of transmittal and requests for a notice of guaranteed delivery to the exchange agent addressed as follows:
By Mail, Hand or Overnight Delivery:
DB Services Americas, Inc. MS JCK01-D218 5022 Gate Parkway, Suite 200 Jacksonville, FL 32256 Attn: Reorganization Unit |
By Facsimile:
1-615-866-3889
For Information or Confirmation by Telephone:
1-800-735-7777, Option 1 |
Delivery to an address or facsimile number other than that listed above will not constitute a valid delivery.
Fees and Expenses
The registration rights agreement provides that we will bear all expenses in connection with the performance of our obligations relating to the registration of the exchange notes and the conduct of the exchange offer. These expenses include registration and filing fees, accounting and legal fees and printing costs, among others. We will pay the exchange agent the fees for its services as agreed to in writing between us and the exchange agent. We will also reimburse brokerage houses and other custodians, nominees and fiduciaries for customary mailing and handling expenses incurred by them in forwarding this prospectus and related documents to their clients that are holders of existing notes and for handling or tendering for such clients.
We have not retained any dealer-manager in connection with the exchange offer and will not pay any fee or commission to any broker, dealer, nominee or other person, other than the exchange agent, for soliciting tenders of existing notes pursuant to the exchange offer.
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Consequences of Failure to Exchange
Participation in the exchange offer is voluntary. We urge you to consult your legal, financial and tax advisors in making your decisions on what action to take. Existing notes that are not exchanged for exchange notes pursuant to the exchange offer will remain restricted securities. Accordingly, those existing notes may be resold only:
| as set forth in the legend printed on the existing notes as a consequence of the issuance of the existing notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws; and |
| as otherwise set forth in the offering memorandum distributed in connection with the private offering of the existing notes. |
In each case, the existing notes may be resold only in accordance with any applicable securities laws of any state of the United States or any other applicable jurisdiction.
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On October 11, 2010, we entered into an Agreement and Plan of Merger with Giraffe Holding, Inc. (Holding) and Giraffe Acquisition Corporation, an indirect 100%-owned subsidiary of Holding (Acquisition Sub), referred to in this prospectus as the Merger Agreement. Acquisition Sub and Holding are Delaware corporations formed by investment funds sponsored by Bain Capital Partners, LLC (Bain Capital or the Sponsor) solely for the purposes of completing the Acquisition and the other transactions described in this prospectus.
Pursuant to the Merger Agreement, Acquisition Sub accepted for payment all outstanding shares of the Companys common stock at a cash purchase price of $65.40 per share (the Offer Price). Acquisition Sub was merged with and into the Company on November 23, 2010 in accordance with the short-form merger provisions available under Delaware law, upon which the Company became an indirect 100%-owned subsidiary of Holding. In connection with the Acquisition, each issued and outstanding share was converted into the right to receive the Offer Price.
The total amount of the consideration payable in connection with the Acquisition was approximately $1.9 billion. The Acquisition and the related fees, expenses and original issue discount were financed with:
| the proceeds from the initial offering of the existing notes of approximately $400 million; |
| equity investments of $508 million from certain investment funds sponsored by Bain Capital, certain co-investors and certain members of the Company management team (see Certain Relationships and Related Party TransactionsSubscription Agreements for more information); |
| initial borrowings of $850 million in the aggregate under the Senior Credit Facilities, consisting of (i) $820.0 million of borrowings under a $820 million senior secured term loan and (ii) $30 million of borrowings under a $225 million senior secured asset-based revolving credit facility; and |
| approximately $165 million of available cash from the Companys balance sheet. |
The closing of the offering of the existing notes and the Senior Credit Facilities occurred substantially concurrently with the closing of the Acquisition on November 23, 2010. Effective February 11, 2011, we amended the terms of the $820 million senior secured term loan facility to, among other things, lower the interest rate by 50 basis points and remove select financial covenants.
The offering of the existing notes, the initial borrowings under the Senior Credit Facilities, the cash equity investment in Holding by investment funds sponsored by Bain Capital, the Acquisition, and other related transactions are collectively referred to in this prospectus as the Transactions.
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Ownership and Corporate Structure
Subsequent to the Transactions, we became an indirect 100%-owned subsidiary of Holding, an entity controlled by the Sponsor. The following chart illustrates our current ownership and corporate structure.
* | Guarantor of the existing notes and the exchange notes. Not all of the Companys subsidiaries guarantee the existing notes or the exchange notes offered hereby or the Senior Credit Facilities. See Description of the Exchange Notes. |
+ | Guarantor or co-borrower under the Senior Credit Facilities. |
(1) | Our Senior Credit Facilities are comprised of a $820 million senior secured term loan and a $225 million ABL Facility. See Description of Other Indebtedness. |
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated statement of income has been derived by the application of pro forma adjustments to our historical consolidated financial statements appearing elsewhere in this prospectus. In deriving the pro forma condensed consolidated statement of income, we have added our operating results for the predecessor period from January 31, 2010 to November 22, 2010 and the successor period from November 23, 2010 to January 29, 2011. As a result of the Acquisition on November 23, 2010 and the application of purchase accounting, a new basis of accounting began on November 23, 2010.
The unaudited pro forma condensed consolidated statement of income gives effect to the Transactions as if they had occurred on January 31, 2010. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. The unaudited pro forma condensed consolidated statement of income is for informational purposes only and does not purport to represent what our results of operations or financial information would have been if the Transactions had occurred as of the date indicated, nor do such data purport to project the results of operations for any future period.
The unaudited pro forma condensed consolidated statement of income has been prepared to give effect to the Transactions, including the accounting for the acquisition of our business as a purchase business combination in accordance with ASC 805, Business Combinations.
The unaudited pro forma condensed consolidated statement of income does not reflect non-recurring charges that have been or will be incurred in the connection with the Transactions, including (i) share-based compensation expense of approximately $27.7 million relating to the accelerated vesting of restricted stock and restricted stock units awarded to management and employees that vested upon a change in control; (ii) certain non-recurring expenses related to the Transactions of approximately $30.1 million required to be expensed by accounting standards; and (iii) recognition of inventory step-up of approximately $56.2 million from the allocation of fair value in purchase accounting.
The unaudited pro forma financial statements should be read in conjunction with the information contained in Selected Historical Consolidated Financial Data, Managements Discussion and Analysis of Financial Condition and Results of Operations, and the audited consolidated financial statements and the accompanying notes appearing elsewhere in this prospectus.
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THE GYMBOREE CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Predecessor | Successor | |||||||||||||||||||||||
January 31, 2010 to November 22, 2010 |
November 23, 2010 to January 29, 2011 |
Adjustments | Pro
Forma Fiscal Year Ended January 29, 2011 |
|||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||
Net sales: |
||||||||||||||||||||||||
Retail |
$ | 814,863 | $ | 244,287 | $ | (5,132 | ) | (a) | $ | 1,054,018 | ||||||||||||||
Play & Music |
10,847 | 2,814 | | 13,661 | ||||||||||||||||||||
Other |
1,173 | 447 | | 1,620 | ||||||||||||||||||||
Total net sales |
826,883 | 247,548 | (5,132 | ) | 1,069,299 | |||||||||||||||||||
Cost of goods sold, including buying and occupancy expenses |
(431,675 | ) | (184,483 | ) | 45,832 | (b)(c)(e) | (570,326 | ) | ||||||||||||||||
Gross profit |
395,208 | 63,065 | 40,700 | 498,973 | ||||||||||||||||||||
Selling, general and administrative expenses |
(307,361 | ) | (78,843 | ) | 40,751 | (d)(e)(g)(j)(k) | (345,453 | ) | ||||||||||||||||
Operating income (loss) |
87,847 | (15,778 | ) | 81,451 | 153,520 | |||||||||||||||||||
Interest income |
295 | 36 | (331 | ) | (i) | | ||||||||||||||||||
Interest expense |
(248 | ) | (17,387 | ) | (73,740 | ) | (f) | (91,375 | ) | |||||||||||||||
Other income, net |
119 | 53 | | 172 | ||||||||||||||||||||
Income (loss) before income taxes |
88,013 | (33,076 | ) | 7,380 | 62,317 | |||||||||||||||||||
Income tax (expense) benefit |
(36,449 | ) | 10,032 | (2,878 | ) | (h) | (29,295 | ) | ||||||||||||||||
Net income (loss) |
$ | 51,564 | $ | (23,044 | ) | $ | 4,502 | $ | 33,022 | |||||||||||||||
See accompanying notes to unaudited pro forma condensed consolidated statement of income.
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (in thousands)
(a) | Reflects the elimination of retail revenue recognized from deferred revenue associated with the Companys co-branded credit arrangement, which has been revalued to zero in purchase accounting. |
(b) | Reflects the elimination of deferred rent expense and construction allowance amortization recognized of $3.2 million and $4.5 million, respectively, both of which have been revalued to zero in purchase accounting. |
(c) | Reflects adjustments to cost of goods sold from an increase in the net book value (step-up) of inventory of approximately $56.2 million, which is amortized over the period the related inventory is sold, estimated to be 3 months. |
(d) | Represents an adjustment to reflect the aggregate annual fee of $3 million to be paid to affiliates of the Sponsor in accordance with the new management agreement to be entered into at the closing of the Transactions. |
(e) | Represents the following adjustments to depreciation and amortization: |
Fiscal Year Ended January 29, 2011 |
||||
Amortization expense (i) |
$ | 11,905 | ||
Depreciation expense (ii) |
59 | |||
Total pro forma adjustment |
$ | 11,964 | ||
Pro forma adjustment recorded in cost of goods sold |
$ | (1,662 | ) | |
Pro forma adjustment recorded in selling, general and administrative expenses |
13,627 | |||
Total pro forma adjustment |
$ | 11,964 | ||
(i) | Represents adjustments resulting from the increase in the estimated fair market values of intangible assets. Intangible assets subject to amortization include $36.4 million in customer relationships related to our loyalty program amortized on a straight-line basis over the estimated average customer life of 2.3 years, $7.0 million in fair market value of favorable leases and $16.6 million in fair market value of unfavorable leases amortized on a straight-line basis over the remaining lease life, $4.0 million related to the co-branded credit card agreement amortized on a straight-line basis over the estimated remaining contract term of 6.5 years and $1.9 million related to Gymboree Play & Music franchise agreements amortized on a straight-line basis over the estimated average life of a franchise relationship of 14 years. |
(ii) | Represents adjustments resulting from an increase in the net book value (step-up) of depreciable property and equipment of approximately $1.9 million with estimated weighted-average remaining useful lives of 25.0 years. |
(f) | Represents the following adjustments to interest expense, net: |
Fiscal Year Ended January 29, 2011 |
||||
Pro forma cash interest expense (i) |
$ | 83,232 | ||
Pro forma deferred financing fee amortization expense (i) |
8,143 | |||
Less: interest expense, historical |
(17,635 | ) | ||
Additional expense |
$ | 73,740 | ||
(i) | To reflect the adjustments to interest expense as a result of the increase in annual interest expense associated with borrowings under the Senior Credit Facilities and the existing notes, including the amortization of deferred financing costs and accretion of original issue discount (OID) of $4.1 million associated with the senior secured term loan. Pro forma cash interest expense associated with |
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borrowings under the Senior Credit Facilities reflects a weighted-average annual interest rate of 6.7% for the fiscal year ended January 29, 2011. Actual interest rates may vary. An increase or decrease of 0.125% in the interest rate applicable to the indebtedness under the Senior Credit Facilities outstanding at January 29, 2011 would result in an approximate $1.0 million change in interest expense annually. |
(g) | Represents adjustments of $0.4 million resulting from the decrease in the estimated fair market value of the Companys gift card and merchandise credit card liabilities amortized on a straight-line basis over 3 years, which is the estimated life of a gift card or merchandise credit based on historical redemption trends. |
(h) | To reflect the tax effect of the pro forma adjustments, using a combined federal and state effective tax rate of approximately 39%. |
(i) | To eliminate historical interest income to reflect the Companys capitalization after the transactions. |
(j) | Represents an adjustment of $27.7 million to reverse the non-recurring stock based compensation charge related to accelerated vesting of options, restricted stock and restricted stock units awarded to management and employees that vested upon the closing of the Transactions. |
(k) | Represents an adjustment of $29.1 million to reverse the non-recurring charge related to transaction costs expensed. |
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial data for the periods ended and at the dates indicated below. Our selected financial data as of February 3, 2007, February 2, 2008, January 31, 2009, January 30, 2010 (Predecessor) and for the years then ended, and our selected financial data as of January 29, 2011 (Successor) and for the periods from January 31, 2010 to November 22, 2010 (Predecessor) and November 23, 2010 to January 29, 2011 (Successor), presented in this table have been derived from our historical audited consolidated financial statements. The Predecessor and Successor periods presented relate to the periods preceding the Transactions and the period beginning on the date of the Transactions (November 23, 2010 to January 29, 2011), respectively. The following information should be read in conjunction with the sections entitled The Transactions, Managements Discussion and Analysis of Financial Condition and Results of Operations and with our consolidated financial statements and the notes thereto contained elsewhere in this prospectus.
Predecessor | Successor | |||||||||||||||||||||||||||
Fiscal Year Ended (weeks) | ||||||||||||||||||||||||||||
February 3, 2007 (52) |
February 2, 2008 (52) |
January 31, 2009 (52) |
January 30, 2010 (52) |
January 31, 2010 to November 22, 2010 |
November 23, 2011 to January 29, 2011 |
|||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||
Statement of operations data: |
||||||||||||||||||||||||||||
Net sales: |
||||||||||||||||||||||||||||
Retail |
$ | 781,172 | $ | 909,410 | $ | 987,859 | $ | 1,001,527 | $ | 814,863 | $ | 244,287 | ||||||||||||||||
Play & Music |
10,466 | 11,404 | 12,819 | 13,384 | 10,847 | 2,814 | ||||||||||||||||||||||
Other |
| | | | 1,173 | 447 | ||||||||||||||||||||||
Total net sales |
791,638 | 920,814 | 1,000,678 | 1,014,911 | 826,883 | 247,548 | ||||||||||||||||||||||
Cost of goods sold, including buying and occupancy expenses |
(407,180 | ) | (478,020 | ) | (524,477 | ) | (535,005 | ) | (431,675 | ) | (184,483 | ) | ||||||||||||||||
Gross profit |
384,458 | 442,794 | 476,201 | 479,906 | 395,208 | 63,065 | ||||||||||||||||||||||
Selling, general and administrative expenses |
(278,294 | ) | (312,549 | ) | (327,893 | ) | (316,268 | ) | (307,361 | ) | (78,843 | ) | ||||||||||||||||
Operating income (loss) |
106,164 | 130,245 | 148,308 | 163,638 | 87,847 | (15,778 | ) | |||||||||||||||||||||
Interest income |
5,314 | 2,609 | 1,690 | 728 | 295 | 36 | ||||||||||||||||||||||
Interest expense |
(232 | ) | (179 | ) | (208 | ) | (243 | ) | (248 | ) | (17,387 | ) | ||||||||||||||||
Other income (expense), net |
1,560 | 769 | (151 | ) | 610 | 119 | 53 | |||||||||||||||||||||
Income (loss) before income taxes |
112,806 | 133,444 | 149,639 | 164,733 | 88,013 | (33,076 | ) | |||||||||||||||||||||
Income tax (expense) benefit |
(41,655 | ) | (53,113 | ) | (56,159 | ) | (62,814 | ) | (36,449 | ) | 10,032 | |||||||||||||||||
Income (loss) from continuing operations |
71,151 | 80,331 | 93,480 | 101,919 | 51,564 | (23,044 | ) | |||||||||||||||||||||
Loss from discontinued operations, net of income tax |
(10,901 | ) | | | | | | |||||||||||||||||||||
Net income (loss) |
$ | 60,250 | $ | 80,331 | $ | 93,480 | $ | 101,919 | $ | 51,564 | $ | (23,044 | ) | |||||||||||||||
Cash flows: |
||||||||||||||||||||||||||||
Net cash provided by operating activities |
$ | 121,692 | $ | 107,867 | $ | 155,024 | $ | 176,595 | $ | 90,951 | $ | 21,080 | ||||||||||||||||
Net cash (used in) provided by investing activities |
(52,858 | ) | 60,531 | (56,114 | ) | (39,579 | ) | (43,452 | ) | (1,833,408 | ) | |||||||||||||||||
Net cash (used in) provided by financing activities |
(73,223 | ) | (164,346 | ) | 9,728 | (21,535 | ) | (110,655 | ) | 1,648,690 | ||||||||||||||||||
Capital expenditures |
(38,722 | ) | (68,794 | ) | (56,114 | ) | (39,579 | ) | (42,214 | ) | (5,054 | ) | ||||||||||||||||
Balance sheet data: |
||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | 27,493 | $ | 33,313 | $ | 140,472 | $ | 257,672 | $ | * | $ | 32,124 | ||||||||||||||||
Accounts receivable, net |
12,988 | 12,640 | 18,735 | 9,911 | * | 13,669 | ||||||||||||||||||||||
Working capital (a) |
161,710 | 58,038 | 180,040 | 287,348 | * | 113,936 | ||||||||||||||||||||||
Property and equipment, net |
150,251 | 185,357 | 204,227 | 205,461 | * | 212,491 | ||||||||||||||||||||||
Total assets |
454,208 | 397,184 | 520,581 | 636,130 | * | 2,088,125 | ||||||||||||||||||||||
Total debt |
| | | | * | 1,215,991 | ||||||||||||||||||||||
Stockholders equity |
275,727 | 208,295 | 334,275 | 438,753 | * | 485,811 | ||||||||||||||||||||||
Other financial data: |
||||||||||||||||||||||||||||
Ratio of earnings to fixed changes (b) |
7.1x | 7.7x | 7.6x | 7.6x | 5.0x | |
* | Information not available for this period. |
(a) | Working capital is defined as current assets minus current liabilities. |
(b) | For purposes of calculating the ratio of earnings to fixed charges, earnings represents pre-tax income from continuing operations plus fixed charges. Fixed charges consist of interest expense on all indebtedness plus amortization of debt issuance costs and the portion of rental expense that we believe is representative of the interest component of rental expense. With respect to the period from November 23, 2010 to January 29, 2011, our earnings were insufficient to cover fixed charges by $10.5 million. |
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion of our results of operations and financial condition with the Selected Historical Consolidated Financial Data, Unaudited Pro Forma Condensed Consolidated Financial Information, and the historical consolidated financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the Risk Factors section of this prospectus. Actual results may differ materially from those contained in any forward-looking statements.
Effect of the Acquisition
The application of purchase accounting as a result of the Acquisition required the adjustment of our assets and liabilities to their fair value, which resulted in an increase in our amortization expense following the closing of the Acquisition. Also, as a result of the Transactions, our borrowings and interest expense significantly increased. The excess of purchase price over the fair value of our net assets and identified intangible assets was allocated to goodwill. Our indefinite-lived intangible assets and goodwill are subject to periodic tests for impairment. We also recorded certain non-recurring charges in connection with the Transactions, including (i) the share-based compensation expense of $27.7 million relating to the accelerated vesting of restricted stock and restricted stock units awarded to management and employees which vested upon the change in control; (ii) certain non-recurring expenses related to the Transactions of $30.1 million that were required to be expensed by accounting standards; and (iii) amortization of inventory step-up of approximately $45.5 million from the allocation of fair value in purchase accounting.
Overview
We are one of the largest childrens apparel specialty retailers in North America, offering collections of high-quality apparel and accessories. As of January 29, 2011, the Company operated a total of 1,065 retail stores: 785 Gymboree stores (including 150 Gymboree Outlet stores), consisting of 743 stores (including 149 Gymboree Outlet stores) in the United States, 37 stores in Canada, three stores in Puerto Rico (including one Gymboree Outlet store) and two stores in Australia, 123 Janie and Jack shops (including six Janie and Jack outlets), and 157 Crazy 8 stores in the United States. The Company also operates online stores at www.gymboree.com, www.janieandjack.com and www.crazy8.com, and offers directed parent-child developmental play programs under the Gymboree Play & Music brand at 688 franchised and company-operated centers in the United States and 36 other countries as of January 29, 2011. In addition, as of January 29, 2011, a franchisee operated two Gymboree stores in Dubai, UAE that opened in the third quarter of fiscal 2010.
During the fourth quarter of fiscal 2010, the Company opened three Gymboree stores (including two Gymboree Outlet stores), one Janie and Jack shop and 15 Crazy 8 stores. The Company also relocated, remodeled or expanded five Gymboree stores and closed two Gymboree stores and one Crazy 8 store.
In fiscal 2011, we plan to continue to execute on our vision intended to reach every mom in America and moms around the world with our multi-tiered portfolio of brands. As part of our strategy, we plan to open approximately 80 new Crazy 8 stores in fiscal 2011 to reach our more cost-conscious customers. We also plan to continue to roll out additional company-operated stores in Canada with the core Gymboree brand, and look to expand with the Crazy 8 brand in fiscal 2012. In addition, we plan to open several more Gymboree stores in the Middle East in fiscal 2011 through our franchise agreement. We will continue to evaluate other territories that might be appropriate for international expansion with our brand portfolio.
We expect higher commodity prices (including that of cotton) and, to a lesser extent, higher wages in developing countries, to put upward pressure on costs in fiscal 2011. In light of these likely cost pressures and continued price sensitivity of our customers in the foreseeable future, we plan to implement a number of cost-saving measures, including strategies to better optimize our markdown and promotional plans and leveraging our
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corporate infrastructure across our multi-brand portfolio of stores in order to maximize the benefits from our selling, general and administrative expenses. Despite these efforts, we anticipate some degree of downward pressure on our gross margins in fiscal 2011.
Critical Accounting Policies and Estimates
Critical Accounting Policies
Critical accounting policies are those accounting policies and estimates that management believes are important to the portrayal of the Companys financial condition and results of operations and require managements most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. Management has discussed the development and selection of the critical accounting policies and estimates applicable to the Company as of the date of the completion of the audit for the fiscal year ended January 29, 2011 with the Companys Audit Committee.
Goodwill. Goodwill, which amounted to approximately $934.6 million as of January 29, 2011, represents the excess of the acquisition cost over the estimated fair value of tangible assets and other identifiable intangible assets acquired, less liabilities assumed. Goodwill is not amortized, but is tested for impairment at least annually. The impairment test compares the carrying value of the assets and liabilities associated with a reporting unit, including goodwill, with the fair value of the reporting unit. If the carrying value of the assets and liabilities exceeds the fair value of the reporting unit, the Company would calculate the implied fair value of its reporting unit goodwill as compared with the carrying value of its reporting unit goodwill to determine the appropriate impairment charge. The Company will test goodwill for impairment in November of each fiscal year. Calculating the fair value of a reporting unit and the implied fair value of reporting unit goodwill requires significant judgment. Actual results could vary significantly from these estimates and could result in material impairment charges in the future.
Intangible Assets and Liabilities. Intangible assets, which amounted to $606.2 million as of January 29, 2011, primarily represent trade names for each of the Companys brands, contractual customer relationships, and below market leases. Intangible liabilities, which amounted to $15.9 million as of January 29, 2011, represent above market leases and are included in deferred liabilities. Trade names have been assigned an indefinite life and are reviewed for impairment at least annually. The Company will test trade names for impairment in November of each fiscal year. The impairment test will compare the fair value of these intangible assets with their carrying amounts. Calculating the fair value of trade names requires significant judgment. Actual results could vary significantly from these estimates and could result in material impairment charges in the future. All other intangible assets and liabilities will be amortized on a straight-line basis over their estimated useful lives (see Note 4 to the Notes to the Consolidated Financial Statements appearing elsewhere in this prospectus). Intangible assets and liabilities with finite lives are evaluated for impairment using a process similar to that used to evaluate other long-lived assets as described below. An impairment loss is recognized for the amount by which the carrying value exceeds fair value.
Inventory Valuation. Merchandise inventories are recorded at the lower of cost or market (LCM), determined on a weighted-average basis. The Company reviews its inventory levels to identify slow-moving merchandise and broken assortments (items no longer in stock in a sufficient range of sizes) and records an adjustment when the future estimated selling price is less than cost. The Company takes a physical count of inventories in all stores once a year and in some stores twice a year, and performs cycle counts throughout the year in its distribution center. The Company records an inventory shrink adjustment based upon physical counts and also provides for estimated shrink adjustments for the period between the last physical inventory count and each balance sheet date. The Companys inventory shrink estimate can be affected by changes in merchandise mix and changes in actual shrink trends. The Companys LCM estimate can be affected by changes in consumer demand and the promotional environment. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our LCM or inventory shortage adjustments. However, if estimates regarding consumer demand are inaccurate or our actual physical inventory shortage differs significantly from our estimates, our operating results could be affected.
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Asset Impairment. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the undiscounted future cash flows from the asset group are less than the carrying value, the Company recognizes a loss equal to the difference between the carrying value of the asset group and its fair value. The fair value of the asset group is estimated based on discounted future cash flows using a discount rate commensurate with the risk. The asset group is determined based on the lowest level for which identifiable cash flows are available. Decisions to close a store or facility can also result in accelerated depreciation over the revised useful life. For locations to be closed that are under long-term leases, the Company records a charge for lease buyout expense, or the difference between its rent and the rate at which it expects to be able to sublease the properties and related cost, as appropriate. Most closures occur upon the lease expiration. The Companys estimate of future cash flows is based on historical experience and typically third-party advice or market data. These estimates can be affected by factors that are difficult to predict, such as future store profitability, real estate demand and economic conditions. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate impairment losses of long-lived assets. The Companys recorded asset impairment charges have not been and are not expected to be material. However, if actual results are not consistent with our estimates and assumptions used in the calculations, we may be exposed to losses that could be material.
Income Taxes. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities. The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is warranted, the Company takes into account such factors as prior earnings history, expected future earnings, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. The Company is subject to periodic audits by the Internal Revenue Service (the IRS) and other taxing authorities. These audits may challenge certain of the Companys tax positions, such as the timing and amount of deductions and allocation of taxable income to the various tax jurisdictions. Determining income tax expense for tax contingencies requires management to make assumptions that are subject to factors such as proposed assessments by tax authorities, changes in facts and circumstances, issuance of new regulations, and resolution of tax audits. Actual results could materially differ from these estimates and could significantly affect the effective tax rate and cash flows in future years.
Share-Based Compensation. Share-based compensation expense is estimated at the grant date based on the fair-value of the award and is expensed ratably over the requisite service period of the award. Determining the appropriate fair-value model and calculating the fair value of share-based awards at the grant date requires considerable judgment, including estimating the grant-date fair value of the underlying stock, stock price volatility, expected term and forfeiture rates. The Company uses the Black-Scholes option valuation model to value employee share-based awards. The Company develops its estimate of the fair value of the underlying stock based on the Option Pricing Method, which considers the various equity securities as call options on the total equity value, giving consideration to the rights and preferences of each class of equity. Expected stock price volatility was determined based on the historical and implied volatilities of comparable companies and based on each of the guideline companys longest term traded options, where available. Expected term was determined using the simplified method described in ASC 718-10-S99-1. Forfeiture rate assumptions are derived from historical data, giving consideration to expectations of future employee behavior. The Company recognizes compensation expense using the straight-line amortization method. Had the Company used alternative valuation methodologies or assumptions, the amount expensed for share-based awards could have been significantly different.
Revenue Recognition. While revenue recognition does not involve significant judgment, it represents an important accounting policy for the Company. Revenue is recognized at the point of sale in retail stores. Online revenue is recorded when the Company estimates merchandise is delivered to the customer. Online customers generally receive merchandise within three to six days of shipment. Shipping fees received from customers are
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included in net sales and the associated shipping costs are included in cost of goods sold. The Company also sells gift cards in its retail store locations, through its online stores and through third parties. Revenue is recognized in the period that the gift card is redeemed. The Company recognizes unredeemed gift card and merchandise credit balances when it can determine the portion of the liability for which redemption is remote (generally three years after issuance). These amounts are recorded as other income within selling, general and administrative expenses. Sales are presented net of a sales return reserve, which is estimated based on historical return trends. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our sales return reserve. However, if the actual rate of sales returns increases significantly, our operating results could be adversely affected.
Results of Operations
Pro Forma Fiscal 2010 Compared to Fiscal 2009
On November 23, 2010, Acquisition Sub was merged with and into the Company. In presenting a comparison of our results of operations for the fiscal year ended January 29, 2011 to our results of operations for the fiscal year ended January 30, 2010, we have presented pro forma results for the fiscal year ended January 29, 2011. This presentation does not comply with generally accepted accounting principles (GAAP).
Net Sales
Pro forma net retail sales for fiscal 2010 increased to $1.1 billion from net retail sales of $1.0 billion in fiscal 2009, an increase of $52.5 million, or 5.2%. This increase was largely due to net store growth of 112 stores and an aggregate square footage growth of approximately 259,000 square feet. Comparable store sales decreased by 2% in fiscal 2010, primarily due to the continuing difficult retail environment and slow economic recovery. The Company operated a total of 1,065 retail stores at the end of fiscal 2010 compared to 953 at the end of fiscal 2009.
Pro forma Gymboree Play & Music net sales for fiscal 2010 increased to $13.7 million from $13.4 million in fiscal 2009. The increase was primarily due to an increase in royalties from international franchisees, as well as an increase in revenues from the Companys corporate-owned sites. These increases were partially offset by a decrease in equipment sales. There were 688 Gymboree Play & Music sites (including eight corporate-owned sites) at the end of fiscal 2010 compared to 650 sites at the end of fiscal 2009 (including eight Company-operated sites).
Pro forma other net sales of $1.6 million in fiscal 2010 primarily relate to the Companys international retail franchise business, which was launched in August 2010. As of January 29, 2011, a franchisee operated two Gymboree stores in the Middle East.
Gross Profit
Pro forma gross profit for fiscal 2010 increased to $499.0 million from a gross profit of $479.9 million in fiscal 2009. As a percentage of net sales, pro forma gross profit decreased 0.6 percentage points to 46.7% from a gross profit of 47.3% in fiscal 2009. This decrease was primarily due to deleveraging of occupancy costs. In the period from November 23, 2010 to January 29, 2011, cost of goods sold included $45.5 million resulting from an increase in the net book value of inventory that was eliminated in the pro forma results for fiscal 2010.
Selling, General and Administrative Expenses
Pro forma selling, general and administrative (SG&A) expenses, which principally consist of non-occupancy store expenses, corporate overhead and distribution expenses, increased to $345.5 million in fiscal 2010 from SG&A of $316.3 million in fiscal 2009, an increase of $29.2 million, or 9.2%. Pro forma SG&A
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as a percentage of net sales increased 1.1 percentage points to 32.3% in fiscal 2010 from SG&A of 31.2% in fiscal 2009. This increase was primarily due to amortization expense related to intangible assets recognized as a result of the Transactions, and was partially offset by a decrease in stock-based and incentive compensation. The pro forma results for fiscal 2010 include a full year of amortization expense for intangible assets. In the period from November 23, 2010 to January 29, 2011, as a result of the Transactions, we incurred $13.5 million of transaction expenses and a $27.7 million stock-based compensation charge that are not included in the pro forma results for fiscal 2010.
Interest Income
Pro forma interest income decreased to zero in fiscal 2010 from $0.7 million in fiscal 2009 mainly due to lower interest rates and lower average cash balances. In addition, the pro forma results for fiscal 2010 eliminated the Companys interest income to reflect the Companys capitalization after the Transactions.
Interest Expense
Pro forma interest expense increased to $91.4 million in fiscal 2010 from $0.2 million in fiscal 2009, primarily due to interest on the Senior Credit Facilities and the existing notes obtained in connection with the Transactions, as well as amortization of deferred financing costs related to the Transactions and accretion of the original issue discount on the Companys new senior secured term loan.
Income Taxes
Pro forma income tax expense for fiscal 2010 and income tax expense for fiscal 2009 resulted in effective tax rates of approximately 47.0% and 38.1%, respectively. The effective tax rate increased in fiscal 2010 due to non-deductible costs associated with the Transactions.
Fiscal 2009 Compared to Fiscal 2008
Net Sales
Net retail sales for fiscal 2009 increased to $1.0 billion from $987.9 million in fiscal 2008, an increase of $12.1 million, or 1.2%. This increase was primarily due to net store and square footage growth of 67 stores and approximately 144,000 square feet, respectively. Comparable store sales decreased by 4%, primarily due to the continuing difficult retail environment and sluggish economic recovery, which resulted in an overall decrease in average unit retail prices and units per transaction.
Gymboree Play & Music net sales for fiscal 2009 increased to $13.4 million from $12.8 million in fiscal 2008. The increase was primarily due to an increase in international equipment sales and revenues from the Companys corporate-owned sites. These increases were partially offset by a decrease in international and domestic franchise sales. There were 650 Gymboree Play & Music sites at the end of fiscal 2009 (including eight Company-operated sites), compared to 609 sites (including seven Company-operated sites) at the end of fiscal 2008.
Gross Profit
Gross profit for fiscal 2009 increased to $479.9 million from $476.2 million in fiscal 2008. As a percentage of net sales, gross profit decreased 0.3 percentage points to 47.3% from 47.6% last year. This decrease was primarily due to deleveraging of occupancy costs and was partially offset by product cost reductions and buying cost leverage. Gross profit for fiscal 2008 includes a $6.1 million write-off, recorded in the fourth quarter, related to merchandise inventories and compliance with new consumer product safety laws relating to levels of lead and phthalates in childrens apparel and accessories.
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Selling, General and Administrative Expenses
SG&A expenses, decreased to $316.3 million in fiscal 2009 from $327.9 million in fiscal 2008, a decrease of $11.6 million, or 3.5%. SG&A as a percentage of net sales decreased 1.6 percentage points to 31.2% in fiscal 2009 from 32.8% in fiscal 2008. The SG&A decrease as a percentage of net sales for fiscal 2009 was primarily due to lower compensation and benefits costs, as well as a reduction in operating supply expenses, and was partially offset by higher depreciation and marketing expenses.
Interest Income
Interest income decreased to $0.7 million in fiscal 2009 from $1.7 million in fiscal 2008 mainly due to lower interest rates in fiscal 2009.
Income Taxes
Income tax expense for fiscal 2009 and 2008 resulted in effective tax rates of approximately 38.1% and 37.5%, respectively. The effective tax rates in fiscal 2009 and 2008 benefited from foreign tax credits arising from foreign taxes accrued, excluding deferred taxes and uncertain tax position reserves. The impact of these foreign tax credits was greater in fiscal 2008 compared to fiscal 2009.
Financial Condition
Liquidity and Capital Resources
Cash and cash equivalents totaled $32.1 million and $257.7 million as of January 29, 2011 and January 30, 2010, respectively. Working capital as of January 29, 2011 totaled $113.9 million as compared to $287.3 million as of January 30, 2010. Net cash provided by operating activities was $21.1 million for the period from November 23, 2010 to January 29, 2011 and $91.0 million for the period from January 31, 2010 to November 22, 2010, compared to $176.6 million in fiscal 2009. The decrease in cash provided by operating activities in fiscal 2010 was primarily due to:
| a decrease in operating income during the period from January 31, 2010 to November 22, 2010 and an operating loss during the period from November 23, 2010 to January 29, 2011; and |
| an increase in prepaid income taxes due to tax deductions related to the Transactions. |
The factors above were partially offset by:
| an increase in accrued liabilities due to costs related to the Transactions and interest accrued on the Companys new Senior Credit Facilities; and |
| an increase in accounts payable due to costs related to the Transactions and timing of payments. |
Net cash used in investing activities was $1.8 billion during the period from November 23, 2010 to January 29, 2011 and $43.5 million during the period from January 31, 2010 to November 22, 2010, compared to $39.6 million in fiscal 2009. Net cash used in investing activities during the period from November 23, 2010 to January 29, 2011 primarily related to acquisition costs related to the Transactions. Net cash used in investing activities during the period from January 31, 2010 to November 22, 2010 consisted primarily of $42.2 million in capital expenditures related to the opening of new stores, relocation, remodeling and/or expansion of existing stores, information technology improvements, and improvements to the Companys distribution center.
Net cash provided by financing activities was $1.6 billion during the period from November 23, 2010 to January 29, 2011, compared to net cash used in financing activities of $110.7 million during the period from January 31, 2010 and November 22, 2010 and $21.5 million in fiscal 2009. The change during the period from November 23, 2010 to January 29, 2011 was primarily due to borrowings on the Companys Senior Credit
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Facilities in connection with the Transactions, as well as the equity investment made by Holding. Net cash used in financing activities during the period from January 31, 2010 to November 22, 2010 was primarily for stock repurchases.
Net cash provided by operating activities for fiscal 2009 was $176.6 million compared to $155.0 million in fiscal 2008. The increase in fiscal 2009 was primarily due to:
| an increase in operating income; |
| a decrease in accounts receivable due to the timing of payments related to the Companys co-branded credit card agreements, as well as expiration of the Companys original co-branded credit card agreement, which provided for minimum guaranteed annual payments (the new agreement does not include such guarantees); |
| an increase in income tax payable due to the timing of payments; and |
| an increase in accounts payable due to the timing of payments. |
The above factors were partially offset by:
| a smaller increase in lease incentives and deferred liabilities due to expiration of the Companys original co-branded credit card agreement; |
| a decrease in prepaid rent due to the timing of payments; and |
| an increase in inventory levels, in part due to compliance with new consumer product safety laws, which resulted in lower than normal inventory levels at the end of fiscal 2008. |
Net cash used in investing activities was $39.6 million in fiscal 2009 compared to $56.1 million in fiscal 2008, and consisted of capital expenditures related to the opening of 72 new stores, relocation, remodeling and/or expansion of 50 existing stores, store openings and relocations currently in progress, information technology improvements, and improvements to the Companys distribution center
Net cash used in financing activities in fiscal 2009 was $21.5 million compared to net cash provided by financing activities of $9.7 million in fiscal 2008. The decrease in fiscal 2009 was primarily due to the Companys authorized share repurchase program. Repurchases of common stock in fiscal 2009 included $5.0 million in stock repurchases, primarily reflecting employee minimum statutory tax withholding requirements for restricted stock awards and units that vested during the period. Employees satisfy their minimum statutory tax requirements through a net settlement feature whereby restricted stock awards and units are sold on their vest date to cover tax obligations.
As part of the Acquisition and the other Transactions, we incurred substantial additional indebtedness by issuing the existing notes and borrowing under our Senior Credit Facilities. For the fiscal year ended January 29, 2011, on a pro forma basis after giving effect to the offering and the consummation of the other Transactions, our cash interest expense would have been approximately $83.2 million. At January 29, 2011, we had $820.0 million of debt outstanding under our Senior Credit Facilities, which bore interest based on a floating rate index. In December 2010, the Company purchased four interest rate caps to hedge against rising interest rates associated with the Companys senior secured term loan above the 5% strike rate of the caps through December 23, 2016, the maturity date of the caps (see Note 16 of the Notes to the Consolidated Financial Statements appearing elsewhere in this prospectus).
The Senior Credit Facilities are comprised of a $820 million senior secured term loan and a $225 million ABL Facility. The senior secured term loan was fully funded at January 29, 2011. There was no indebtedness outstanding under the ABL Facility and approximately $148.4 million of undrawn availability thereunder at January 29, 2011. Amounts available under the ABL Facility are subject to customary borrowing base limitations
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and are reduced by letter of credit utilization. The Senior Credit Facilities also allow an aggregate of $200 million in uncommitted incremental facilities, the availability of which is subject to our meeting certain conditions, including, in the case of any incremental term facility, applicable financial ratios. No incremental facilities are currently in effect. Effective February 11, 2011, we amended the terms of the $820 million senior secured term loan facility to, among other things, lower the interest rate by 50 basis points and remove select financial covenants. See Description of Other Indebtedness.
Capital expenditures were approximately $5.1 million during the period from November 23, 2010 to January 29, 2011 and $42.2 million during the period from January 31, 2010 to November 22, 2010, and were used to open approximately 118 new stores, including 20 Gymboree stores (inclusive of 10 Gymboree Outlet stores), five Janie and Jack shops, 93 Crazy 8 stores, and to remodel, relocate or expand approximately 43 stores, as well as to continue investment in the Companys systems infrastructure and distribution center. In fiscal 2011, the Company plans to open approximately 10 Gymboree stores, 10 Janie and Jack shops and 80 Crazy 8 stores. The Companys current plans for Gymboree, Janie and Jack and Crazy 8 will require increasing capital expenditures for new stores for the next several years.
Pursuant to authorization from the Board of Directors, the Company repurchased and retired 2,613,375 shares of Company stock at an aggregate cost of approximately $113.6 million, or approximately $43.49 per share, during the period from January 31, 2010 to November 22, 2010; 627,156 shares of Company stock at an aggregate cost of approximately $26.4 million, or approximately $42.02 per share, in fiscal 2009; and 18,000 shares of Company stock at an aggregate cost of approximately $0.7 million, or approximately $40.15 per share, in fiscal 2008.
Subject to certain limitations imposed on business combinations under the agreements governing the Companys indebtedness, the Companys capital resources allow it to consider business acquisitions as an alternative means of growth. The Company reviews acquisition opportunities from time to time and, while it has not previously acquired an existing business, it would consider doing so in the future with respect to an appropriate opportunity.
We anticipate that cash and cash equivalents generated by operations, the remaining funds available under our Senior Credit Facilities and existing cash and equivalents will be sufficient to meet working capital requirements, service our debt and finance capital expenditures over the next twelve months. We cannot assure you, however, that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under the Senior Credit Facilities in amounts sufficient to enable us to repay our indebtedness, including the exchange notes, or to fund other liquidity needs. See Risk FactorsRisks Related to Our Indebtedness and Certain Other Obligations and Risk FactorsRisks Related to the Exchange Notes.
Contractual Obligations and Commercial Commitments
The following table reflects a summary of our contractual obligations as of January 29, 2011:
Payments due by period | ||||||||||||||||||||
($ in thousands) |
Less than 1 year | 1-3 years | 3-5 years | After 5 years | Total | |||||||||||||||
Standby-by letters of credit |
$ | 6,387 | $ | | $ | | $ | | $ | 6,387 | ||||||||||
Operating leases (1) |
83,484 | 152,852 | 130,303 | 161,672 | 528,311 | |||||||||||||||
Inventory purchase obligations (2) |
235,582 | | | | 235,582 | |||||||||||||||
Other purchase obligations (3) |
10,176 | 2,741 | 1,704 | | 14,621 | |||||||||||||||
Senior Credit Facilities (4) |
8,200 | 16,400 | 16,400 | 779,000 | 820,000 | |||||||||||||||
Existing notes (5) |
| | | 400,000 | 400,000 | |||||||||||||||
Total contractual cash obligations |
$ | 343,829 | $ | 171,993 | $ | 148,407 | $ | 1,340,672 | $ | 2,004,901 | ||||||||||
(1) | Other lease-required expenses such as utilities, real estate taxes and common area repairs and maintenance are excluded. See Note 3 to the Audited Consolidated Financial Statements included in this prospectus for discussion of the Companys operating leases. |
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(2) | Inventory purchase obligations include outstanding purchase orders for merchandise inventories that are enforceable and legally binding on the Company and that specify all significant terms (including fixed or minimum quantities to be purchased), fixed, minimum or variable price provisions, and the approximate timing of the transaction. |
(3) | Other purchase obligations include commitments for fixtures and equipment, information technology and professional services. |
(4) | The Senior Credit Facilities are comprised of a $820 million senior secured term loan and a $225 million ABL Facility. The amounts presented in the table above do not include interest on the Senior Credit Facilities. |
(5) | Represents an aggregate principal amount of $400 million of our existing notes. The amounts presented in the table above do not include interest on the existing notes. |
As of January 29, 2011, the Company had unrecognized tax benefits of $6.7 million, accrued interest of $1.6 million, and accrued penalties of $0.8 million. These amounts have been excluded from the contractual obligations table because a reasonably reliable estimate of the timing of future tax settlements cannot be determined.
The expected timing of payment of the obligations discussed above is estimated based on current information. The timing of payments and actual amounts paid may differ depending on the timing of receipt of services, or, for some obligations, changes to agreed-upon amounts.
Quantitative and Qualitative Disclosures about Market Risk
Foreign Currency Risk
The Company enters into forward foreign exchange contracts with respect to certain purchases in U.S. dollars of inventory to be sold in the Companys retail stores in Canada. The purpose of these contracts is to protect the Companys margins on the eventual sale of the inventory from fluctuations in the exchange rate for Canadian and U.S. dollars. The term of the forward exchange contracts is generally less than one year.
The table below summarizes the notional amounts and fair values of the Companys forward foreign exchange contracts in U.S. dollars (in thousands, except weighted-average rate data):
Notional Amount | Fair Value Gain (Loss) |
Weighted- Average Rate |
||||||||||
January 29, 2011 |
$ | 4,505 | $ | (33 | ) | $ | 1.00 | |||||
January 30, 2010 |
$ | 5,181 | $ | 179 | $ | 0.93 |
Interest Rate Risk
The Company is subject to interest rate risk in connection with its long-term debt. The Companys principal interest rate risk relates to the term loan outstanding under the Senior Credit Facilities. The Company has $820.0 million outstanding under its Senior Credit Facilities, bearing interest at variable rates. A 0.125% increase in these floating rates applicable to the indebtedness outstanding under the Senior Credit Facilities would have increased annual interest expense by approximately $1.0 million. The Senior Credit Facilities also allow an aggregate of $200 million in uncommitted incremental facilities, bearing interest at variable rates. No incremental facilities are currently in effect.
In December 2010, the Company purchased four interest rate caps to hedge against rising interest rates associated with the Companys senior secured term loan above the 5% strike rate of the caps through December 23, 2016, the maturity date of the caps. The notional amount of these caps is $700 million. As of January 29, 2011, accumulated other comprehensive income included approximately $0.2 million in unrealized losses related to the interest rate caps. Additional information relating to the Companys derivative instruments is presented in Note 16 of the Notes to the Consolidated Financial Statements appearing elsewhere in this prospectus.
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Impact of Inflation
The impact of inflation on results of operations has not been significant in fiscal 2008, fiscal 2009 and fiscal 2010.
Recently Issued Accounting Standards
In January 2010, the FASB issued guidance which amends and clarifies existing guidance related to fair value measurements and disclosures. This guidance requires new disclosures for (1) transfers in and out of Level 1 and Level 2 and reasons for such transfers; and (2) the separate presentation of purchases, sales, issuances and settlement in the Level 3 reconciliation. It also clarifies guidance around disaggregation and disclosures of inputs and valuation techniques for Level 2 and Level 3 fair value measurements. The Company adopted this guidance as of January 31, 2010, except for the new disclosures in the Level 3 reconciliation, which will be adopted during the first quarter of fiscal 2011. The adoption of this guidance did not have and is not expected to have a material impact on the Companys consolidated financial statements.
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Overview
We are one of the largest childrens apparel specialty retailers in North America, offering collections of high-quality apparel and accessories. We have an internationally recognized brand with a highly loyal customer base. We believe our customer loyalty and brand strength are the foundation of a business model that has generated consistent cash flows and strong performance across economic cycles over the past five years.
Our vision is to reach every mom in America and moms around the world with branded assortments of wholesome, age-appropriate products made for children. To achieve this vision, we have developed the following retail brands: Gymboree, Janie and Jack and Crazy 8. We operate retail stores in the United States, Puerto Rico, Canada and Australia, primarily in regional shopping malls and in selected suburban and urban locations. In addition, as of January 29, 2011, a franchisee operated two stores in Dubai, UAE that opened in the third quarter of fiscal 2010. We also operate three online stores at www.gymboree.com, www.janieandjack.com and www.crazy8.com. Additionally, we offer play programs for children under our fourth brand, Gymboree Play & Music, both in the United States and abroad.
Gymboree: Gymboree stores offer fashionable, age-appropriate apparel and accessories for boys and girls characterized by mix and match colors, patterns and graphics, complex embellishments, comfort, functionality and durability in sizes newborn through 12. Gymboree Outlet stores provide similar high-quality mix-and-match childrens apparel and accessories in the same size ranges but at outlet prices. As of January 29, 2011, we operated 785 Gymboree stores (including 150 Gymboree Outlet stores), consisting of 743 stores (including 149 Gymboree Outlet stores) in the United States, 37 stores in Canada, three stores in Puerto Rico (including one Gymboree Outlet store) and two stores in Australia, as well as an online store at www.gymboree.com. In addition, as of January 29, 2011, a franchisee operated two Gymboree stores in Dubai, UAE that opened in the third quarter of fiscal 2010.
Janie and Jack: Janie and Jack shops offer distinctive, finely crafted clothing and accessories for boys and girls in sizes newborn through 12. Lush fabrics, a hand-made quality and details such as hand-embroidery, smocking and vintage prints are utilized to create classic looks. Shops have a European style reminiscent of a small Parisian boutique. As of January 29, 2011, we operated 123 Janie and Jack shops in the United States, including six Janie and Jack outlets, as well as an online shop at www.janieandjack.com.
Crazy 8: Crazy 8 stores provide wholesome age-appropriate fashion for boys and girls at price points approximately 25% to 30% lower than Gymboree. Through merchandise design, product presentation, store environment, customer service and packaging, Crazy 8 stores reflect an upscale store experience at value prices. Crazy 8 apparel is offered in sizes newborn through 14 and is intended to address a broader customer base than Gymboree. As of January 29, 2011, we operated 157 Crazy 8 stores in the United States, as well as an online store at www.crazy8.com.
Gymboree Play & Music: Gymboree Play & Music offers children ages newborn through five the opportunity to explore, learn and play in an innovative parent-child program. Gymboree Play & Music offers an array of classes developed by early childhood experts as well as birthday parties and developmental toys, books and music. As of January 29, 2011, Gymboree Play & Music programs were offered at 222 franchised and Company-operated Gymboree Play & Music centers in the United States and 466 franchised Gymboree Play & Music centers in 36 other countries.
Our online stores at www.gymboree.com, www.janieandjack.com and www.crazy8.com offer the entire Gymboree, Janie and Jack and Crazy 8 product offerings, respectively. We fully integrate online stores with retail stores by offering the same products, pricing and promotions. We also have a Save the Sale policy, whereby retail stores order merchandise for customers from the online stores. In addition, customers may return merchandise purchased online at traditional retail stores and vice versa.
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The majority of our apparel is manufactured to our specifications by over 300 independent manufacturers located primarily in Asia (principally China (41%), Indonesia (16%), Thailand (10%), India (8%) and Bangladesh (8%) for the fiscal year ended January 29, 2011). We purchase all products in U.S. dollars. One buying agent manages a substantial portion of our inventory purchases (approximately 80% for the fiscal year ended January 29, 2011). We have no long-term contracts with suppliers and typically transact business on an order-by-order basis. Our factories undergo annual audits for social accountability by an independent third party. In addition, all products undergo a quality audit performed by independent third parties.
Properties
The Company leases approximately 162,400 square feet of office space in a building in San Francisco, California, for its corporate offices. The lease expires on April 14, 2018.
The Company owns a 444,000 square-foot distribution center on approximately 31 acres in Dixon, California. All products are distributed from this facility.
As of January 29, 2011, the Companys 1,065 stores included an aggregate of approximately 2,138,000 square feet of space. Store leases typically have 10-year terms and include a cancellation clause if minimum revenue levels are not achieved during a specified 12-month period during the lease term. Some leases are structured with a minimum rent component plus a percentage rent based on the stores net sales in excess of a certain threshold. Substantially all of the leases require the Company to pay insurance, utilities, real estate taxes, and common area repair and maintenance expenses. Approximately 13 and 89 store leases will come up for renewal during the remainder of fiscal 2011 and 2012, respectively. We are also in the process of negotiating lease terms for approximately 30 stores, which are currently operating under month-to-month terms. As of January 29, 2011, the Company also operated eight Gymboree Play & Music corporate-owned sites in California, Florida and Arizona under leases that expire between fiscal 2011 and fiscal 2014.
Suppliers
The majority of our apparel is manufactured to our specifications by over 300 independent manufacturers located primarily in Asia (principally China (41%), Indonesia (16%), Thailand (10%), India (8%) and Bangladesh (8%) for the fiscal year ended January 29, 2011). We purchase all products in U.S. dollars. One buying agent manages a substantial portion of our inventory purchases (approximately 80% for the fiscal year ended January 29, 2011). We have no long-term contracts with suppliers and typically transact business on an order-by-order basis. Our factories undergo annual audits for social accountability by an independent third party. In addition, all products undergo a quality audit performed by independent third parties.
Seasonality and Competition
The Companys operations are seasonal in nature, with sales from our retail operations peaking during the fourth quarter, primarily during the holiday season in November and December. During fiscal 2010, 2009 and 2008, the fourth quarter accounted for approximately 30% of our net sales from retail operations.
The Companys Gymboree, Janie and Jack and Crazy 8 brands compete on a national level with BabyGap and GapKids (divisions of Gap Inc.), certain leading department stores operating in malls, outlet centers or street locations, certain discount retail chains such as Old Navy (a division of Gap Inc.), The Childrens Place, Wal-Mart, Target and Carters, as well as with a wide variety of local and regional specialty stores, with certain other retail chains, and with childrens retailers that sell their products by mail order, over the Internet or through outlet malls. The principal factors affecting competition for retail sales are product design, product quality, brand image, customer service and pricing. Our goal is to provide our customers with high-quality apparel at a price that reflects excellent value. We design and produce our apparel exclusively for sale at our retail and online stores.
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Trademark and Service Marks
In the United States, the Company is the owner of a number of trademarks and service marks, including the trademarks and service marks Gymboree, Janie and Jack, Crazy 8 and Gymboree Play & Music, and the trademarks Gymbo and Gymbucks. These marks and certain other of our marks are registered with the United States Patent and Trademark Office. The mark Gymboree is also registered, or is the subject of pending applications, in approximately 95 foreign countries. Each federal registration is renewable indefinitely if the mark is still in use at the time of renewal. Our rights in the Gymboree, Janie and Jack and Crazy 8 marks and other marks are a significant part of our business. Accordingly, we intend to maintain the marks and the related registrations. We are not aware of any material claims of infringement or other material challenges to our right to use the Gymboree, Janie and Jack and Crazy 8 marks in the United States.
The Company uses a number of other trademarks, certain of which have been registered with the U.S. Patent and Trademark Office and in certain foreign countries. We believe that our registered and common-law trademarks have significant value and that some of our trademarks are instrumental to our ability to both market our products and create and sustain demand for our products.
Employees
As of January 29, 2011, Gymboree had approximately 13,330 full-time and part-time employees or 5,083 full-time equivalents. In addition, a significant number of seasonal employees are hired during each holiday selling season. None of Gymborees employees are represented by a labor union.
Segment and International Financial Information
Financial information for the Companys two reportable segments, retail stores and Gymboree Play & Music, and for its Canadian and Australian subsidiaries, for the period from November 23, 2010 to January 29, 2011, and from January 31, 2010 to November 22, 2010, and for the fiscal years ended January 30, 2010 and January 31, 2009 is contained in Note 12 to the audited consolidated financial statements included elsewhere in this prospectus.
Less than 5% of the Companys revenues were derived from outside the United States, and less than 3% of the Companys long-lived assets were located outside the United States, in the period from November 23, 2010 to January 29, 2011, and from January 31, 2010 to November 22, 2010, and in fiscal 2009 and fiscal 2008.
Regulation
Our products are subject to consumer product safety, environmental, health and safety, consumer protection and labor laws, as well as regulations and standards with respect to product quality and safety set by various governmental authorities, including the Consumer Product Safety Commission. Such laws include the Consumer Product Safety Improvement Act of 2008, which imposes significant requirements relating to the presence of lead and other substances in apparel and accessories, as well as enhances the penalties for noncompliance. In addition, our manufacturers are subject to labor laws. Our sourcing personnel periodically visit and monitor the operations of our independent manufacturers, and we also rely on an independent third party to audit our factories for compliance with safety and labor laws on an annual basis. We believe that we are in substantial compliance with such laws and regulations.
Legal Proceedings
Between October 12 and October 18, 2010, three purported class action complaints were filed in the Superior Court of the State of California, County of San Francisco, captioned Halliday v. The Gymboree Corporation, et al., Case No. CGC-10-504544, Himmel v. Gymboree Corp., et al., Case No. CGC-10-504550,
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and Harris v. The Gymboree Corporation, et al., Case No. CGC-10-504693. The complaints challenged the transaction pursuant to which Bain Capital commenced a tender offer for the outstanding shares of the Company, which was followed by a merger of a subsidiary of Bain Capital with and into the Company (the Transaction). The various complaints name as defendants the Company, the Companys Board of Directors, the Companys Chief Financial Officer (collectively, the Individual Defendants), Bain Capital and the two subsidiaries of Bain Capital that were created to consummate the Acquisition (collectively, the Bain Defendants). The suits alleged generally that the Individual Defendants breached their fiduciary duties in connection with the Transaction and that the Company and the Bain Defendants aided and abetted those alleged breaches. The complaints sought, among other things, to (i) enjoin the Transaction unless and until the Company adopts and implements a procedure to obtain the highest possible value for stockholders, and (ii) rescind the Merger Agreement between Bain Capital and the Company.
While the Company believes that each of the aforementioned complaints is without merit and that it and the other defendants named therein (collectively with the Company, the Defendants) have valid defenses to all claims, in an effort to minimize the burden and expense of further litigation relating to such complaints, on November 12, 2010, the Defendants reached an agreement in principle with the plaintiffs in these actions (collectively, the Plaintiffs) to settle the litigation in its entirety and resolve all allegations by the Plaintiffs against the Defendants in connection with the Transaction. The settlement, which is subject to further definitive documentation and court approval, provides for a settlement and release by the purported class of the Companys stockholders of all claims against the Defendants in connection with the Transaction. In exchange for such settlement and release, and after arms length discussions between and among the Defendants and the Plaintiffs, the Company provided certain additional supplemental disclosures to its Schedule 14D-9, although the Company did not make any admission that such additional supplemental disclosures were material or otherwise required. After reaching agreement on the substantive terms of the settlement, the parties agreed that Plaintiffs may apply to the court for an award of attorneys fees and reimbursement of expenses up to $0.8 million, which Defendants have agreed not to oppose. In the event the settlement is not approved by the court or the conditions to settlement are not satisfied, the Defendants will continue to vigorously defend against these actions. There can be no assurance that the parties will ultimately enter into a formal stipulation of settlement or that the Superior Court will approve the settlement even if the parties were to enter into such a stipulation. In such event, the proposed settlement as contemplated by the agreement in principle may be terminated.
The Company is also subject to various other legal proceedings and claims arising in the ordinary course of business. Our management does not expect that the results of any of these other legal proceedings, either individually or in the aggregate, would have a material adverse effect on our financial position, results of operations or cash flows.
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Directors and Executive Officers
Below is a list of the names, ages as of March 31, 2011 and positions, and a brief account of the business experience, of the individuals who serve as our executive officers and directors:
Name |
Age | Position | ||||
Matthew K. McCauley |
37 | Chief Executive Officer; Director | ||||
Kip M. Garcia |
60 | President | ||||
Marina Armstrong |
48 | Senior Vice President, General Manager and Secretary | ||||
Jeffrey P. Harris |
48 | Chief Financial Officer | ||||
Lynda G. Gustafson |
46 | Vice President, Corporate Controller | ||||
Joshua Bekenstein |
52 | Director | ||||
Robert C. Gay |
59 | Director | ||||
Jordan Hitch |
44 | Director | ||||
Marko Kivisto |
35 | Director | ||||
J. Steven Young |
49 | Director |
Matthew K. McCauley has served as our Chief Executive Officer since January 2006 and a director of the Board since October 2005. Mr. McCauley joined The Gymboree Corporation in July 2001 as Director of Allocation and was named Vice President of Planning and Allocation in 2003, Senior Vice President and General Manager in February 2005, President in June 2005 and Chief Executive Officer in January 2006. Mr. McCauley also served as Chairman of the Board from July 2006 to November 2010. Mr. McCauley also serves as a director of Holding. Prior to joining The Gymboree Corporation, Mr. McCauley served in a variety of positions at Gap Inc., a clothing retailer, including Planning Manager from 2000 to 2001 and Manager of Business Solutions in 2001.
Kip M. Garcia joined The Gymboree Corporation in May 2004 as Senior Vice President of MerchandisingKids and was named President in January 2006. Prior to joining The Gymboree Corporation, Mr. Garcia served as Senior Vice President for GapKids, a division of Gap Inc., a childrens clothing retailer, from April 2002 to February 2003 and Senior Vice President for DFS Merchandising Ltd., a travel retail company, from February 1992 to February 2002.
Marina Armstrong has served as our Senior Vice President, General Manager since April 2010 and Secretary since December 2004. Ms. Armstrong joined The Gymboree Corporation in May 1997 as a District Manager and became a Human Resources Staffing Manager at the corporate office in 1998. Later that year she was promoted to Director, Recruiting and Staffing. Ms. Armstrong was named Vice President, Human Resources in 1999, Senior Vice President, Stores, Human Resources and Loss Prevention in February 2005, and Senior Vice President, Stores, Human Resources, and Play & Music in January 2006. Ms. Armstrong was named Assistant Secretary in March 2002 and Secretary in December 2004. Prior to joining The Gymboree Corporation, Ms. Armstrong held several human resources and store operations positions with other retailers including Saks Fifth Avenue, Robinsons-May and The Bon Marche.
Jeffrey P. Harris joined The Gymboree Corporation as Vice President, Finance in July 2005 and was promoted to Chief Financial Officer in February 2010. In 2004, Mr. Harris served as Vice President of Finance for CBS MarketWatch, a leading multimedia source of financial news and information, until its sale to Dow Jones in 2005. From 2001 to 2004, he was employed at Lucasfilm in the capacity of Corporate Controller. Prior to that time, Mr. Harris worked in the Consumer Products division of The Walt Disney Company, an entertainment company, as Controller and Director of Finance for its Art and Collectibles division. He also spent over seven years working in various finance and audit roles for the Tribune Company based in Chicago, Illinois. Mr. Harris is an inactive Certified Public Accountant.
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Lynda G. Gustafson has served as our Vice President, Corporate Controller since February 2005. Ms. Gustafson joined The Gymboree Corporation in August 2001 as the Corporate Controller and was promoted to Vice President, Corporate Controller in February 2005. Ms. Gustafson was a business consultant for various companies from September 2000 to July 2001. From November 1993 to August 2000, Ms. Gustafson was at US Home & Garden, Inc., a manufacturer and distributor of lawn and garden products, and was the Vice President, Finance and Principal Accounting Officer when she departed. Ms. Gustafson is a Certified Public Accountant.
Joshua Bekenstein has been a director on our Board and a director of Holding since November 2010. Mr. Bekenstein joined Bain Capital at its inception in 1984. He has been a Managing Director since 1986. Prior to joining Bain Capital, Mr. Bekenstein spent several years at Bain & Company where he was involved with companies in a variety of industries. Mr. Bekenstein serves as a director of Toys R Us, Inc., Burlington Coat Factory Warehouse Corporation, Michaels Stores, Inc. and Waters Corporation.
Robert C. Gay has been a director on our Board and a director of Holding since February 2011. Mr. Gay is a Managing Director, Co-founder, and the Chief Executive Officer of Huntsman Gay Global Capital. He is also a member of Huntsman Gays Policy and Investment Committee. Mr. Gay has been involved in the private equity business since 1986. From 19892004, he served as a Managing Director of Bain Capital. He was one of the firms senior partners and served as a member of its Management and Business Policy committees. He also led many of the firms investments and oversaw Bain Capital Europe where he opened the firms London and Munich offices. Mr. Gay started in private equity when he joined GE Capital from McKinsey & Co. where he was an Engagement Manager. At GE he was Executive Vice President of the GECC Capital Markets group. He also formed and organized Sorenson Capital, a middle-market private equity firm, and was a member of its Advisory Board.
Jordan Hitch has been a director on our Board and a director of Holding since November 2010. Mr. Hitch joined Bain Capital in 1997. Prior to joining Bain Capital, Mr. Hitch was a consultant at Bain & Company where he worked in the financial services, healthcare and utility industries. Previously, Mr. Hitch worked for Nalco Chemical Co. as an Area Manager. Mr. Hitch serves as a director of Burlington Coat Factory Warehouse Corporation and Bombardier Recreational Products Inc.
Marko Kivisto has been a director on our Board since February 2011 and a director of Holding since December 2010. Mr. Kivisto joined Bain Capital in 2007. Prior to joining Bain Capital, Mr. Kivisto was a Manager at Bain & Company where he advised clients on corporate strategy, M&A, and operations improvement. Mr. Kivisto was also a member of Bain & Companys Private Equity Practice.
J. Steven Young has been a director on our Board and a director of Holding since February 2011. Mr. Young is a Managing Director and Co-founder of Huntsman Gay Global Capital. He is also a member of Huntsman Gays Policy and Investment Committee. Prior to his tenure at Huntsman Gay, Mr. Young was a co-founder and Managing Director of Sorenson Capital, a private equity fund which focused on middle market leveraged buyouts in the Western United States. Previously, Mr. Young was a member in Northgate Capital, LLC, the general partner of Northgate Capital Partners, L.P., a fund of funds.
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Introduction
In general, this section focuses on, and provides a description of, our executive compensation philosophy and objectives and a discussion of each of the key elements of our compensation programs for fiscal 2010 as they applied to the individuals identified in the Summary Compensation Table, referred to in this prospectus as the named executive officers.
This discussion reflects the decisions made in respect of our executive compensation program for fiscal 2010 prior to the Acquisition, as conducted by the compensation committee of the Board of Directors of the Company (the Gymboree Compensation Committee). In connection with the Acquisition, the vesting of all then-outstanding unvested equity incentive awards was accelerated and all outstanding equity incentive awards were cashed out pursuant to the terms and conditions of the Merger Agreement. Following the consummation of the Acquisition, the Board of Directors of our parent company, Holding (the Holding Board), was responsible for making equity-related compensation decisions for our named executive officers. The Holding Board established a new equity incentive plan and granted awards under this plan in 2010. In addition, a new compensation committee of the Board of Directors of Holding (the Holding Compensation Committee), consisting of Messrs. Bekenstein and Hitch, was appointed in December 2010.
Compensation Discussion and Analysis
General Philosophy and Objectives
During fiscal 2010 prior to the Acquisition, the Gymboree Compensation Committee was responsible for determining the compensation of our named executive officers, including base salary, payments under our bonus programs and equity compensation. The philosophy of the Gymboree Compensation Committee was that executive compensation should be performance-based. Consistent with this philosophy, we tied a significant portion of senior executive compensation during fiscal 2010 to our financial and business performance. We designed our compensation policies with the objectives of:
| Aligning the interests of our executive officers with those of our stockholders; |
| Supporting a performance-oriented environment that recognizes individual performance as well as the achievement of specific Company goals; and |
| Attracting, rewarding and retaining highly qualified executives. |
We compensated our senior management principally through a mix of base salary, cash bonus and equity compensation that was designed to provide total compensation at levels competitive with those at comparable companies with which we compete for executive talent. The Gymboree Compensation Committee did not have a specific formula for the mix of base salary, cash incentives and equity incentives, but instead examined the Companys business plan and magnitude of stretch goals in the plan to determine the performance metrics and the emphasis that should be placed on annual compared to long-term incentives.
Following the Acquisition, our executive compensation philosophy remained substantially similar to that prior to the Acquisition, other than as described below. The Holding Board continued to emphasize performance-based compensation by establishing a new equity incentive plan and granting awards under the plan to our named executive officers and other employees. We expect that the Company and Holding, acting through their respective Boards, will generally follow the same principles when making compensation decisions. Since we are no longer a publicly-traded company, the elements of compensation and the principles and philosophies set forth above are subject to change as we continue our transition to being a privately-held company.
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Targeted Total Compensation and Benchmarking
Our compensation-setting process for fiscal 2010 consisted of targeting our Chief Executive Officers guaranteed compensation below the 50th percentile relative to the base compensation offered by comparable companies, while providing the opportunity to earn total compensation commensurate with the Companys performance.
As a starting point for establishing targeted total compensation for our Chief Executive Officer, we had benchmarked overall compensation levels using a peer group of companies in the retail apparel sector with annual sales, market capitalizations and/or ownership profiles comparable to ours. The companies in our peer group for fiscal 2010 were Aeropostale, Buckle, Chicos, Childrens Place, Coldwater Creek, Dress Barn, Guess, Hot Topic, J. Crew, Limited Brands, Mens Wearhouse, New York & Company, Pacific Sunwear, Talbots, Urban Outfitters, Wet Seal and Williams-Sonoma. In establishing this peer group, the Gymboree Compensation Committee examined retail companies that generally had comparable business models with complex organizations in addition to companies in a revenue range of $500 million to $2 billion as a proxy for business complexity. Our peers were generally in the market capitalization range of $700 million to $3 billion so as to include both smaller-growth retailers and more established retailers with which we compete to attract executive talent.
The peer group was selected by us in consultation with our compensation consultant Radford, an Aon Consulting Company (Radford). Radford reported directly to the Gymboree Compensation Committee in performing a range of services, including providing independent direction on peer group companies and pay information, financial performance comparisons, and related general compensation recommendations.
In addition to the peer group information, our review of compensation had generally relied on both quantitative and qualitative indicators of individual and Company performance in determining total compensation, including the achievement of pre-established earnings targets and other performance metrics, expense ratios, store openings, customer acquisition and loyalty, performance relative to certain competitors, the achievement of business objectives and strategic initiatives (particularly with respect to our more recently established operating divisions such as Crazy 8), succession planning and retention.
We had followed a similar process with respect to establishing targeted total compensation for our other named executive officers. The Gymboree Compensation Committee determined the compensation of the other named executive officers after consultation with our Chief Executive Officer, who provided recommendations to the Gymboree Compensation Committee.
Components of Executive Compensation
During fiscal 2010, we compensated our named executive officers principally through a combination of base salary, cash bonus and equity compensation. We believed that offering executive officers a total compensation package that included a significant portion of at-risk, performance-based awards aligned the interests of the officers with those of our stockholders. Other than as described below, the executive compensation components following the Acquisition have remained substantially similar to those prior to the Acquisition.
Base Salaries
The first key component of executive compensation was base salary. We provided our named executive officers with base salaries for fiscal 2010 at or below the 50th percentile of our peer group, consistent with our philosophy that a significant majority of our named executive officers compensation should be performance-based in order to align our executives interests with those of our stockholders. Base salaries for our named executive officers were reduced in December 2008 as part of an overall Company strategy to reduce costs, including compensation costs, in light of deteriorating economic conditions and the challenging retail environment at that time. Those reduced base salaries remained in effect for all of fiscal 2010, except that the Gymboree Compensation Committee approved a base salary increase to $285,000 for Mr. Harris at the start of fiscal 2010 in connection with his promotion to Chief Financial Officer.
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Cash Bonuses
The second key component of executive compensation for fiscal 2010 was our cash bonus program. In fiscal 2010, we established cash bonus programs with quarterly, semi-annual and annual awards, the payment of which based on specific earnings goals to encourage alignment of the interests of the named executive officers with those of our stockholders. We have also, on occasion, provided discretionary cash bonuses in recognition of outstanding performance by an executive or group of executives.
The Gymboree Compensation Committee granted award opportunities to our named executive officers with respect to fiscal 2010 under our 2010 Bonus Plan. The target payout amount for each named executive officer was a precentage of base salary for the fiscal year. Potential bonus payouts ranged from 25% to 300% (or, for Ms. Gustafson, 25% to 150%) of the target payout, depending on Company performance relative to the specified earnings per share (EPS) targets established by the Compensation Committee for quarterly, semi-annual and annual periods. The specified EPS threshold, which was the lowest level at which the Compensation Committee felt a named executive officer should receive a bonus, represented a 4% increase in annual earnings per diluted share over fiscal 2009. The specified EPS target, which was the level at which a named executive officer would be entitled to the target payout amount, represented at 10% increase in annual earnings per diluted share over fiscal 2009. The specified EPS level at which maximum bonuses would be payable represented a 30% (or, for Ms. Gustafson, 15%) increase in annual earnings per diluted share over fiscal 2009.
Target payout (% of base salary) |
Actual payout (% of base salary) |
Actual payout (% of target payout) (1) |
||||||||||
Matthew K. McCauley |
150 | % | 169 | % | 113 | % | ||||||
Jeffrey P. Harris |
65 | % | 73 | % | 112 | % | ||||||
Kip M. Garcia |
100 | % | 112 | % | 112 | % | ||||||
Marina Armstrong |
85 | % | 96 | % | 112 | % | ||||||
Lynda G. Gustafson |
40 | % | 30 | % | 75 | % | ||||||
Blair W. Lambert |
85 | % | 95 | % | 112 | % |
(1) | The dollar amounts of the actual payouts are reported in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table below. |
The payouts described above were made pursuant to the 2010 Bonus Plan based on the achievement by the Company of specified EPS levels during the first quarter (during which EPS of $0.99 was achieved relative to a threshold of $0.77 and a target of $0.81 for the quarter) and the first half of fiscal 2010 (during which EPS of $1.44 was achieved relative to a threhold of $1.20, a target of $1.27, and a maximum of $1.49 for the semi-annual period). During the third quarter of fiscal 2010, prior to the time that actual performance for the quarter was known, the named executive officers determined that they did not want any bonus to be paid to them for that quarter, given that other non-executive employees of the Company would not be receiving discretionary bonuses for that quarter. As a result, no amounts were paid under the 2010 Bonus Plan for the third quarter of fiscal 2010. Following the completion of the Acquisition and the close of fiscal 2010, no additional amounts were paid under the 2010 Bonus Plan.
In addition to the plan-based awards described above, the Company granted discretionary bonus awards to Ms. Gustafson, consisting of $77,282 for her performance during fiscal 2010 and an additional $25,000 for her individual performance in connection with the Acquisition. The Company granted these discretionary awards to reflect Ms. Gustafsons performance during this period, taking into account her particular role and responsibilties as well as her total compensation (including her opportunities under the 2010 Bonus Plan) relative to that of our other named executive officers and Vice Presidents.
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Equity Compensation
The third key component of executive compensation was equity compensation. Prior to the Acquisition, we continued our practice of granting restricted stock awards that vest based on the achievement of specified performance goals and continued service. We believed that performance-based restricted stock would be an effective long-term incentive and retention vehicle.
Our process for granting restricted stock prior to the Acquisition was as follows:
| We had considered a number of factors, including prior year performance, in determining the grant size. |
| Each grant contained performance criteria to be satisfied during the performance period in order for the restricted stock grant to be earned and subject to time-based vesting. |
| At the end of the performance period, the portion of the grant that was earned was to be determined based on actual performance and 25% of that earned portion would have vested. The unearned portion of the grant would have lapsed. |
| The remaining 75% of the earned portion of the grant would have vested in annual increments of 25% over three years, provided that the executive remained employed by the Company. |
The Gymboree Compensation Committee had historically relied on earnings per share (EPS) as the principal measure that reflected the Companys performance and aligned the interests of management with those of our stockholders. Starting in fiscal 2009, the Gymboree Compensation Committee used additional performance metrics. For fiscal 2010, the Gymboree Compensation Committee combined an EPS metric with an additional performance metric that reflected the increasing importance to our overall strategic plan of Crazy 8, our newest concept, in order to measure managements success in improving the operations and internal performance of Crazy 8.
In the first quarter of fiscal 2010, each named executive officer (other than Mr. Lambert, who was scheduled to retire before the end of the year) received an award under our 2004 Equity Incentive Plan (the 2004 EIP). Messrs. McCauley, Harris and Garcia and Ms. Armstrong received awards of performance-based restricted stock subject to fiscal 2010 performance criteria. Performance relative to the performance criteria, which was based on specified EPS targets as to 70% of each award and specified levels of Crazy 8 profitability as to 30% of each award, would determine the portion (up to the full amount) of each award that was earned and eligible to vest. To the extent earned, each award was subject to additional time-based vesting requirements. Ms. Gustafson received an award of restricted stock units subject only to time-based vesting requirements. As discussed below, in connection with the Acquisition, these awards under the 2004 EIP became fully vested and, together with all outstanding stock options, restricted stock units and restricted stock awards held by our named executive officers (and other employees), were cashed-out based on the Acquisition consideration of $65.40 per share, or the Offer Price.
Following the Acquisition, our indirect parent company, Holding, established the Giraffe Holding Inc. 2010 Equity Incentive Plan (the 2010 EIP). During fiscal 2010 the Holding Board granted only options to purchase common stock of Holding (Class A Common Stock, or Class A Common, and Class L Common Stock, or Class L Common) under the 2010 EIP. Stock option awards are designed to align the interests of our named executive officers with those of the Company and its stockholders by directly linking individual compensation to the Companys long-term performance (and the resulting performance of Holding), as reflected in stock price appreciation and increased stockholder value. In addition, through the imposition of a five-year vesting schedule, these awards encourage employee retention. Stock options granted under the 2010 EIP have an exercise price equal to the fair market value of a share of Class A Common or Class L Common, as applicable, on the date of grant. The Holding Board consulted with the Chief Executive Officer prior to making such grants regarding his recommendations as to the size of such grants (other than the grant to the Chief Executive Officer). In determining the size of each named executive officers stock option award, the Holding Board considered factors
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such as the estimated long-term values of these awards, the size of prior awards granted to the named executive officers, and the executives position and responsibilities. There is no program for making annual grants of stock options under the 2010 EIP, although the Holding Compensation Committee retains the discretion to grant additional options or other awards.
Please see the 2010 Grants of Plan Based Awards Table below for additional information on equity-based awards granted to our named executive officers during fiscal 2010.
Other Benefits
Severance Benefits
The only severance benefits available to our executives prior to the Acquisition were those under our management severance plans in effect from time to time or provided in connection with our equity awards. These benefits were provided to our eligible executives in the case of a termination by the Company without cause or by the executive for good reason. We believe that reasonable severance benefits support employee retention.
During fiscal 2010, we maintained two severance plans: an Amended and Restated Management Severance Plan (the Severance Plan) and an Amended and Restated Management Change of Control Plan (the Change of Control Plan). These plans remain in existence following the Acquisition, as described below. Under the Severance Plan, each of our named executive officers is entitled to receive a severance benefit equal to 100% of base salary in the event of a termination by the Company without cause or by the executive for good reason as well as continued health and other insurance benefits for 18 months following employment termination if such employment termination occurs outside of a change in control. We believed that this level of severance benefits was competitive with those offered by our peer companies.
The Acquisition constituted a change in control for purposes of our Change of Control Plan. As a result, severance benefits for the named executive officers are determined under the Change of Control Plan following the Acquisition. Under this plan, each of our named executive officers is entitled to receive lump-sum payments equal to a specified multiple of his or her annual cash compensation (current salary plus average bonus for the prior three full fiscal years), as well as a pro-rated bonus for the year in which termination occurred, if his or her employment is terminated by the Company without cause or by the executive for good reason within 18 months following the Acquisition. We also are required to continue health and other insurance benefits for 18 months following such a termination. To the extent that benefits under the Change of Control Plan (when aggregated with other payments or benefits to a participant) are parachute payments under the Internal Revenue Code and subject to an excise tax, we are obligated to gross up the change-of-control benefits so that the participant receives the benefit promised net of any incremental taxes imposed. Accordingly, if the employment of any of the named executive officers is terminated on an involuntary basis other than for cause until May 23, 2012 (i.e., 18 months following the Acquisition), such officer will be entitled to the Change of Control Plan benefits described above.
Following the Acquisition, we also continue to maintain our Severance Plan which, as described above, provides benefits to eligible participants upon involuntary terminations of employment outside of the change in control context.
During fiscal 2010, we did not have any written employment agreements with our named executive officers. The only contractual benefits for a named executive officer in the event of a termination of employment and/or a change of control are under the severance plans described above or as set forth below under Potential Payments upon Termination of Employment or a Change in Control.
Retirement Plans
In fiscal 2010, we maintained a 401(k) plan in which named executive officers were eligible to participate. We did not provide an employer match under the 401(k) plan for fiscal 2010.
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Perquisites and Other Benefits
During fiscal 2010, our senior management received certain other benefits and perquisites. The primary perquisite for executives at and above the level of Vice President consisted of reimbursement of up to 1% of base salary for tax-related and other financial planning services. We also paid all medical, dental and vision insurance premiums at and above the level of Vice President, and we paid life and disability insurance premiums for all eligible employees. Certain other benefit programs had been made available to eligible employees, including discounts on our products.
Deductibility of Executive Compensation
Since the Acquisition, the equity securities of the Company are no longer publicly held; accordingly, Section 162(m) of the Internal Revenue Code no longer applies to the Company.
Payments Received by Named Executive Officers in Connection with the Acquisition
As noted above, at the time of the Acquisition, our named executive officers held, in some combination, shares of our common stock, outstanding options to purchase our common stock and/or unvested restricted stock or restricted stock units. Upon closing of the Acquisition, our named executive officers received the same consideration for their equity holdings in the Company as other holders. Specifically:
| each outstanding share of common stock was exchanged for a payment of the Offer Price; |
| all outstanding options to purchase common stock were cancelled and converted into the right to receive a cash payment equal to the excess of the Offer Price over the option exercise price; and |
| all unvested shares of restricted stock and restricted stock units were deemed vested and were cancelled and exchanged for a payment equal to the number of shares of Company common stock underlying such award multiplied by the Offer Price. |
Please see the Cancellation of Stock Options in Connection with the Acquisition and Vesting and Cancellation of Restricted Stock Awards and Restricted Stock Units in Connection with the Acquisition tables below for additional information on Acquisition-related payments to our named executive officers.
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Executive Compensation Tables
The following table sets forth information regarding compensation for each of our named executive officers for fiscal years 2010, 2009 and 2008. All numbers are rounded to the nearest dollar.
SUMMARY COMPENSATION TABLE
Name and Principal Position |
Year | Salary ($) (1) |
Bonus ($) (2) |
Stock Awards ($) (3) |
Non-Equity Incentive Plan Compensation ($) (4) |
All Other Compensation ($) (6) |
Total ($) | |||||||||||||||||||||
Matthew K. McCauley |
2010 | $ | 637,500 | $ | | $ | 14,617,802 | $ | 1,075,781 | $ | 20,788,922 | $ | 37,120,005 | |||||||||||||||
Chairman and CEO |
2009 | 637,500 | 240,000 | 3,474,000 | | 15,258 | 4,366,758 | |||||||||||||||||||||
2008 | 884,831 | | 6,237,500 | 2,103,915 | 25,601 | 9,251,847 | ||||||||||||||||||||||
Jeffrey P. Harris |
2010 | 285,000 | | 2,588,670 | 208,406 | 1,276,533 | 4,358,609 | |||||||||||||||||||||
CFO |
||||||||||||||||||||||||||||
Kip M. Garcia |
2010 | 374,000 | | 6,857,919 | 420,750 | 10,724,312 | 18,376,981 | |||||||||||||||||||||
President |
2009 | 374,000 | 120,000 | 2,316,000 | | 12,666 | 2,822,666 | |||||||||||||||||||||
2008 | 493,519 | | 4,145,200 | 820,974 | 20,781 | 5,480,474 | ||||||||||||||||||||||
Marina Armstrong |
2010 | 338,800 | | 6,177,749 | 323,978 | 9,585,838 | 16,426,365 | |||||||||||||||||||||
SVP, General Manager |
2009 | 338,800 | 120,000 | 2,316,000 | | 18,673 | 2,793,473 | |||||||||||||||||||||
2008 | 464,886 | | 2,696,350 | 644,144 | 24,720 | 3,830,100 | ||||||||||||||||||||||
Lynda G. Gustafson |
2010 | 207,000 | 102,282 | 721,768 | 62,100 | 848,458 | 1,941,608 | |||||||||||||||||||||
VP, Corporate Controller |
2009 | 207,000 | 132,100 | 231,600 | | 14,099 | 584,799 | |||||||||||||||||||||
2008 | 225,750 | 79,660 | 201,350 | 135,488 | 21,672 | 663,920 | ||||||||||||||||||||||
Blair W. Lambert |
2010 | 280,162 | | | 323,383 | 7,780,045 | 8,383,590 | |||||||||||||||||||||
Former COO (5) |
2009 | 338,800 | 120,000 | 2,316,000 | | 16,785 | 2,791,585 | |||||||||||||||||||||
2008 | 404,516 | | 2,696,350 | 644,144 | 21,681 | 3,766,691 |
(1) | Reflects the dollar amount of base salary paid for fiscal 2010, including any salary increases and decreases effective during the year. |
(2) | Reflects, for fiscal 2010, discretionary bonuses approved by the Gymboree Compensation Committee for Ms. Gustafson in the amount of $77,282 and $25,000, as discussed in the Compensation Discussion and Analysis above. |
(3) | Reflects the aggregate grant date fair value of awards under our equity plans computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, Stock Compensation, which is referred to as FASB ASC Topic 718, rather than an amount paid to or realized by the named executive officer. For fiscal 2010, this amount represents pre-Acquisition grants of performance-based restricted stock and restricted stock units under the 2004 EIP and post-Acquisition grants of stock options under the 2010 EIP. The fair values of restricted stock awards and restricted stock units are based on the fair value of the Companys common stock on the date of grant, and the fair value of stock options is calculated based on the Black-Scholes option valuation model using the assumptions disclosed in Note 9 to the Companys audited financial statements included in this prospectus. In each case, the fair values in this column exclude the effect of estimated forfeitures. |
(4) | Reflects, for fiscal 2010, the amount earned by each named executive officer under the 2010 Bonus Plan following the close of the first quarter of the fiscal year (Mr. McCauley, $239,063; Mr. Harris, $46,313; Mr. Garcia, $93,500; Ms. Armstrong, $71,995; Ms. Gustafson, $20,700; and Mr. Lambert, $71,995) and the second quarter of the fiscal year (Mr. McCauley, $836,719; Mr. Harris, $162,094; Mr. Garcia, $327,250; Ms. Armstrong, $251,983; Ms. Gustafson, $41,400; and Mr. Lambert, $251,388). No payout was awarded for subsequent periods during fiscal 2010, as described in the Compensation Discussion and Analysis above. |
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(5) | Mr. Lambert voluntarily retired from the Company effective December 1, 2010. The amounts shown for fiscal 2010 reflect Mr. Lamberts base salary and bonus payments under the 2010 Bonus Plan for the portion of fiscal 2010 in which he was employed by the Company. |
(6) | The All Other Compensation column for fiscal 2010 with respect to each of our named executive officers consists of the following amounts: |
Acquisition- Related Payments (a) |
Medical, Life and (b) |
Financial (c) |
||||||||||
Matthew K. McCauley |
$ | 20,767,303 | $ | 15,244 | $ | 6,375 | ||||||
Jeffrey P. Harris |
$ | 1,264,550 | $ | 11,983 | | |||||||
Kip M. Garcia |
$ | 10,711,850 | $ | 12,462 | | |||||||
Marina Armstrong |
$ | 9,567,350 | $ | 15,100 | $ | 3,388 | ||||||
Lynda G. Gustafson |
$ | 835,135 | $ | 13,323 | | |||||||
Blair W. Lambert |
$ | 7,766,250 | $ | 13,795 | |
(a) | Reflects the dollar amounts received by each named executive officer pursuant to the cancellation of stock options, restricted stock units, and restricted stock awards under the Companys 2002 Stock Incentive Plan and 2004 EIP in connection with the Acquisition (reduced by the grant date fair value of any such award reported for fiscal 2010 in the Stock Awards column of the Summary Compensation Table above). See Cancellation of Stock Options in Connection with the Acquisition and Vesting and Cancellation of Restricted Stock Awards and Restricted Stock Units in Connection with the Acquisition below for additional information on these payments in connection with the Acquisition. |
(b) | Reflects insurance premiums, the full cost of which is paid by the Company. The amount shown for Mr. Lambert reflects premiums paid by the Company for the portion of fiscal 2010 in which he was employed by the Company. |
(c) | Reflects reimbursement of financial/tax planning services. Each named executive officer is eligible for reimbursement of such costs, up to 1% of his or her salary. |
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2010 GRANTS OF PLAN BASED AWARDS TABLE
The following table provides information regarding grants of plan-based awards for each of our named executive officers for fiscal 2010.
Name |
Grant Date |
Estimated Possible Payouts (1) |
Estimated Possible Payouts Under Equity Incentive Plan Award (2) |
All Other Stock Awards: Number of Shares of Stock or Units (#) (2) |
All Other Option Awards: Number of Units Underlying Options (#) (3) |
Exercise or Base Price of Option Awards ($/Unit) (4) |
Grant Date Fair Value of Stock and Option Award ($) (5) |
|||||||||||||||||||||||||||||||||||||
Threshold ($) |
Target ($) |
Maximum ($) |
Threshold (#) |
Target (#) |
Maximum (#) |
|||||||||||||||||||||||||||||||||||||||
Matthew K. McCauley |
||||||||||||||||||||||||||||||||||||||||||||
Bonus Plan |
239,063 | 956,250 | 2,868,750 | |||||||||||||||||||||||||||||||||||||||||
2004 EIP (EPS) |
2/1/2010 | 24,500 | 98,000 | 98,000 | 3,887,660 | |||||||||||||||||||||||||||||||||||||||
2004 EIP (Crazy 8) |
2/1/2010 | 10,500 | 42,000 | 42,000 | 1,666,140 | |||||||||||||||||||||||||||||||||||||||
2010 EIP |
12/28/2010 | 306,500 | 45.00 | 9,064,002 | ||||||||||||||||||||||||||||||||||||||||
Jeffrey P. Harris |
||||||||||||||||||||||||||||||||||||||||||||
Bonus Plan |
46,313 | 185,250 | 555,750 | |||||||||||||||||||||||||||||||||||||||||
2004 EIP (EPS) |
2/1/2010 | 4,375 | 17,500 | 17,500 | 694,225 | |||||||||||||||||||||||||||||||||||||||
2004 EIP (Crazy 8) |
2/1/2010 | 1,875 | 7,500 | 7,500 | 297,525 | |||||||||||||||||||||||||||||||||||||||
2010 EIP |
12/28/2010 | 54,000 | 45.00 | 1,596,920 | ||||||||||||||||||||||||||||||||||||||||
Kip M. Garcia |
||||||||||||||||||||||||||||||||||||||||||||
Bonus Plan |
93,500 | 374,000 | 1,122,000 | |||||||||||||||||||||||||||||||||||||||||
2004 EIP (EPS) |
2/1/2010 | 12,250 | 49,000 | 49,000 | 1,943,830 | |||||||||||||||||||||||||||||||||||||||
2004 EIP (Crazy 8) |
2/1/2010 | 5,250 | 21,000 | 21,000 | 833,070 | |||||||||||||||||||||||||||||||||||||||
2010 EIP |
12/28/2010 | 138,000 | 45.00 | 4,081,019 | ||||||||||||||||||||||||||||||||||||||||
Marina Armstrong |
||||||||||||||||||||||||||||||||||||||||||||
Bonus Plan |
71,995 | 287,980 | 863,940 | |||||||||||||||||||||||||||||||||||||||||
2004 EIP (EPS) |
2/1/2010 | 12,250 | 49,000 | 49,000 | 1,943,830 | |||||||||||||||||||||||||||||||||||||||
2004 EIP (Crazy 8) |
2/1/2010 | 5,250 | 21,000 | 21,000 | 833,070 | |||||||||||||||||||||||||||||||||||||||
2010 EIP |
12/28/2010 | 115,000 | 45.00 | 3,400,849 | ||||||||||||||||||||||||||||||||||||||||
Lynda G. Gustafson |
||||||||||||||||||||||||||||||||||||||||||||
Bonus Plan |
20,700 | 82,800 | 124,200 | |||||||||||||||||||||||||||||||||||||||||
2004 EIP |
4/14/2010 | 5,000 | 266,350 | |||||||||||||||||||||||||||||||||||||||||
2010 EIP |
12/28/2010 | 15,400 | 45.00 | 455,418 | ||||||||||||||||||||||||||||||||||||||||
Blair W. Lambert |
||||||||||||||||||||||||||||||||||||||||||||
Bonus Plan |
71,995 | 287,980 | 863,940 |
(1) | Reflects award opportunities for each named executive officer under the 2010 Bonus Plan. Actual amounts received by each named executive officer under the 2010 Bonus Plan are described in footnote 4 to the Summary Compensation Table above. |
(2) | Reflects awards of performance-based restricted stock granted to Messrs. McCauley, Harris and Garcia and Ms. Armstrong and an award of restricted stock units granted to Ms. Gustafson under the Companys 2004 EIP. Each performance-based restricted stock award consists of two tranches, the first of which is subject to EPS-based performance criteria and the second of which is subject to Crazy 8 performance criteria, as described below. In this table, the EPS tranche and the Crazy 8 tranche (together with the applicable threshold and target number of shares underlying each tranche) are shown separately. Each of these awards under the 2004 EIP subsequently vested and were cancelled in connection with the Acquisition, as described below. |
(3) | Reflects stock options granted to each named executive officer (other than Mr. Lambert) under the 2010 EIP. The number of securities in this column represents the number of Units underlying each stock option award. Each Unit constists of nine shares of Class A Common and one share of Class L Common. Options may only be exercised to purchase one or more Units. |
(4) | The exercise price of each option to purchase a Unit is no less than the fair market value of a Unit on the grant date, as determined by the Holding Board pursuant to the terms of the 2010 EIP. The exercise price of $45 per Unit represents a fair market value of $1 per share of Class A Common and $36 per share of Class L Common. |
(5) | The amount reported in this column reflects the aggregate grant date fair value of awards under our equity plans computed in accordance with FASB ASC Topic 718, as described further in footnote 3 to the Summary Compensation Table above. |
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Non-Equity Incentive Plan amounts above reflect the award opportunities granted under our fiscal 2010 Bonus Plan, as described in the Compensation Discussion and Analysis and footnote 4 to the Summary Compensation Table.
Awards of performance-based restricted stock granted to Messrs. McCauley, Harris and Garcia and Ms. Armstrong under the 2004 EIP were subject to fiscal 2010 performance criteria. Performance relative to the performance criteria, which was based on specified EPS targets as to 70% of each award (the EPS tranche) and specified levels of Crazy 8 profitability as to 30% of each award (the Crazy 8 tranche), would determine the portion (up to the full amount) of each award that was earned and eligible to vest. The EPS threshold required at least a 4% increase over fiscal 2009 for any portion of the EPS tranche to be earned and at least a 10% increase over fiscal 2009 for the full EPS tranche to be earned. The Crazy 8 profitability threshold required at least an 11% or $8 million contribution to corporate profitability for any portion of the Crazy 8 tranche to be earned and at least a 14% or $14 million contribution to corporate profitability for the full Crazy 8 tranche to be earned. Following the close of fiscal 2010, 25% of the earned portion of the award would vest immediately (so long as the executive had remained employed through fiscal 2010) and the remaining 75% of the earned portion of the award would vest in equal installments on the second, third and fourth anniversaries of the grant date (so long as the executive remained employed on such dates). Any time-based vesting conditions applicable to the earned portion of the award would be deemed satisfied upon an involuntary termination of employment (as defined in the Severance Plan) after the close of fiscal 2010. The award of restricted stock units granted to Ms. Gustafson under the 2004 EIP was scheduled to vest in four equal installments on each of the first four anniversaries of the grant date (so long as she remained employed on such dates). Each of these awards under the 2004 EIP subsequently vested and was cancelled in connection with the Acquisition, as described below.
Options granted under the 2010 EIP to our named executive officers (other than Mr. Lambert) are subject to time-based vesting conditions. Each option has a maximum 10-year term and is exercisable (to the extent provided under its terms) for a Unit consisting of nine shares of Class A Common and one share of Class L Common. Each option award is scheduled to vest in five equal installments on the first five anniversaries of the grant date (so long as the executive remains employed through such date) or in the event of a change of control. Upon a termination of employment, unvested options terminate and vested options remain exercisable for a specified period (one year following death, 180 days following a termination due to disability, or 60 days following any other termination without cause) or, if earlier, until the expiration of the option term. Units acquired upon the exercise of an option are subject to transfer restrictions and other restrictions set forth in the 2010 EIP and the Stockholders Agreement to which each named executive officer is a party. See Certain Relationships and Related Party TransactionsStockholders Agreement for further information regarding the Stockholders Agreement.
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2010 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END TABLE
The following table provides information regarding the number of Units underlying outstanding equity awards for each named executive officer as of January 29, 2011. As described above, each Unit consists of nine shares of Class A Common and one share of Class L Common.
Name |
Grant Date (1) |
Number of Units Underlying Unexercised Options (#) (2) |
Option Exercise Price ($) (3) |
Option Expiration Date (4) |
||||||||||||||||
Exercisable | Unexercisable | |||||||||||||||||||
Matthew K. McCauley |
12/28/2010 | 0 | 306,500 | 45.00 | 12/28/2020 | |||||||||||||||
Jeffrey P. Harris |
12/28/2010 | 0 | 54,000 | 45.00 | 12/28/2020 | |||||||||||||||
Kip M. Garcia |
12/28/2010 | 0 | 138,000 | 45.00 | 12/28/2020 | |||||||||||||||
Marina Armstrong |
12/28/2010 | 0 | 115,000 | 45.00 | 12/28/2020 | |||||||||||||||
Lynda G. Gustafson |
12/28/2010 | 0 | 15,400 | 45.00 | 12/28/2020 |
(1) | All options in this table were granted under the 2010 EIP. |
(2) | Each option is exercisable (to the extent provided under its terms) for a Unit consisting of nine shares of Class A Common and one share of Class L Common. |
(3) | The exercise price of stock options is the fair market value of a Unit on the grant date, as described above in footnote 4 to the 2010 Grants of Plan Based Awards Table. |
(4) | All options have a maximum 10-year term and are subject to the vesting scheduled described above. |
2010 OPTION EXERCISES AND STOCK VESTED TABLE
The following table provides information regarding stock option exercises and restricted stock or restricted stock unit awards vesting for each of our named executive officers during fiscal 2010 prior to the Acquisition. During the period of fiscal 2010 following the Acquisition, the named executive officers did not hold any stock awards, and all options under the 2010 EIP remained unvested.
Option Awards | Stock Awards | |||||||||||||||
Name |
Number of Shares Acquired on Exercise (#) |
Value Realized Upon Exercise ($) (1) |
Number of Shares Acquired on Vesting (#) |
Value Realized Upon Vesting ($) (2) |
||||||||||||
Matthew K. McCauley |
148,958 | 6,824,574 | ||||||||||||||
Jeffrey P. Harris |
16,500 | 787,949 | 6,250 | 296,720 | ||||||||||||
Kip M. Garcia |
11,859 | 436,751 | 93,750 | 4,304,825 | ||||||||||||
Marina Armstrong |
82,500 | 3,770,225 | ||||||||||||||
Lynda G. Gustafson |
5,500 | 265,355 | ||||||||||||||
Blair W. Lambert |
7,826 | 295,521 | 70,000 | 3,247,475 |
(1) | For stock options, the value realized is the difference between the closing fair market value of the underlying Company stock at the time of exercise and the exercise price. |
(2) | For stock awards, the value realized is based on the closing fair market value of the underlying Company stock on the vesting date. |
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Cancellation of Stock Options in Connection with the Acquisition
On November 23, 2011, in connection with the Acquisition, all stock options, whether or not vested, were cancelled and converted into the right to receive a cash payment equal to the intrinsic value of each outstanding option multiplied by the number of shares underlying the stock option. The intrinsic value is the excess of the Offer Price over the exercise price of the option. The following table details the payments to our named executive officers in respect of the cancellation of stock options in connection with the Acquisition:
Name |
Original Grant Date |
Stock Options Cancelled (Shares)(#) |
Intrinsic Value Per Share ($) |
Stock Option Cancellation Payment ($) |
||||||||||||
Matthew K. McCauley |
11/18/2004 | 9,374 | 53.74 | 503,759 | ||||||||||||
2/7/2005 | 23,801 | 53.40 | 1,270,973 | |||||||||||||
3/21/2005 | 41,667 | 53.16 | 2,215,018 | |||||||||||||
Total | 3,989,750 | |||||||||||||||
Lynda G. Gustafson |
11/18/2004 | 1,198 | 53.74 | 64,381 | ||||||||||||
2/7/2005 | 1,663 | 53.40 | 88,804 | |||||||||||||
Total | 153,185 |
Vesting and Cancellation of Restricted Stock Awards and Restricted Stock Units in Connection with the Acquisition
On November 23, 2011, in connection with the Acquisition, all restricted shares became fully vested and were converted into the right to receive the Offer Price, and all restricted stock units became fully vested and were cancelled in exchange for a payment equal to the number of shares of Company common stock underlying such restricted stock unit multiplied by the Offer Price. The following table details the payments to our named executive officers in respect of restricted shares and restricted stock units in connection with the Acquisition:
Name |
Number of Shares of Restricted Stock and Restricted Stock Units (#) |
Restricted Stock and Restricted Stock Unit Cancellation Payment ($) (1) |
||||||
Matthew K. McCauley |
341,458 | 22,331,353 | ||||||
Jeffrey P. Harris |
34,500 | 2,256,300 | ||||||
Kip M. Garcia |
206,250 | 13,488,750 | ||||||
Marina Armstrong |
188,750 | 12,344,250 | ||||||
Lynda G. Gustafson |
14,500 | 948,300 | ||||||
Blair W. Lambert |
118,750 | 7,766,250 |
(1) | Amounts are calculated by multiplying the Offer Price by the number of restricted shares or restricted stock units outstanding. |
Potential Payments upon Termination of Employment or a Change in Control
We offer our executives certain benefits on termination of employment under the Severance Plan and on termination of employment following a change of control under the Change of Control Plan. Because the Acquisition constituted a change of control during fiscal 2010 for purposes of our Change of Control Plan, the severance benefits, if any, for our named executive officers would have been determined under that plan had they experienced a termination of employment at the end of fiscal 2010. In addition, under the terms of outstanding option awards granted under the 2010 EIP, a subsequent change of control occurring at the end of fiscal 2010 would have accelerated the vesting of option awards.
We have not entered into written employment agreements with any of our named executive officers, so the only contractual benefits for a named executive officer in the event of a termination of employment and/or a change of control are under these plans or as set forth below.
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Severance Benefits under Change of Control Plan
Participants in the Change of Control Plan are eligible to receive certain lump-sum payments and benefit continuation payments if their employment terminates on an involuntary basis other than for cause, death or disability within a specified period following the Acquisition (18 months for our named executive officers). For this purpose, involuntarily termination other than for cause includes a material reduction in title, duties or responsibilities, a material reduction in annual base salary, or a material change in geographic work location. The lump-sum payment for each named executive officer is equal to 300% (or, for Ms. Gustafson, 200%) of his or her annual compensation (current base salary plus average annual bonus for the three full fiscal years prior to termination) plus a pro-rated quarterly and annual bonus for the year of termination, less applicable taxes. The executive would also be entitled to continued participation in health and other insurance benefit plans (to the extent provided in the governing documents of the plans), and reimbursement of the cost of COBRA premiums, for a period of 18 months following employment termination. In addition, benefits under the Change of Control Plan are subject to forfeiture or repayment in certain cases if the participant violates the Companys code of ethics or code of conduct or any restrictive covenants with the Company.
If the benefits under the Change of Control Plan, when aggregated with any other payments or benefits received by a participant, or to be received by a participant, would constitute parachute payments within the meaning of Section 280G of the Internal Revenue Code and would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, then the participants benefits would be grossed up so that the net amount retained by the participant will equal the total payments described in the preceding paragraph.
Change of Control Benefits under the 2010 EIP Acceleration of Vesting of Option Awards
In the event of a change of control, all outstanding stock options under the 2010 EIP will become immediately vested and exercisable. The option agreements define a change of control as any change in the ownership of the capital stock of Holding if any person other than investment funds associated with Bain Capital and their affiliates having the power to elect a majority of the members of the board of directors of Holding or any change in the ownership of the capital stock of Holding if any person other than investment funds associated with Bain Capital and their affiliates own less than 25% of Holdings stock. We do not provide a tax gross-up on any golden parachute excise tax applicable to the acceleration of option awards under the 2010 EIP in connection with a change of control.
2010 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL TABLE
The potential payments upon termination of employment or change of control for each of the named executive officers are set forth in the table below.
Amounts payable pursuant to the Change of Control Plan assume a qualifying termination of employment on January 28, 2011, the last business day of our 2010 fiscal year. Because each of our named executive officers (other than Mr. Lambert, who had voluntarily retired during fiscal 2010) would be entitled to benefits under the Change of Control Plan, no benefits would have been payable under the Severance Plan in connection with a termination of employment on January 28, 2011.
If a change of control (as defined in the 2010 EIP) had occurred on January 28, 2011, the last business day of our 2010 fiscal year, outstanding option awards under the 2010 EIP would have vested in full. However, because the per share value of Class A Common and the per share value of Class L Common did not exceed the exercise price of outstanding options as of January 28, 2011, no amounts would have been due to our name executive officers with respect to their options upon such a change of control. For a summary of what our named executive officers actually received in connection with the cash-out of their outstanding equity awards in connection with the consummation of the Acquisition, please see Payments Received by Named Executive Officers in Connection with the Acquisition above.
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None of our named executive officers was entitled to receive any severance payments or benefits upon a voluntary termination or a termination due to death, disability or cause on January 28, 2011, other than accrued base salary as of the date of termination. Furthermore, none of our named executive officers is entitled to any enhanced severance benefits following a subsequent change of control.
Potential Payments upon Involuntary Termination of Employment (1)
Name |
Severance (2) | Benefit Continuation (3) | Tax Gross-Up (4) | Total | ||||||||||||
Matthew K. McCauley |
5,143,290 | 24,074 | | 5,167,364 | ||||||||||||
Jeffrey P. Harris |
1,287,210 | 18,903 | 1,200,069 | 2,506,182 | ||||||||||||
Kip M. Garcia |
2,512,943 | 19,622 | 2,728,194 | 5,260,759 | ||||||||||||
Marina Armstrong |
2,229,900 | 23,858 | | 2,253,758 | ||||||||||||
Lynda G. Gustafson |
754,899 | 21,191 | | 776,090 | ||||||||||||
Blair W. Lambert (5) |
| | | |
(1) | Assumes, in each case, an involuntary termination of employment (other than for death, disability or cause) that would entitle the executive to benefits under the Change of Control Plan, as described above. |
(2) | Consists of 300% (or, for Ms. Gustafson, 200%) of the sum of the named executive officers base salary in effect on January 28, 2011 and average annual bonus payments for the prior three completed fiscal years. Assumes that no additional pro-rated quarterly or annual bonus amount would have been paid because no amounts were paid under the 2010 Bonus Plan to named executive officers with respect to the third quarter and all amounts to which named executive officers were entitled under the 2010 Bonus Plan had been paid by January 28, 2011. |
(3) | Assumes 18 months of continued coverage under the Companys benefit programs. Disability and life insurance costs are estimated based on the Companys current group plan benefit costs. Medical, dental and vision insurance costs are calculated using the current post-termination continued benefit rate prescribed by the applicable plan. |
(4) | Includes estimated tax gross-up payments under the Change of Control Plan for Acquisition-related change-of-control excise taxes in the case of an assumed termination of employment on January 28, 2011. For purposes of calculating the estimated gross-up payments, we assumed that only a portion of the value of certain awards of restricted stock and restricted stock units that were cashed out in connection with the Acquisition is taken into account, that certain performance goals associated with such awards had been met or were substantially certain to have been met as of the Acquisition, and that no payment with respect to such awards is treated as contingent upon the Acquisition under a special presumption applicable to agreements entered into or amendments made within one year before the Acquisition. |
(5) | Mr. Lambert voluntarily retired from the Company effective December 1, 2010. Mr. Lambert received no amounts in connection with his termination of employment, except for earned but unpaid base salary and benefits. |
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2010 DIRECTOR COMPENSATION TABLE
The following table sets forth information regarding compensation of our non-employee directors for fiscal 2010, which consisted of the following components: cash compensation, consisting of annual retainer fees; and equity compensation, consisting of annual restricted stock awards. The compensation for Mr. McCauley, who was the sole director for the portion of fiscal 2010 following the Acquisition, is included in the discussion of our named executive officer compensation above.
Name |
Fees Earned or Paid in Cash ($) (1) |
Stock Awards ($) (2) |
All Other Compensation (3) |
Total ($) | ||||||||||||
Gary M. Heil (4) |
137,911 | 549,900 | 793,501 | 1,481,312 | ||||||||||||
Daniel R. Lyle (4) |
141,432 | 549,900 | 485,578 | 1,176,910 | ||||||||||||
John C. Pound (4) |
167,911 | 549,900 | 1,253,695 | 1,971,506 | ||||||||||||
William U. Westerfield (4) |
137,911 | 549,000 | 486,478 | 1,173,389 | ||||||||||||
Scott Ryles (4) |
66,199 | 549,900 | 300,300 | 916,399 |
(1) | Represents the cash compensation earned in fiscal 2010 for Company Board and committee service prior to the Acquisition, plus the one-time fee for services on the Special Committee as described under Director Compensation in Connection with the Acquisition below. |
(2) | Reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, rather than an amount paid to or realized by the director, for restricted stock awards granted in fiscal 2010 under the 2004 EIP. The fair values of restricted stock awards are based on the fair value of the Companys common stock on the date of grant and exclude the effect of estimated forfeitures. |
(3) | Reflects the dollar amounts received by each director pursuant to the cancellation of stock options, restricted stock units, and restricted stock awards under the Companys 2002 Stock Incentive Plan and 2004 EIP in connection with the Acquisition, reduced by the grant date fair value of any such award reported in the Stock Awards column of this table. See Director Compensation in Connection with the Acquisition below for additional information on these payments in connection with the Acquisition. |
(4) | Messrs. Heil, Lyle, Pound, Westerfield and Ryles retired from the Board effective November 23, 2010. |
Prior to the Acquisition, each non-employee director was entitled to an annual retainer fee, to be paid on a quarterly basis on the first day of each fiscal quarter. The Company also reimbursed non-employee directors for actual travel and out-of-pocket expenses incurred in connection with their services. There were no additional fees for meeting attendance. In addition, each non-employee director was entitled to an annual award of 3,000 shares of restricted stock to be granted on the date of each annual meeting of stockholders of the Company. During fiscal 2010, the Company Board and the Gymboree Compensation Committee reviewed cash and equity compensation for our non-employee directors and discussed target levels of stock ownership for these directors. In connection with such review, the Company Board determined to increase the annual retainer fee to $75,000 for all non-employee directors and to provide for a one-time grant of 10,000 shares of restricted stock upon an individuals initial election or appointment to the Board. In addition, the Company Board approved a grant of 10,000 shares of restricted stock to each of the then-current non-employee directors. Each new and continuing director also received the annual stock award described above. All shares of restricted stock were granted under the 2004 EIP and were scheduled to vest in six equal installments on the first six anniversaries of the grant date (if the director remained a member of the Company Board).
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Director Compensation in Connection with the Acquisition
In connection with the consummation of the Acquisition, on November 23, 2010 the service of each of the then-serving members on the Company Board (other than Mr. McCauley) terminated. All shares of restricted stock held by the Companys non-employee directors that remained unvested immediately prior to the Acquisition vested and were canceled in exchange for an amount in cash, as described below. The following table shows the amount in cash that each non-employee director received in connection with the Acquisition.
Name of Director |
Vested Stock Options ($) (1) |
Restricted Stock Units and Restricted Stock ($) (2) |
Total ($) | |||||||||
Gary M. Heil |
307,923 | 1,035,478 | 1,343,401 | |||||||||
Daniel R. Lyle |
| 1,035,478 | 1,035,478 | |||||||||
John C. Pound |
768,117 | 1,035,478 | 1,803,595 | |||||||||
Scott Ryles |
| 850,200 | 850,200 | |||||||||
William U. Westerfield |
| 1,035,478 | 1,035,478 |
(1) | Amounts are calculated by multiplying the excess of the Offer Price over the exercise price of the option times the number of shares underlying the option. |
(2) | Amounts are calculated by multiplying the Offer Price by the number of restricted shares or restricted stock units outstanding. |
In addition, in connection with the Acquisition, each member of the special committee of independent and disinterested directors (the Special Committee) received a one-time fee of $45,000, except for Mr. Pound, who acted as Chair of the Special Committee and received a one-time fee of $75,000. Messrs. Heil, Lyle, Pound and Westerfield, each of whom was considered independent under the NASDAQ Marketplace Rules and the rules and regulations of the SEC and for purposes of participating on the Special Committee, had been appointed to serve on the Special Committee.
The Companys securities are currently not listed on a national securities exchange that has requirements as to board composition. As such, the Board has made no determination as to whether any of its members is independent as defined in national securities exchange listing standards and SEC rules.
Our Compensation Policies and Practices as They Relate to Risk Management
The Gymboree Compensation Committee has concluded that the risks arising from the Companys compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the Company. In doing so, the Committee considered whether the Companys compensation policies and practices encourage unnecessary or excessive risk, taking into account the following:
| the mix of long-term equity compensation and base salary provided to the executive officers and other key employees, which offsets incentives to take short-term risks to enhance annual performance bonus compensation; |
| the financial performance targets of the Companys annual cash bonus program are the objectives that are reviewed and approved by the Board and/or the Gymboree Compensation Committee; |
| the Companys bonus targets for its general corporate bonus plan having been based largely on earnings-related targets that take into account the overall impact of related actions on the Companys operating results (however, going forward, bonuses may be based on other criteria to be determined); |
| bonus awards generally are not contractual entitlements, but are reviewed by the Gymboree Compensation Committee and/or the Board and can be modified at their discretion; and |
| the Companys current policy and practice of using time-based vesting for the Companys equity compensation, further aligning an employees long-term compensation with the long-term value of the Company and mitigating short-term risk-taking. |
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Management Agreement
On October 23, 2010, Acquisition Sub and Holding entered into a management agreement with the Sponsor, pursuant to which the Sponsor agreed to provide certain management services to Acquisition Sub and Holding until December 31, 2020 (unless terminated earlier), with evergreen one-year extensions thereafter. We have assumed the obligations of Acquisition Sub under this agreement by operation of law as a result of the Acquisition. Pursuant to such agreement, the Sponsor is entitled to receive an aggregate annual management fee equal to $3.0 million and reimbursement for out-of-pocket expenses incurred by it or its affiliates in connection with the provision of services pursuant to the agreement or otherwise related to its investment. In addition, pursuant to such agreement, we paid the Sponsor an aggregate transaction fee of $17.0 million in connection with services it provided related to the Transactions.
The management agreement provides that the Sponsor is entitled to receive fees in connection with certain subsequent financing, acquisition, disposition and change of control transactions of 1% of the gross transaction value of any such transaction. The management agreement includes customary exculpation and indemnification provisions in favor of the Sponsor and its affiliates. The management agreement may be terminated by the Sponsor at any time and will terminate automatically upon an initial public offering or a change of control unless we and the counterparty to the management agreement determine otherwise. Upon termination, each provider of management services will be entitled to a termination fee calculated based on the present value of the annual fees due during the remaining period from the date of termination to December 31, 2020 or the then-applicable scheduled date for termination of the management agreement.
Stockholders Agreement
On November 23, 2010, Holding, the Company, certain investment funds sponsored by the Sponsor (collectively the Sponsor Funds), Giraffe Intermediate A, Inc., Giraffe Intermediate B, Inc. and certain co-investors entered into a stockholders agreement. The agreement, among other things, creates certain rights and restrictions on the shares of Holdings Common Stock held by the parties thereto, including transfer restrictions, tag-along and drag-along rights, and put and call rights.
Registration and Participation Rights Agreement
On November 23, 2010, Holding, the Sponsor Funds and certain co-investors entered into a registration and participation rights agreement. Pursuant to the agreement, the Sponsor Funds have a right to participate in certain future issuances or sales of the capital stock of Holding or any of its subsidiaries or any securities convertible into or exchangeable for any such securities, including options. The agreement also gives certain investors demand and piggyback registration rights with respect to their and certain other persons interests in Holding.
Indemnification of Directors and Officers; Directors and Officers Insurance
Under the Merger Agreement relating to the acquisition, the directors and officers of Gymboree and its subsidiaries who served as such prior to the consummation of the acquisition are entitled to continued indemnification and insurance coverage.
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Holding indirectly owns all of our outstanding equity interests. The following table sets forth information with respect to the ownership as of March 31, 2011 for (a) each person known by us to own beneficially more than a 5% equity interest in Holding, (b) each member of our Board of Directors (who are also members of the Board of Directors of Holding), (c) each of our named executive officers, and (d) all of our and Holdings executive officers and directors as a group. The beneficial ownership percentages reflected in the table below are based on 104,600,007 shares of Class A Common Stock and 11,622,223 shares of Class L Common Stock of Holding outstanding as of March 31, 2011.
The amounts and percentages of shares beneficially owned are reported on the basis of SEC regulations governing the determination of beneficial ownership of securities. Under SEC rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Securities that can be so acquired are deemed to be outstanding for purposes of computing such persons ownership percentage, but not for purposes of computing any other persons percentage. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.
Notwithstanding the beneficial ownership table presented below, the rights of holders of the Class A Common Stock of Holding and the Class L Common Stock of Holding (referred to collectively in this prospectus as Common Stock) are governed by certain organizational documents and agreements, including the Amended and Restated Certificate of Incorporation of Holding and a stockholders agreement by and among Holding, the Company, the Bain Stockholders (as defined in note (1) below), Giraffe Intermediate A, Inc., Giraffe Intermediate B, Inc. and certain co-investors. See Certain Relationships and Related Party Transactions. Except as described in the organizational documents and agreements referred to above or as otherwise indicated in a footnote, each of the beneficial owners listed has, to our knowledge, sole voting and investment power with respect to the indicated shares.
Unless otherwise indicated in a footnote, the address for each individual listed below is c/o The Gymboree Corporation, 500 Howard Street, San Francisco, CA 94105.
Name of Beneficial Owner |
Class A Common Stock |
Class L Common Stock |
Percentage Ownership |
|||||||||
Bain Stockholders (1) |
99,869,238 | 11,096,582 | 95.48 | % | ||||||||
Matthew K. McCauley |
600,003 | 66,667 | * | |||||||||
Blair Lambert (2) |
250,002 | 27,778 | * | |||||||||
Marina Armstrong |
200,007 | 22,223 | * | |||||||||
Kip M. Garcia |
100,008 | 11,112 | * | |||||||||
Jeffrey P. Harris |
20,250 | 2,250 | * | |||||||||
Lynda G. Gustafson |
| | | |||||||||
Jordan Hitch (3) |
99,869,238 | 11,096,582 | 95.48 | % | ||||||||
Joshua Bekenstein (3) |
99,869,238 | 11,096,582 | 95.48 | % | ||||||||
Marko Kivisto |
| | | |||||||||
J. Steven Young |
| | | |||||||||
Robert C. Gay |
| | | |||||||||
All executive officers and directors as a group (11 people) (4) |
1,170,270 | 130,030 | 1.12 | % |
* | Less than one percent. |
(1) | Represents 99,162,829.28 shares of Class A Common Stock and 11,018,092.14 shares of Class L Common Stock held by Bain Capital Fund X, L.P., a Cayman Islands exempted limited partnership (Bain Capital Fund X), 383,045.51 shares of Class A Common Stock and 42,560.61 shares of Class L Common Stock held by BCIP Associates IV (US), L.P., a Cayman Islands limited partnership (BCIP IV), 190,136.39 |
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shares of Class A Common Stock and 21,126.27 shares of Class L Common Stock held by BCIP T Associates IV (US), L.P. a Cayman Islands limited partnership (BCIP T IV), 115,692.14 shares of Class A Common Stock and 12,854.68 shares of Class L Common Stock held by BCIP Associates IV-B (US), L.P., a Cayman Islands exempted limited partnership (BCIP IV-B), and 17,534.68 shares of Class A Common Stock and 1,948.30 shares of Class L Common Stock held by BCIP T Associates IV-B (US), L.P., a Cayman Islands limited partnership (BCIP T IV-B and, together with Bain Capital Fund X, BCIP IV, BCIP T IV and BCIP IV-B, the Bain Stockholders). Bain Capital Partners X, L.P., a Cayman Islands exempted limited partnership (Bain Capital Partners X), is the general partner of Bain Capital Fund X, and Bain Capital Investors, LLC, a Delaware limited liability company (BCI), is the general partner of each of Bain Capital Partners X, BCIP IV, BCIP T IV, BCIP IV-B and BCIP T IV-B. By virtue of these relationships, Bain Capital Partners X may be deemed to have voting and dispositive power with respect to the 99,162,829.28 shares of Class A Common Stock and 11,018,092.14 shares of Class L Common Stock held by Bain Capital Fund X and BCI may be deemed to have voting and dispositive power with respect to the 99,869,238 shares of Class A Common Stock and 11,096,582 shares of Class A Common Stock held by the Bain Stockholders. Each of BCI and Bain Capital Partners X expressly disclaims beneficial ownership of any securities owned beneficially or of record by any person or persons other than itself for purposes of Section 13(d)(3) and Rule 13d-3 of the Exchange Act and expressly disclaims beneficial ownership of any such securities except to the extent of its pecuniary interest therein. The business address of each of the Bain Stockholders, Bain Capital Partners X and BCI is c/o Bain Capital Partners, LLC, 111 Huntington Avenue, Boston, Massachusetts 02199. |
(2) | Mr. Lambert resigned as our Chief Operating Officer effective December 1, 2010 and is no longer an officer of the Company. |
(3) | Includes all Common Stock of Holding held by each of the Bain Stockholders. Each of Messrs. Hitch and Bekenstein is a Managing Director of BCI and, by virtue of this and the relationships described in note (1) above, may be deemed to share voting and dispositive power with respect to the 99,869,238 shares of Class A Common Stock and 11,096,582 shares of Class L Common Stock held by the Bain Stockholders. Each of Messrs. Hitch and Bekenstein expressly disclaims beneficial ownership of any securities owned beneficially or of record by any person or persons other than himself for purposes of Section 13(d)(3) and Rule 13d-3 of the Exchange Act and expressly disclaims beneficial ownership of any such securities except to the extent of his pecuniary interest therein. The business address of each of Messrs. Hitch and Bekenstein is c/o Bain Capital Partners, LLC, 111 Huntington Avenue, Boston, Massachusetts 02199. |
(4) | This number does not include the 99,869,238 shares of Class A Common Stock and 11,096,582 shares of Class L Common Stock that may be deemed to be beneficially owned by the Bain Stockholders. |
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DESCRIPTION OF THE EXCHANGE NOTES
General
Certain terms used in this description are defined under the subheading Certain Definitions. In this description, (i) the terms we, our and us each refer to The Gymboree Corporation (Gymboree) and its consolidated Subsidiaries; (ii) the term Issuer refers only to Gymboree and not any of its Subsidiaries.
The Issuer issued $400,000,000 aggregate principal amount of 9.125% senior notes due 2018 (the existing notes) under an indenture dated November 23, 2010 (the Indenture) among the Issuer, the Guarantors and Deutsche Bank Trust Company Americas, as trustee (the Trustee). The existing notes were issued in a private transaction that was not subject to the registration requirements of the Securities Act. In this section, we refer to the exchange notes together with the existing notes as the Notes. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act.
The following description is only a summary of the material provisions of the Indenture, does not purport to be complete and is qualified in its entirety by reference to the provisions thereof, including the definitions therein of certain terms used below. We urge you to read the Indenture because it, and not this description, defines your rights as a Holder of the Notes.
Brief Description of the Notes
The Notes are:
| unsecured senior obligations of the Issuer; |
| pari passu in right of payment to all existing and future senior indebtedness (including the Senior Credit Facilities) of the Issuer; |
| effectively subordinated to all Secured Indebtedness of the Issuer (including the Senior Credit Facilities) to the extent of the value of the assets securing such Indebtedness; |
| senior in right of payment to all existing and future Subordinated Indebtedness of the Issuer; and |
| initially guaranteed on a senior unsecured basis by each Restricted Subsidiary that guarantees the Senior Credit Facilities. |
Guarantees
The Guarantors, as primary obligors and not merely as sureties, will jointly and severally irrevocably and unconditionally guarantee, on an unsecured senior basis, the performance and full and punctual payment when due, whether at maturity, by acceleration or otherwise, of all obligations of the Issuer under the Indenture and the Notes, whether for payment of principal of, premium, if any, or interest on or Additional Interest, if any, in respect of the Notes, expenses, indemnification or otherwise, on the terms set forth in the Indenture by executing the Indenture.
The Restricted Subsidiaries (other than as described below) will initially guarantee the Notes. Each of the Guarantees of the Notes will be a general unsecured obligation of each Guarantor and will be pari passu in right of payment with all existing and future senior indebtedness of each such entity, will be effectively subordinated to all Secured Indebtedness of each such entity to the extent of the value of the assets securing such Indebtedness and will be senior in right of payment to all existing and future Subordinated Indebtedness of each such entity. The Notes will be structurally subordinated to Indebtedness of Subsidiaries of the Issuer that do not Guarantee the Notes.
Not all of the Issuers Subsidiaries will Guarantee the Notes. In the event of a bankruptcy, liquidation or reorganization of any of these non-guarantor Subsidiaries, the non-guarantor Subsidiaries will pay the holders of
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their debt and their trade creditors before they will be able to distribute any of their assets to the Issuer. None of our Foreign Subsidiaries, non-Wholly-Owned Subsidiaries or any Receivables Subsidiary is required to Guarantee the Notes. In addition, certain Immaterial Subsidiaries (as defined in the Senior Credit Facilities) will not Guarantee the Notes.
The obligations of each Guarantor under its Guarantee will be limited as necessary to prevent such Guarantee from constituting a fraudulent conveyance under applicable law.
Any Guarantor that makes a payment under its Guarantee will be entitled upon payment in full of all guaranteed obligations under the Indenture to a contribution from each other Guarantor in an amount equal to such other Guarantors pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with GAAP.
The Indenture provides that each Guarantor may consolidate with, amalgamate or merge with or into or sell its assets to the Issuer or another Guarantor without limitation, or with other Persons upon the terms and conditions set forth in the Indenture. See Certain CovenantsMerger, Consolidation or Sale of All or Substantially All Assets.
If a Guarantee was rendered voidable, it could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the Guarantor, and, depending on the amount of such indebtedness, a Guarantors liability on its Guarantee could be reduced to zero. See Risk FactorsRisks Related to the Exchange NotesFederal and state fraudulent transfer laws may permit a court to void the guarantees, and, if that occurs, you may not receive any payments on the exchange notes.
A Guarantee by a Guarantor shall provide by its terms that it shall be automatically and unconditionally released and discharged upon:
(1) (a) any sale, exchange, disposition or transfer (by merger or otherwise) of (x) the Capital Stock of such Guarantor, after which the applicable Guarantor is no longer a Restricted Subsidiary, or (y) all or substantially all the assets of such Guarantor, which sale, exchange, disposition or transfer in each case is made in compliance with clauses (1) and (2) of the first paragraph under the caption Repurchase at the Option of HoldersAsset Sales;
(b) the release or discharge of the guarantee by such Guarantor of the Senior Credit Facilities or the guarantee which resulted in the creation of such Guarantee, except a discharge or release by or as a result of payment under such guarantee;
(c) the permitted designation of any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary; or
(d) the Issuer exercising its legal defeasance option or covenant defeasance option as described under Legal Defeasance and Covenant Defeasance or the Issuers obligations under the Indenture being discharged in accordance with the terms of the Indenture; and
(2) the Issuer delivering to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in the Indenture relating to such transaction have been complied with.
Ranking
The payment of the principal of, premium, if any, and interest and Additional Interest, if any, on the Notes and the payment of any Guarantee will rank pari passu in right of payment to all senior indebtedness of the Issuer or the relevant Guarantor, as the case may be, including the obligations of the Issuer and such Guarantor under the Senior Credit Facilities.
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The Notes are effectively subordinated in right of payment to all of the Issuers and each Guarantors existing and future Secured Indebtedness to the extent of the value of the assets securing such Indebtedness. As of January 29, 2011, the Issuer had $820.0 million of outstanding Secured Indebtedness, consisting entirely of Secured Indebtedness under the Senior Credit Facilities, and $148.4 million of undrawn availability under the Revolving Credit Facility.
Although the Indenture will contain limitations on the amount of additional Indebtedness that the Issuer and the Guarantors may incur, under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be senior indebtedness. See Certain CovenantsLimitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock.
Paying Agent and Registrar for the Notes
The Issuer will maintain one or more paying agents for the Notes in the Borough of Manhattan, City of New York. The initial paying agent for the Notes will be the Trustee.
The Issuer will also maintain a registrar with offices in the Borough of Manhattan, City of New York. The initial registrar will be the Trustee. The registrar will maintain a register reflecting ownership of the Notes outstanding from time to time and will make payments on and facilitate transfers of Notes on behalf of the Issuer.
The Issuer may change the paying agents or the registrars without prior notice to the Holders. The Issuer or any of its Subsidiaries may act as a paying agent or registrar.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the Indenture. The registrar and the Trustee may require a Holder to furnish appropriate endorsements and transfer documents in connection with a transfer of Notes. Holders will be required to pay all taxes due on transfer. The Issuer is not required to transfer or exchange any Note selected for redemption. Also, the Issuer is not required to transfer or exchange any Note for a period of 15 days before the mailing of a notice of redemption.
Principal, Maturity and Interest; Special Redemption
The Issuer initially issued $400,000,000 in aggregate principal amount of Notes. The Issuer may issue additional Notes under the Indenture from time to time subject to compliance with the covenant described below under Certain CovenantsLimitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock (the Additional Notes). The Notes offered by this prospectus and any Additional Notes subsequently issued under the Indenture will be treated as a single class for all purposes under the Indenture, including waivers, amendments, redemptions and offers to purchase. Unless the context requires otherwise, references to Notes for all purposes of the Indenture and this Description of the Exchange Notes include any Additional Notes.
Interest on the Notes will accrue at the rate of 9.125% per annum and be payable in cash. Interest on the Notes will be payable semi-annually in arrears on each June 1 and December 1, commencing on June 1, 2011. The Issuer will make each interest payment to the Holders of record of the Notes on the immediately preceding May 15 and November 15. Interest on the Notes will accrue from the most recent date to which interest has been paid with respect to such Notes, or if no interest has been paid with respect to such Notes, from the date of original issuance thereof. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. The Notes will mature on December 1, 2018 and will be issued in denominations of $2,000 and integral multiples of $1,000 in excess of $2,000. Additional Interest may accrue on the existing notes in certain circumstances pursuant to the Registration Rights Agreement. More specifically, if we have not exchanged the exchange notes for all existing notes validly tendered in accordance with the terms of the exchange offer (or if
87
the shelf registration statement covering resales of the existing notes that may be required to be filed pursuant to the Registration Rights Agreement under certain circumstances is not declared effective) on or before the 250th day after the Issue Date or, if applicable, such shelf registration statement ceases to be effective at any time during the shelf registration period (subject to certain exceptions), then Additional Interest shall accrue on the principal amount of the existing notes at a rate of 0.25% per annum for the first 90-day period immediately following such date and by an additional 0.25% per annum with respect to each subsequent 90-day period, up to a maximum additional rate of 1.0% per annum thereafter, until (i) the exchange offer is completed, (ii) the shelf registration statement is declared effective or, if such shelf registration statement ceased to be effective, again becomes effective or, (iii) the second anniversary of the Issue Date, as the case may be, as described in the Registration Rights Agreement. All references in the Indenture and this Description of Notes, in any context, to any interest or other amount payable on or with respect to the existing notes shall be deemed to include any Additional Interest required to be paid pursuant to the Registration Rights Agreement.
On or before the end of the first accrual period ending after the fifth anniversary of the date of issue (each within the meaning of Section 163(i)(2) of the Code) and prior to the end of each subsequent accrual period (the date of each such payment, an AHYDO Payment Date), the Issuer shall redeem a principal amount of the Notes in an amount equal to the AHYDO Amount at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, to the date of redemption. For purposes of the foregoing, AHYDO Amount means, as of each AHYDO Payment Date, the amount sufficient to ensure that the Notes will not be treated as an applicable high yield discount obligation within the meaning of Section 163(i)(1) of the Code. The AHYDO Amount shall be calculated by the Issuer. Each payment of the AHYDO Amount shall be treated for tax purposes as a payment of original issue discount on such Notes to the extent that the original issue discount has accrued as of the date such payment is due and then as a payment of principal. It is the intention of the foregoing that the Notes will not be an applicable high yield discount obligation within the meaning of Section 163(i)(1) of the Code.
Principal of, premium, if any, and interest on the Notes will be payable at the office or agency of the Issuer maintained for such purpose within the City and State of New York or, at the option of the Issuer, payment of interest may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders; provided that all payments of principal, premium, if any, and interest with respect to the Notes represented by one or more global notes registered in the name of or held by The Depository Trust Company (DTC) or its nominee will be made by wire transfer of immediately available funds to the accounts specified by the Holder or Holders thereof. Until otherwise designated by the Issuer, the Issuers office or agency in New York will be the office of the Trustee maintained for such purpose.
Mandatory Redemption; Offers to Purchase; Open Market Purchases
The Issuer is not required to make any mandatory redemption or sinking fund payments with respect to the Notes. However, under certain circumstances, the Issuer may be required to offer to purchase Notes as described under the caption Repurchase at the Option of Holders. We may at any time and from time to time purchase Notes in the open market or otherwise.
Optional Redemption
Except as set forth below, the Issuer will not be entitled to redeem Notes at its option prior to December 1, 2014.
At any time prior to December 1, 2014, the Issuer may redeem all or a part of the Notes, upon not less than 30 nor more than 60 days prior notice mailed by first-class mail to the registered address of each Holder of Notes or otherwise delivered in accordance with the procedures of DTC, at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest and Additional Interest, if any, to the date of redemption (the Redemption Date), subject to the rights of Holders of record on the relevant record date to receive interest due on the relevant interest payment date.
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On and after December 1, 2014, the Issuer may redeem the Notes, in whole or in part, upon notice as described under the heading Repurchase at the Option of HoldersSelection and Notice, at the redemption prices (expressed as percentages of principal amount of the Notes to be redeemed) set forth below, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period beginning on December 1 of each of the years indicated below:
Year |
Percentage | |||
2014 |
104.563 | % | ||
2015 |
102.281 | % | ||
2016 and thereafter |
100.000 | % |
In addition, until December 1, 2013, the Issuer may, at its option, on one or more occasions redeem up to 35% of the aggregate principal amount of Notes (including the aggregate principal amount of Notes issued after the Issue Date) at a redemption price equal to 109.125% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date, with the net cash proceeds of one or more Equity Offerings; provided that at least 50% of the sum of the aggregate principal amount of Notes originally issued under the Indenture and any Notes that are issued under the Indenture after the Issue Date remains outstanding immediately after the occurrence of each such redemption; provided further that each such redemption occurs within 90 days of the date of closing of each such Equity Offering.
Notice of any redemption of Notes upon any Equity Offering may be given prior to such redemption, and any such redemption or notice may, at the Issuers discretion, be subject to one or more conditions precedent, including, but not limited to, completion of the related Equity Offering.
The Trustee shall select the Notes to be redeemed in the manner described under Repurchase at the Option of HoldersSelection and Notice.
Repurchase at the Option of Holders
Change of Control
The Notes provide that, if a Change of Control occurs after the Effective Date, unless the Issuer has previously or concurrently mailed a redemption notice with respect to all the outstanding Notes as described under Optional Redemption, the Issuer will make an offer to purchase all of the Notes pursuant to the offer described below (the Change of Control Offer) at a price in cash (the Change of Control Payment) equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, subject to the right of Holders of record of the Notes on the relevant record date to receive interest due on the relevant interest payment date. Within 30 days following any Change of Control, the Issuer will send notice of such Change of Control Offer by first-class mail, with a copy to the Trustee, to each Holder of Notes to the address of such Holder appearing in the security register or otherwise in accordance with the procedures of DTC, with the following information:
(1) that a Change of Control Offer is being made pursuant to the covenant entitled Change of Control, and that all Notes properly tendered pursuant to such Change of Control Offer will be accepted for payment by the Issuer;
(2) the purchase price and the purchase date, which will be no earlier than 30 days nor later than 60 days from the date such notice is mailed (the Change of Control Payment Date);
(3) that any Note not properly tendered will remain outstanding and continue to accrue interest;
(4) that unless the Issuer defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on the Change of Control Payment Date;
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(5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender such Notes, with the form entitled Option of Holder to Elect Purchase on the reverse of such Notes completed, to the paying agent specified in the notice at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their tendered Notes and their election to require the Issuer to purchase such Notes, provided that the paying agent receives, not later than the close of business on the second Business Day prior to the Change of Control Payment Date, facsimile transmission or letter setting forth the name of the Holder of the Notes, the principal amount of Notes tendered for purchase, and a statement that such Holder is withdrawing its tendered Notes and its election to have such Notes purchased;
(7) that if the Issuer is redeeming less than all of the Notes, the Holders of the remaining Notes will be issued new Notes and such new Notes will be equal in principal amount to the unpurchased portion of the Notes surrendered. The unpurchased portion of the Notes must be equal to $2,000 or an integral multiple of $1,000 in excess of $2,000; and
(8) the other instructions, as determined by the Issuer, consistent with the covenant described hereunder, that a Holder must follow.
The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase by the Issuer of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the Indenture, the Issuer will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in the Indenture by virtue thereof.
On the Change of Control Payment Date, the Issuer will, to the extent permitted by law,
(1) accept for payment all Notes issued by it or portions thereof properly tendered pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the aggregate Change of Control Payment in respect of all Notes or portions thereof so tendered; and
(3) deliver, or cause to be delivered, to the Trustee for cancellation the Notes so accepted together with an Officers Certificate to the Trustee stating that such Notes or portions thereof have been tendered to and purchased by the Issuer.
The Senior Credit Facilities prohibit or limit, and future credit agreements or other agreements to which the Issuer becomes a party may prohibit or limit, the Issuer from purchasing any Notes as a result of a Change of Control. In the event a Change of Control occurs at a time when the Issuer is prohibited from purchasing the Notes, the Issuer could seek the consent of its lenders to permit the purchase of the Notes or could attempt to refinance the borrowings that contain such prohibition. If the Issuer does not obtain such consent or repay such borrowings, the Issuer will remain prohibited from purchasing the Notes. In such case, the Issuers failure to purchase tendered Notes after any applicable notice and lapse of time would constitute an Event of Default under the Indenture.
The Senior Credit Facilities provide, and future credit agreements or other agreements relating to senior indebtedness to which the Issuer becomes a party may provide, that certain change of control events with respect to the Issuer would constitute a default thereunder (including a Change of Control under the Indenture). If we experience a change of control that triggers a default under our Senior Credit Facilities, we could seek a waiver of such default or seek to refinance our Senior Credit Facilities. In the event we do not obtain such a waiver or refinance the Senior Credit Facilities, such default could result in amounts outstanding under our Senior Credit Facilities being declared due and payable.
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Our ability to pay cash to the Holders of Notes following the occurrence of a Change of Control may be limited by our then-existing financial resources. Therefore, sufficient funds may not be available when necessary to make any required repurchases.
The Change of Control purchase feature of the Notes may in certain circumstances make more difficult or discourage a sale or takeover of us and, thus, the removal of incumbent management. The Change of Control purchase feature is a result of negotiations between the Initial Purchasers and us. We have no present intention to engage in a transaction involving a Change of Control, although it is possible that we could decide to do so in the future. Subject to the limitations discussed below, we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings. Restrictions on our ability to incur additional Indebtedness are contained in the covenants described under Certain CovenantsLimitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock and Certain CovenantsLiens. Such restrictions in the Indenture can be waived only with the consent of the Holders of a majority in principal amount of the Notes then outstanding. Except for the limitations contained in such covenants, however, the Indenture does not contain any covenants or provisions that may afford Holders of the Notes protection in the event of a highly leveraged transaction.
We will not be required to make a Change of Control Offer following a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by us and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. Notwithstanding anything to the contrary herein, a Change of Control Offer may be made in advance of a Change of Control, conditional upon such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making of the Change of Control Offer.
The definition of Change of Control includes a disposition of all or substantially all of the assets of the Issuer to any Person. Although there is a limited body of case law interpreting the phrase substantially all, there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of all or substantially all of the assets of the Issuer. As a result, it may be unclear as to whether a Change of Control has occurred and whether a Holder of Notes may require the Issuer to make an offer to repurchase the Notes as described above.
The provisions under the Indenture relative to the Issuers obligation to make an offer to repurchase the Notes as a result of a Change of Control may be waived or modified with the written consent of the Holders of a majority in principal amount of the Notes.
Asset Sales
The Indenture provides that, after the Effective Date, the Issuer will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale, unless:
(1) the Issuer or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value (as determined in good faith by the Issuer) of the assets sold or otherwise disposed of; and
(2) except in the case of a Permitted Asset Swap, at least 75% of the consideration therefor received by the Issuer or such Restricted Subsidiary, as the case may be, is in the form of Cash Equivalents; provided that the amount of:
(a) any liabilities (as shown on the Issuers or such Restricted Subsidiarys most recent balance sheet or in the footnotes thereto) of the Issuer or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the Notes, that are assumed by the transferee of any such assets and for which the Issuer and all of its Restricted Subsidiaries have been validly released by all creditors in writing,
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(b) any securities, notes or other obligations received by the Issuer or such Restricted Subsidiary from such transferee that are converted by the Issuer or such Restricted Subsidiary into Cash Equivalents (to the extent of the Cash Equivalents received) within 180 days following the closing of such Asset Sale, and
(c) any Designated Non-cash Consideration received by the Issuer or such Restricted Subsidiary in such Asset Sale having an aggregate fair market value, taken together with all other Designated Non-cash Consideration received pursuant to this clause (c) that is at that time outstanding, not to exceed the greater of (x) $30.0 million and (y) 1.4% of Total Assets at the time of the receipt of such Designated Non-cash Consideration, with the fair market value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value,
shall be deemed to be Cash Equivalents for purposes of this provision and for no other purpose.
Within 365 days after the receipt of any Net Proceeds of any Asset Sale, the Issuer or such Restricted Subsidiary, at its option, may apply the Net Proceeds from such Asset Sale,
(1) to permanently reduce:
(a) Obligations under the Senior Credit Facilities and to correspondingly reduce commitments with respect thereto;
(b) Obligations under Indebtedness (other than Subordinated Indebtedness) that is secured by a Lien, which Lien is permitted by the Indenture, and to correspondingly reduce commitments with respect thereto;
(c) Obligations under other Indebtedness (other than Subordinated Indebtedness) (and to correspondingly reduce commitments with respect thereto), provided that the Issuer shall equally and ratably reduce Obligations under the Notes as provided under Optional Redemption, through open-market purchases (to the extent such purchases are at or above 100% of the principal amount thereof) or by making an offer (in accordance with the procedures set forth below for an Asset Sale Offer) to all Holders to purchase their Notes at 100% of the principal amount thereof, plus the amount of accrued but unpaid interest, if any, and Additional Interest, if any, on the amount of Notes that would otherwise be prepaid; or
(d) Indebtedness of a Restricted Subsidiary that is not a Guarantor, other than Indebtedness owed to the Issuer or another Restricted Subsidiary;
(2) to make (a) an Investment in any one or more businesses, provided that such Investment in any business is in the form of the acquisition of Capital Stock and results in the Issuer or another of its Restricted Subsidiaries, as the case may be, owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (b) capital expenditures or (c) acquisitions of other assets, in the case of each of (a), (b) and (c), used or useful in a Similar Business; or
(3) to make an Investment in (a) any one or more businesses, provided that such Investment in any business is in the form of the acquisition of Capital Stock and results in the Issuer or another of its Restricted Subsidiaries, as the case may be, owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (b) properties or (c) other assets that, in the case of each of (a), (b) and (c), replace the businesses, properties and/or assets that are the subject of such Asset Sale;
provided that, in the case of clauses (2) and (3) above, a binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment so long as the Issuer or such other Restricted Subsidiary enters into such commitment with the good faith expectation that such Net Proceeds will be applied to satisfy such commitment within 180 days of such commitment (an Acceptable Commitment) and, in the event any Acceptable Commitment is later cancelled or terminated for any reason before the Net Proceeds are applied
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in connection therewith, the Issuer or such Restricted Subsidiary enters into another Acceptable Commitment (a Second Commitment) within 180 days of such cancellation or termination; provided further that if any Second Commitment is later cancelled or terminated for any reason before such Net Proceeds are applied, then such Net Proceeds shall constitute Excess Proceeds (as defined below).
Any Net Proceeds from the Asset Sale that are not invested or applied as provided and within the time period set forth in the preceding paragraph will be deemed to constitute Excess Proceeds. When the aggregate amount of Excess Proceeds exceeds $25.0 million, the Issuer shall make an offer to all Holders of the Notes and, if required by the terms of any Indebtedness that is pari passu with the Notes (Pari Passu Indebtedness), to the holders of such Pari Passu Indebtedness (an Asset Sale Offer), to purchase the maximum aggregate principal amount of the Notes and such Pari Passu Indebtedness that is an integral multiple of $1,000 that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. The Issuer will commence an Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that Excess Proceeds exceed $25.0 million by mailing the notice required pursuant to the terms of the Indenture, with a copy to the Trustee or otherwise in accordance with the procedures of DTC.
To the extent that the aggregate amount of Notes and such Pari Passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Issuer may use any remaining Excess Proceeds for general corporate purposes, subject to compliance with other covenants contained in the Indenture. If the aggregate principal amount of Notes and the Pari Passu Indebtedness surrendered in an Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such Pari Passu Indebtedness to be purchased on a pro rata basis based on the accreted value or principal amount of the Notes or such Pari Passu Indebtedness tendered. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero (regardless of whether there are any remaining Excess Proceeds upon such completion).
Pending the final application of any Net Proceeds pursuant to this covenant, the holder of such Net Proceeds may apply such Net Proceeds temporarily to reduce Indebtedness outstanding under a revolving credit facility or otherwise invest such Net Proceeds in any manner not prohibited by the Indenture.
The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the Indenture, the Issuer will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in the Indenture by virtue thereof.
The Senior Credit Facilities prohibit or limit, and future credit agreements or other agreements to which the Issuer becomes a party may prohibit or limit, the Issuer from purchasing any Notes pursuant to this Asset Sales covenant. In the event the Issuer is prohibited from purchasing the Notes, the Issuer could seek the consent of its lenders to the purchase of the Notes or could attempt to refinance the borrowings that contain such prohibition. If the Issuer does not obtain such consent or repay such borrowings, it will remain prohibited from purchasing the Notes. In such case, the Issuers failure to purchase tendered Notes would constitute an Event of Default under the Indenture.
Selection and Notice
If the Issuer is redeeming less than all of the Notes issued by it at any time, the Trustee will select the Notes to be redeemed (a) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed or (b) on a pro rata basis (to the extent practicable), by lot or by such other method as the Trustee shall deem fair and appropriate and otherwise in accordance with the procedures of DTC.
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Notices of purchase or redemption shall be mailed by first-class mail, postage prepaid, at least 30 but not more than 60 days before the date of purchase or Redemption Date to each Holder of record of Notes at such Holders registered address or otherwise delivered in accordance with the procedures of DTC, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of the Indenture. If any Note is to be purchased or redeemed in part only, any notice of purchase or redemption that relates to such Note shall state the portion of the principal amount thereof that has been or is to be purchased or redeemed.
The Issuer will issue a new Note in a principal amount equal to the unredeemed portion of the Note called for redemption or tendered for purchase in the name of the Holder upon cancellation of the redeemed or purchased Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions thereof called for redemption.
Certain Covenants
Set forth below are summaries of certain covenants that are contained in the Indenture.
If on any date following the Issue Date (i) the Notes have an Investment Grade Rating from both Rating Agencies and (ii) no Default has occurred and is continuing under the Indenture (the occurrence of the events described in the foregoing clauses (i) and (ii) being collectively referred to as a Covenant Suspension Event), the Issuer and the Restricted Subsidiaries will not be subject to the covenants (the Suspended Covenants) described under:
(1) Repurchase at the Option of HoldersAsset Sales;
(2) Limitation on Restricted Payments;
(3) Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock;
(4) clause (4) of the first paragraph of Merger, Consolidation or Sale of All or Substantially All Assets;
(5) Transactions with Affiliates;
(6) Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries;
(7) Limitation on Guarantees of Indebtedness by Restricted Subsidiaries; and
(8) Repurchase at the Option of HoldersChange of Control.
In the event that the Issuer and the Restricted Subsidiaries are not subject to the Suspended Covenants under the Indenture for any period of time as a result of the foregoing, and on any subsequent date (the Reversion Date) (a) one or both of the Rating Agencies withdraw their Investment Grade Rating or downgrade the rating assigned to the Notes below an Investment Grade Rating or (b) the Issuer or any of its Affiliates enters into an agreement to effect a transaction that would result in a Change of Control and one or more of the Rating Agencies indicate that if consummated, such transaction (alone or together with any related recapitalization or refinancing transactions) would cause such Rating Agency to withdraw its Investment Grade Rating or downgrade the ratings assigned to the Notes below an Investment Grade Rating, then the Issuer and the Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants under the Indenture with respect to future events. The period beginning on the day of a Covenant Suspension Event and ending on a Reversion Date is called a Suspension Period.
On each Reversion Date, all Indebtedness incurred, or Disqualified Stock or Preferred Stock issued, during the Suspension Period will be deemed to have been outstanding on the Issue Date, so that it is classified as permitted under clause (3) of the second paragraph under Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock. Calculations made after the Reversion Date of the amount
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available to be made as Restricted Payments under Limitation on Restricted Payments will be made as though the covenant described under Limitation on Restricted Payments had been in effect since the Issue Date and throughout the Suspension Period. Accordingly, Restricted Payments made during the Suspension Period will reduce the amount available to be made as Restricted Payments under the first paragraph of Limitation on Restricted Payments (but will not reduce any amounts available to be made as Restricted Payments under the second paragraph of Limitation on Restricted Payments). However, no Default or Event of Default will be deemed to have occurred on the Reversion Date (or thereafter) under any Suspended Covenant solely as a result of any actions taken by the Issuer or its Restricted Subsidiaries, or events occurring, during the Suspension Period. For purposes of the Repurchase at the Option of HoldersAsset Sales covenant, on the Reversion Date, the unutilized Excess Proceeds amount will be reset to zero.
There can be no assurance that the Notes will ever achieve or maintain Investment Grade Ratings.
Limitation on Restricted Payments
The Issuer will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:
(I) declare or pay any dividend or make any other payment or any distribution on account of the Issuers, or any of its Restricted Subsidiaries Equity Interests (in such Persons capacity as holder of such Equity Interests), including any dividend or distribution payable in connection with any merger or consolidation other than:
(a) dividends or distributions by the Issuer payable solely in Equity Interests (other than Disqualified Stock) of the Issuer; or
(b) dividends or distributions by a Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary other than a Wholly-Owned Subsidiary, the Issuer or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities;
(II) purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests of the Issuer or any direct or indirect parent of the Issuer, including in connection with any merger or consolidation;
(III) make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value, in each case prior to any scheduled repayment, sinking fund payment or maturity, any Subordinated Indebtedness, other than:
(a) Indebtedness permitted under clauses (7) and (8) of the covenant described under Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock; or
(b) the purchase, repurchase or other acquisition of Subordinated Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase or acquisition; or
(IV) make any Restricted Investment
(all such payments and other actions set forth in clauses (I) through (IV) above being collectively referred to as Restricted Payments), unless, at the time of such Restricted Payment:
(1) no Default shall have occurred and be continuing or would occur as a consequence thereof;
(2) immediately after giving effect to such transaction on a pro forma basis, the Issuer could incur $1.00 of additional Indebtedness under the provisions of the first paragraph of the covenant described under Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock; and
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(3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Issuer and its Restricted Subsidiaries after the Effective Date (including Restricted Payments permitted by clauses (1), (6)(c), (9) and (14) of the next succeeding paragraph, but excluding all other Restricted Payments permitted by the next succeeding paragraph), is less than the sum of (without duplication):
(a) 50% of the Consolidated Net Income of the Issuer for the period (taken as one accounting period) beginning on the first day of the fiscal quarter of the Issuer in which the Effective Date occurs to the end of the Issuers most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment, or, in the case such Consolidated Net Income for such period is a deficit, minus 100% of such deficit; plus
(b) 100% of the aggregate net cash proceeds and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property received by the Issuer since the Effective Date (other than net cash proceeds to the extent such net cash proceeds have been used to incur Indebtedness, Disqualified Stock or Preferred Stock pursuant to clause (12)(a) of the second paragraph of Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock) from the issue or sale of:
(i) (A) Equity Interests of the Issuer, including Treasury Capital Stock (as defined below), but excluding cash proceeds and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property received from the sale of:
(x) Equity Interests to members of management, directors or consultants of the Issuer, any direct or indirect parent company of the Issuer and the Issuers Subsidiaries since the Effective Date to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of the next succeeding paragraph; and
(y) Designated Preferred Stock; and
(B) to the extent such net cash proceeds are actually contributed to the Issuer, Equity Interests of the Issuers direct or indirect parent companies (excluding contributions of the proceeds from the sale of Designated Preferred Stock of such companies or contributions to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of the next succeeding paragraph); or
(ii) debt securities of the Issuer that have been converted into or exchanged for Equity Interests of the Issuer;
provided, however, that this clause (b) shall not include the proceeds from (W) Refunding Capital Stock (as defined below), (X) Equity Interests or convertible debt securities of the Issuer sold to a Restricted Subsidiary, (Y) Disqualified Stock or debt securities that have been converted into Disqualified Stock or (Z) Excluded Contributions; plus
(c) 100% of the aggregate amount of cash and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property contributed to the capital of the Issuer following the Effective Date other than (X) net cash proceeds to the extent such net cash proceeds have been used to incur Indebtedness or issue Disqualified Stock or Preferred Stock pursuant to clause (12)(a) of the second paragraph of Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock, (Y) by a Restricted Subsidiary and (Z) from any Excluded Contributions; plus
(d) 100% of the aggregate amount received in cash and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property received by means of:
(i) the sale or other disposition (other than to the Issuer or a Restricted Subsidiary) of Restricted Investments made by the Issuer or its Restricted Subsidiaries and repurchases and
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redemptions of such Restricted Investments from the Issuer or its Restricted Subsidiaries and repayments of loans or advances, and releases of guarantees, which constitute Restricted Investments by the Issuer or its Restricted Subsidiaries, in each case since the Effective Date; or
(ii) the sale (other than to the Issuer or a Restricted Subsidiary) of the stock of an Unrestricted Subsidiary or a distribution from an Unrestricted Subsidiary (other than in each case to the extent the Investment in such Unrestricted Subsidiary was made by the Issuer or a Restricted Subsidiary pursuant to clause (7) of the next succeeding paragraph or to the extent such Investment constituted a Permitted Investment) or a dividend from an Unrestricted Subsidiary since the Effective Date; plus
(e) in the case of the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary or the merger, amalgamation or consolidation of an Unrestricted Subsidiary into the Issuer or a Restricted Subsidiary or the transfer of all or substantially all of the assets of an Unrestricted Subsidiary to the Issuer or a Restricted Subsidiary after the Effective Date, the fair market value of the Investment in such Unrestricted Subsidiary (or the assets transferred), as determined by the Issuer in good faith or, if such fair market value may exceed $50.0 million, in writing by an Independent Financial Advisor, at the time of the redesignation of such Unrestricted Subsidiary as a Restricted Subsidiary or at the time of such merger, amalgamation, consolidation or transfer of assets other than to the extent the Investment in such Unrestricted Subsidiary was made by the Issuer or a Restricted Subsidiary pursuant to clause (7) of the next succeeding paragraph or to the extent such Investment constituted a Permitted Investment.
The foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of declaration thereof, if at the date of declaration such payment would have complied with the provisions of the Indenture;
(2) (a) the redemption, repurchase, retirement or other acquisition of any Equity Interests (Treasury Capital Stock) of the Issuer or any Equity Interests of any direct or indirect parent company of the Issuer or any Subordinated Indebtedness of the Issuer or a Restricted Subsidiary, in exchange for, or out of the proceeds of, the substantially concurrent sale or issuance (other than to a Restricted Subsidiary) of, Equity Interests of the Issuer or any direct or indirect parent company of the Issuer to the extent contributed to the Issuer (in each case, other than any Disqualified Stock) (Refunding Capital Stock), (b) the declaration and payment of dividends on Treasury Capital Stock out of the proceeds of the substantially concurrent sale or issuance (other than to a Subsidiary of the Issuer or to an employee stock ownership plan or any trust established by the Issuer or any of its Subsidiaries) of Refunding Capital Stock, and (c) if immediately prior to the retirement of Treasury Capital Stock, the declaration and payment of dividends thereon was permitted under clause (6) of this paragraph, the declaration and payment of dividends on the Refunding Capital Stock (other than Refunding Capital Stock the proceeds of which were used to redeem, repurchase, retire or otherwise acquire any Equity Interests of any direct or indirect parent company of the Issuer) in an aggregate amount per year no greater than the aggregate amount of dividends per annum that were declarable and payable on such Treasury Capital Stock immediately prior to such retirement;
(3) the defeasance, redemption, repurchase, exchange or other acquisition or retirement of (x) Subordinated Indebtedness of the Issuer or a Guarantor made by exchange for, or out of the proceeds of, the substantially concurrent sale of, new Indebtedness of the Issuer or a Guarantor, as the case may be, or (y) Disqualified Stock of the Issuer or a Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Disqualified Stock of the Issuer or a Guarantor, that, in each case, is incurred in compliance with Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock so long as:
(a) the principal amount (or accreted value, if applicable) of such new Indebtedness or the liquidation preference of such new Disqualified Stock does not exceed the principal amount of (or accreted value, if applicable), plus any accrued and unpaid interest on, the Subordinated Indebtedness
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or the liquidation preference of, plus any accrued and unpaid dividends on, the Disqualified Stock being so defeased, redeemed, repurchased, exchanged, acquired or retired for value, plus the amount of any premium required to be paid under the terms of the instrument governing the Subordinated Indebtedness or Disqualified Stock being so defeased, redeemed, repurchased, exchanged, acquired or retired, defeasance costs and any reasonable fees and expenses incurred in connection with such redemption, repurchase, exchange, acquisition or retirement and the issuance of such new Indebtedness or Disqualified Stock;
(b) such new Indebtedness is subordinated to the Notes or the applicable Guarantee at least to the same extent as such Subordinated Indebtedness so defeased, repurchased, exchanged, redeemed, acquired or retired for value;
(c) such new Indebtedness or Disqualified Stock has a final scheduled maturity date equal to or later than the final scheduled maturity date of the Subordinated Indebtedness or Disqualified Stock being so defeased, redeemed, repurchased, exchanged, acquired or retired; and
(d) such new Indebtedness or Disqualified Stock has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to Maturity of the Subordinated Indebtedness or Disqualified Stock being so defeased, redeemed, repurchased, exchanged, acquired or retired;
(4) a Restricted Payment to pay for the repurchase, retirement or other acquisition or retirement for value of Equity Interests (other than Disqualified Stock) of the Issuer or any of its direct or indirect parent companies held by any future, present or former employee, director or consultant of the Issuer, any of its Subsidiaries or any of its direct or indirect parent companies, or any of their respective estates, spouses or former spouses pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement (including, for the avoidance of doubt, any principal and interest payable on any notes issued by the Issuer or any direct or indirect parent company in connection with any such repurchase, retirement or other acquisition or retirement); provided, however, that the aggregate Restricted Payments made under this clause (4) do not exceed $10.0 million in any calendar year (which shall increase to $20.0 million subsequent to the consummation of an underwritten public Equity Offering by the Issuer or any direct or indirect parent company of the Issuer) with unused amounts in any calendar year being carried over to succeeding calendar years subject to a maximum (without giving effect to the following proviso) of $20.0 million in any calendar year (which shall increase to $40.0 million subsequent to the consummation of an underwritten public Equity Offering by the Issuer or any direct or indirect parent company of the Issuer); provided further that such amount in any calendar year may be increased by an amount not to exceed:
(a) the cash proceeds from the sale of Equity Interests (other than Disqualified Stock) of the Issuer and, to the extent contributed to the Issuer, Equity Interests of any of the Issuers direct or indirect parent companies, in each case to any future, present or former employees, officers, members of management, directors or consultants of the Issuer, any of its Subsidiaries or any of its direct or indirect parent companies after the Effective Date, to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of clause (3) of the preceding paragraph, plus, in respect of any sale of Equity Interests in connection with an exercise of stock options, an amount equal to the amount required to be withheld by the Issuer or any of its direct or indirect parent companies in connection with such exercise under applicable law to the extent such amount is repaid to the Issuer or its direct or indirect parent company, as applicable, constituted a Restricted Payment and has not otherwise been applied to the payment of Restricted Payments by virtue of clause (3) of the preceding paragraph; plus
(b) the cash proceeds of key man life insurance policies received by the Issuer or its Restricted Subsidiaries after the Effective Date; less
(c) the amount of any Restricted Payments previously made with the cash proceeds described in clauses (a) and (b) of this clause (4);
and provided further that cancellation of Indebtedness owing to the Issuer from any future, present or former employees, directors, officers, managers or consultants of the Issuer, any of the Issuers direct or
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indirect parent companies or any of the Issuers Restricted Subsidiaries in connection with a repurchase of Equity Interests of the Issuer or any of its direct or indirect parent companies will not be deemed to constitute a Restricted Payment for purposes of this covenant or any other provision of the Indenture;
(5) the declaration and payment of dividends to holders of any class or series of Disqualified Stock of the Issuer or any of its Restricted Subsidiaries or any class or series of Preferred Stock of any Restricted Subsidiary issued in accordance with the covenant described under Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock to the extent such dividends are included in the definition of Fixed Charges;
(6) (a) the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued by the Issuer or any of its Restricted Subsidiaries after the Effective Date;
(b) the declaration and payment of dividends to a direct or indirect parent company of the Issuer, the proceeds of which will be used to fund the payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) of such parent company issued after the Effective Date, provided that the amount of dividends paid pursuant to this clause (b) shall not exceed the aggregate amount of cash actually contributed to the Issuer from the sale of such Designated Preferred Stock; or
(c) the declaration and payment of dividends on Refunding Capital Stock that is Preferred Stock in excess of the dividends declarable and payable thereon pursuant to clause (2) of this paragraph;
provided, however, in the case of each of (a), (b) and (c) of this clause (6), that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock or the declaration of such dividends on Refunding Capital Stock that is Preferred Stock, after giving effect to such issuance or declaration on a pro forma basis, the Issuer and its Restricted Subsidiaries on a consolidated basis would have had a Fixed Charge Coverage Ratio of at least 2.00 to 1.00;
(7) Investments in Unrestricted Subsidiaries having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (7) that are at the time outstanding, without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of, or have not been subsequently sold or transferred for, cash or marketable securities, not to exceed $30.0 million (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value);
(8) repurchases of Equity Interests deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants;
(9) declaration and payment of dividends on the Issuers common stock (or the payment of dividends to any direct or indirect parent entity to fund a payment of dividends on such entitys common stock), following the first public offering of the Issuers common stock or the common stock of any of its direct or indirect parent companies after the Effective Date, of up to 6% per annum of the net cash proceeds received by or contributed to the Issuer in or from any public offering, other than public offerings with respect to the Issuers common stock registered on Form S-8 and other than any public sale constituting an Excluded Contribution;
(10) Restricted Payments that are made with Excluded Contributions;
(11) other Restricted Payments in an aggregate amount taken together with all other Restricted Payments made pursuant to this clause (11) that are at the time outstanding (without giving effect to the sale of an Investment to the extent the proceeds of such sale do not consist of, or have not been subsequently sold or transferred for, cash or marketable securities) not to exceed the greater of (x) $60.0 million and (y) 2.85% of Total Assets;
(12) distributions or payments of Receivables Fees;
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(13) any Restricted Payment used to fund the Transactions and the fees and expenses related thereto or owed to Affiliates, in each case with respect to any Restricted Payment to or owed to an Affiliate, to the extent permitted by the covenant described under Transactions with Affiliates;
(14) the repurchase, redemption or other acquisition or retirement for value of any Subordinated Indebtedness pursuant to the provisions similar to those described under the captions Repurchase at the Option of HoldersChange of Control and Repurchase at the Option of HoldersAsset Sales; provided that all Notes tendered by Holders in connection with a Change of Control Offer or Asset Sale Offer, as applicable, have been repurchased, redeemed or acquired for value;
(15) the declaration and payment of dividends or distributions by the Issuer to, or the making of loans to, any direct or indirect parent company in amounts required for any direct or indirect parent companies to pay, in each case without duplication,
(a) franchise taxes and other fees, taxes and expenses required to maintain their corporate existence;
(b) for any taxable period in which the Issuer and/or any of its Subsidiaries is a member of a consolidated, combined or similar income tax group of which a direct or indirect parent of Issuer is the common parent (a Tax Group), federal, foreign, state and local income taxes of such Tax Group that are attributable to the taxable income of the Issuer and/or its Subsidiaries; provided that, for each taxable period, the amount of such payments made in respect of such taxable period in the aggregate shall not exceed the amount that the Issuer and the Subsidiaries would have been required to pay in respect of federal, foreign, state and local income taxes in the aggregate if such entities were corporations paying taxes separately from any Tax Group at the highest combined applicable federal, foreign, state and local tax rate for such fiscal year (it being understood and agreed that if the Issuer or any Subsidiary pays any such federal, foreign, state or local income taxes directly to such taxing authority, that a Restricted Payment in duplication of such amount shall not be permitted to be made pursuant to this clause (b)); provided further that the permitted payment pursuant to this clause (b) with respect to any taxes of any Unrestricted Subsidiary for any taxable period shall be limited to the amount actually paid with respect to such period by such Unrestricted Subsidiary to the Issuer or its Restricted Subsidiaries for the purposes of paying such consolidated, combined or similar taxes;
(c) customary salary, bonus and other benefits payable to officers, directors and employees of any direct or indirect parent company of the Issuer to the extent such salaries, bonuses and other benefits are attributable to the ownership or operation of the Issuer and its Restricted Subsidiaries;
(d) general corporate operating and overhead costs and expenses of any direct or indirect parent company of the Issuer to the extent such costs and expenses are attributable to the ownership or operation of the Issuer and its Restricted Subsidiaries;
(e) fees and expenses other than to Affiliates of the Issuer related to any unsuccessful equity or debt offering of such parent company; and
(f) payments permitted under clauses (3), (4), (7) or (11) of the covenant described under Transactions with Affiliates;
(16) the distribution, by dividend or otherwise, or other transfer or disposition of shares of Capital Stock of, or Indebtedness owed to the Issuer or a Restricted Subsidiary by, Unrestricted Subsidiaries (other than Unrestricted Subsidiaries, the primary assets of which are Cash Equivalents) or the proceeds thereof;
(17) cash payments in lieu of the issuance of fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Capital Stock of the Issuer or any direct or indirect parent company of the Issuer; provided, that any such cash payment shall not be for the purpose of evading the limitation of this covenant; and
(18) payment of dividends and other distributions in an amount equal to any reduction in taxes actually realized by the Issuer and its Restricted Subsidiaries in the form of refunds or credits or from deductions
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when applied to offset income or gain as a direct result of (i) transaction fees and expenses, (ii) commitment and other financing fees or (iii) severance, change in control and other compensation expense incurred in connection with the exercise, repurchase, rollover or payout of stock options or bonuses, in each case in connection with the Transactions.
provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (11), (16) and (18), no Default shall have occurred and be continuing or would occur as a consequence thereof.
All of the Issuers Subsidiaries are Restricted Subsidiaries. The Issuer will not permit any Unrestricted Subsidiary to become a Restricted Subsidiary except pursuant to the second to last sentence of the definition of Unrestricted Subsidiary. For purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by the Issuer and its Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so designated will be deemed to be Investments in an amount determined as set forth in the last sentence of the definition of Investments. Such designation will be permitted only if a Restricted Payment in such amount would be permitted at such time, whether pursuant to the first paragraph of this covenant or under clause (7), (10), (11) or (16) of the second paragraph of this covenant, or pursuant to the definition of Permitted Investments, and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Unrestricted Subsidiaries will not be subject to any of the restrictive covenants set forth in the Indenture.
Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock
The Issuer will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise (collectively, incur and collectively, an incurrence) with respect to any Indebtedness (including Acquired Indebtedness) and the Issuer will not issue any shares of Disqualified Stock and will not permit any Restricted Subsidiary to issue any shares of Disqualified Stock or Preferred Stock; provided, however, that the Issuer may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock, and any of its Restricted Subsidiaries may incur Indebtedness (including Acquired Indebtedness), issue shares of Disqualified Stock and issue shares of Preferred Stock, if the Fixed Charge Coverage Ratio on a consolidated basis for the Issuer and its Restricted Subsidiaries most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or Preferred Stock is issued would have been at least 2.00 to 1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or Preferred Stock had been issued, as the case may be, and the application of the proceeds therefrom had occurred at the beginning of such four-quarter period; provided that the amount of Indebtedness (including Acquired Indebtedness), Disqualified Stock and Preferred Stock that may be incurred or issued, as applicable, pursuant to the foregoing by Restricted Subsidiaries that are not Guarantors shall not exceed $75.0 million at any one time outstanding.
The foregoing limitations will not apply to:
(1) (x) Indebtedness incurred pursuant to the Revolving Credit Facility by the Issuer or any Restricted Subsidiary; provided that immediately after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness incurred under this clause (x) and then outstanding does not exceed the greater of (A) $300.0 million (reduced on a dollar for dollar basis by the aggregate principal amount of Indebtedness under clause (y) below in excess of $945.0 million up to a maximum reduction under this clause (A) of $75.0 million) and (B) the Borrowing Base and (y) Indebtedness incurred pursuant to the Term Loan Facility by the Issuer or any Restricted Subsidiary; provided that after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness incurred under this clause (y) and then outstanding does not exceed $1,020.0 million (reduced on a dollar for dollar basis by the aggregate principal amount of Indebtedness under clause (x)(A) above in excess of $225.0 million);
(2) the incurrence by the Issuer and any Guarantor of Indebtedness represented by the Notes (including any Guarantee) (other than any Additional Notes);
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(3) Indebtedness of the Issuer and its Restricted Subsidiaries in existence on the Effective Date (other than Indebtedness described in clauses (1) and (2));
(4) (i) Indebtedness (including Capitalized Lease Obligations) incurred or Disqualified Stock and Preferred Stock issued by the Issuer or any of its Restricted Subsidiaries, to finance the purchase, lease or improvement of property (real or personal) or equipment that is used or useful in a Similar Business, whether through the direct purchase of assets or the Capital Stock of any Person owning such assets and (ii) any Indebtedness incurred or Disqualified Stock or Preferred Stock issued to refund, refinance or replace any other Indebtedness incurred or Disqualified Stock or Preferred Stock issued pursuant to this clause (4); provided that the aggregate amount of Indebtedness incurred and Disqualified Stock and Preferred Stock issued pursuant to clauses (i) and (ii) of this clause (4) does not exceed $50.0 million at any one time outstanding;
(5) Indebtedness incurred by the Issuer or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including letters of credit in respect of workers compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance, or other Indebtedness with respect to reimbursement type obligations regarding workers compensation claims; provided, however, that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 Business Days following such drawing or incurrence;
(6) Indebtedness arising from agreements of the Issuer or its Restricted Subsidiaries providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; provided, however, that
(a) such Indebtedness is not reflected on the balance sheet of the Issuer, or any of its Restricted Subsidiaries prepared in accordance with GAAP (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (6)(a)); and
(b) the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including non-cash proceeds (the fair market value of such non-cash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by the Issuer and its Restricted Subsidiaries in connection with such disposition;
(7) Indebtedness of the Issuer to a Restricted Subsidiary; provided that any such Indebtedness owing to a Restricted Subsidiary that is not a Guarantor is expressly subordinated in right of payment to the Notes; provided further that any subsequent issuance or transfer of any Capital Stock or any other event which results in any Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Subsidiary or any pledge of such Indebtedness constituting a Permitted Lien) shall be deemed, in each case, to be an incurrence of such Indebtedness not permitted by this clause (7);
(8) Indebtedness of a Restricted Subsidiary to the Issuer or another Restricted Subsidiary; provided that if a Guarantor incurs such Indebtedness to a Restricted Subsidiary that is not a Guarantor, such Indebtedness is expressly subordinated in right of payment to the Guarantee of the Notes of such Guarantor; provided further that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Subsidiary or any pledge of such Indebtedness constituting a Permitted Lien) shall be deemed, in each case, to be an incurrence of such Indebtedness not permitted by this clause (8);
(9) shares of Preferred Stock of a Restricted Subsidiary issued to the Issuer or another Restricted Subsidiary, provided that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent
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transfer of any such shares of Preferred Stock (except to the Issuer or another of its Restricted Subsidiaries or any pledge of such Capital Stock constituting a Permitted Lien) shall be deemed in each case to be an issuance of such shares of Preferred Stock not permitted by this clause (9);
(10) (x) Hedging Obligations (excluding Hedging Obligations entered into for speculative purposes) for the purpose of limiting interest rate risk, exchange rate risk or commodity pricing risk, and (y) Indebtedness in respect of any Bank Products or Cash Management Services provided by any lender party to a Senior Credit Facility or any affiliate of such lender (or any Person that was a lender or an affiliate of a lender at the time the applicable agreement pursuant to which such Bank Products or Cash Management Services are provided was entered into);
(11) obligations in respect of performance, bid, appeal and surety bonds and performance and completion guarantees or obligations in respect of letters of credit related thereto provided by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business;
(12) (a) Indebtedness or Disqualified Stock of the Issuer and Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or any Restricted Subsidiary equal to 100.0% of the net cash proceeds received by the Issuer since immediately after the Effective Date from the issue or sale of Equity Interests of the Issuer or cash contributed to the capital of the Issuer (in each case, other than proceeds of Disqualified Stock or sales of Equity Interests to the Issuer or any of its Subsidiaries) as determined in accordance with clauses (3)(b) and (3)(c) of the first paragraph of Limitation on Restricted Payments to the extent such net cash proceeds or cash have not been applied pursuant to such clauses to make Restricted Payments or to make other Investments, payments or exchanges pursuant to the second paragraph of Limitation on Restricted Payments or to make Permitted Investments (other than Permitted Investments specified in clauses (1) and (3) of the definition thereof) and (b) Indebtedness or Disqualified Stock of the Issuer and Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or any Restricted Subsidiary not otherwise permitted hereunder in an aggregate principal amount or liquidation preference, which when aggregated with the principal amount and liquidation preference of all other Indebtedness, Disqualified Stock and Preferred Stock then outstanding and incurred or issued, as applicable, pursuant to this clause (12)(b), does not at any one time outstanding exceed $100.0 million (it being understood that any Indebtedness incurred or Disqualified Stock or Preferred Stock issued pursuant to this clause (12)(b) shall cease to be deemed incurred, issued or outstanding for purposes of this clause (12)(b) but shall be deemed incurred or issued for the purposes of the first paragraph of this covenant from and after the first date on which the Issuer or such Restricted Subsidiary could have incurred such Indebtedness or issued such Disqualified Stock or Preferred Stock under the first paragraph of this covenant without reliance on this clause (12)(b));
(13) the incurrence by the Issuer or any Restricted Subsidiary of Indebtedness or issuance by the Issuer or any Restricted Subsidiary of Disqualified Stock or Preferred Stock which serves to extend, replace, refund, refinance, renew or defease any Indebtedness incurred or Disqualified Stock or Preferred Stock issued as permitted under the first paragraph of this covenant and clauses (2), (3) and (12)(a) above, this clause (13) and clause (14) below or any Indebtedness incurred or Disqualified Stock or Preferred Stock issued to so refund or refinance such Indebtedness, Disqualified Stock or Preferred Stock including additional Indebtedness incurred or Disqualified Stock or Preferred Stock issued to pay premiums (including tender premiums), defeasance costs and fees and expenses in connection therewith (the Refinancing Indebtedness) prior to its respective maturity; provided, however, that such Refinancing Indebtedness:
(a) has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred or issued which is not less than the remaining Weighted Average Life to Maturity of the Indebtedness, Disqualified Stock or Preferred Stock being extended, replaced, refunded, refinanced, renewed or defeased (except by virtue of prepayment of such Indebtedness),
(b) to the extent such Refinancing Indebtedness extends, replaces, refunds, refinances, renews or defeases (i) Indebtedness subordinated to or pari passu with the Notes or any Guarantee thereof, such Refinancing Indebtedness is subordinated to or pari passu with the Notes or the Guarantee at least to
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the same extent as the Indebtedness being extended, replaced, refunded, refinanced, renewed or defeased or (ii) Disqualified Stock or Preferred Stock, such Refinancing Indebtedness must be Disqualified Stock or Preferred Stock, respectively, and
(c) shall not include:
(i) Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary of the Issuer that is not a Guarantor that refinances Indebtedness, Disqualified Stock or Preferred Stock of the Issuer;
(ii) Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary of the Issuer that is not a Guarantor that refinances Indebtedness, Disqualified Stock or Preferred Stock of a Guarantor; or
(iii) Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or a Restricted Subsidiary that refinances Indebtedness, Disqualified Stock or Preferred Stock of an Unrestricted Subsidiary;
and provided further that subclause (a) of this clause (13) will not apply to any extension, replacement, refunding, refinancing, renewal or defeasance of any Indebtedness outstanding under a Senior Credit Facility;
(14) Indebtedness, Disqualified Stock or Preferred Stock of (x) the Issuer or a Restricted Subsidiary incurred or issued to finance an acquisition or (y) Persons that are acquired by the Issuer or any Restricted Subsidiary or merged into or amalgamated or consolidated with the Issuer or a Restricted Subsidiary in accordance with the terms of the Indenture; provided that after giving effect to such acquisition, merger, amalgamation or consolidation, either
(a) the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first sentence of this covenant, or
(b) the Fixed Charge Coverage Ratio of the Issuer and the Restricted Subsidiaries is greater than immediately prior to such acquisition, merger, amalgamation or consolidation;
(15) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within five Business Days of its incurrence;
(16) Indebtedness of the Issuer or any of its Restricted Subsidiaries supported by a letter of credit issued pursuant to a Senior Credit Facility, in a principal amount not in excess of the stated amount of such letter of credit;
(17) (a) any guarantee by the Issuer or a Restricted Subsidiary of Indebtedness or other obligations of any Restricted Subsidiary so long as the incurrence of such Indebtedness incurred by such Restricted Subsidiary is permitted under the terms of the Indenture, or
(b) any guarantee by a Restricted Subsidiary of Indebtedness of the Issuer provided that such guarantee is incurred in accordance with the covenant described below under Limitation on Guarantees of Indebtedness by Restricted Subsidiaries;
(18) Indebtedness of Foreign Subsidiaries of the Issuer incurred not to exceed, together with any other Indebtedness incurred under this clause (18) at any one time outstanding, the greater of (x) $50.0 million and (y) 2.35% of the Total Assets of the Foreign Subsidiaries (it being understood that any Indebtedness incurred pursuant to this clause (18) shall cease to be deemed incurred or outstanding for purposes of this clause (18) but shall be deemed incurred for the purposes of the first paragraph of this covenant from and after the first date on which the applicable Foreign Subsidiary could have incurred such Indebtedness under the first paragraph of this covenant without reliance on this clause (18));
(19) Indebtedness of the Issuer or any of its Restricted Subsidiaries consisting of (i) the financing of insurance premiums or (ii) take-or-pay obligations contained in supply arrangements, in each case incurred in the ordinary course of business; and
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(20) Indebtedness consisting of Indebtedness issued by the Issuer or any of its Restricted Subsidiaries to current or former officers, directors, employees and consultants thereof, their respective estates, spouses or former spouses, in each case to finance the purchase or redemption of Equity Interests of the Issuer or any direct or indirect parent company of the Issuer to the extent described in clause (4) of the second paragraph under the caption Limitation on Restricted Payments.
For purposes of determining compliance with this covenant:
(1) in the event that an item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) meets the criteria of more than one of the categories of permitted Indebtedness, Disqualified Stock or Preferred Stock described in clauses (1) through (20) above or is entitled to be incurred pursuant to the first paragraph of this covenant, the Issuer, in its sole discretion, will classify or reclassify such item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) and will only be required to include the amount and type of such Indebtedness, Disqualified Stock or Preferred Stock in one of the above clauses; provided that all Indebtedness outstanding under the Senior Credit Facilities on the Effective Date will at all times be deemed to be outstanding in reliance on clause (1) of the preceding paragraph; and
(2) at the time of incurrence, the Issuer will be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described in the first and second paragraphs above.
Accrual of interest or dividends, the accretion of accreted value, the accretion or amortization of original issue discount, and the payment of interest or dividends in the form of additional Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, of the same class will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock or Preferred Stock for purposes of this covenant.
For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed, in the case of revolving credit debt; provided that if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable U.S. dollar denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced.
The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such refinancing.
The Indenture provides that the Issuer will not, and will not permit any Guarantor to, directly or indirectly, incur any Indebtedness (including Acquired Indebtedness) that is contractually subordinated or junior in right of payment to any Indebtedness of the Issuer or such Guarantor, as the case may be, unless such Indebtedness is expressly subordinated in right of payment to the Notes or such Guarantors Guarantee to the extent and in the same manner as such Indebtedness is subordinated to other Indebtedness of the Issuer or such Guarantor, as the case may be.
The Indenture does not treat (1) unsecured Indebtedness as subordinated or junior to Secured Indebtedness merely because it is unsecured or (2) senior indebtedness as subordinated or junior to any other senior indebtedness merely because it has a junior priority with respect to the same collateral.
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Liens
The Issuer will not, and will not permit any Guarantor to, directly or indirectly, create, incur, assume or suffer to exist any Lien (except Permitted Liens) that secures obligations under any Indebtedness or any related guarantee, on any asset or property of the Issuer or any Guarantor, or any income or profits therefrom, or assign or convey any right to receive income therefrom, unless:
(1) in the case of Liens securing Subordinated Indebtedness, the Notes and related Guarantees are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens; or
(2) in all other cases, the Notes or the Guarantees are equally and ratably secured, except that the foregoing shall not apply to or restrict (a) Liens securing the Notes and the related Guarantees, (b) Liens securing Indebtedness permitted to be incurred under Senior Credit Facilities, including any letter of credit facility relating thereto, that was permitted by the terms of the Indenture to be incurred pursuant to clause (1) of the second paragraph under Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock, (c) Liens securing both (i) Indebtedness described in subclause (b) or in respect of a Senior Credit Facility secured by Liens pursuant to subclause (d) below or pursuant to clause (6) of the definition of Permitted Liens and (ii) obligations of the Issuer or any Guarantor in respect of any Bank Products or Cash Management Services provided by any lender party to any Senior Credit Facility or any affiliate of such lender (or any Person that was a lender or an affiliate of a lender at the time the applicable agreements pursuant to which such Bank Products or Cash Management Services are provided were entered into) and (d) Liens incurred to secure Obligations in respect of any Indebtedness permitted to be incurred pursuant to the covenant described above under Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock; provided that, with respect to Liens securing Obligations permitted under this subclause (d), at the time of incurrence and after giving pro forma effect thereto, the Consolidated Secured Debt Ratio would be no greater than 3.50 to 1.0.
Any Lien created for the benefit of the Holders of the Notes pursuant to this covenant shall be deemed automatically and unconditionally released and discharged upon the release and discharge of each of the Liens described in clauses (1) and (2) above.
Merger, Consolidation or Sale of All or Substantially All Assets
The Issuer may not consolidate or merge with or into or wind up into (whether or not the Issuer is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:
(1) the Issuer is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Issuer) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation organized or existing under the laws of the jurisdiction of organization of the Issuer or the laws of the United States, any state thereof, the District of Columbia or any territory thereof (the Issuer or such Person, as the case may be, being herein called the Successor Company);
(2) the Successor Company, if other than the Issuer, expressly assumes all the obligations of the Issuer under the Notes pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;
(3) immediately after such transaction, no Default exists;
(4) immediately after giving pro forma effect to such transaction and any related financing transactions, as if such transactions had occurred at the beginning of the applicable four-quarter period,
(a) the Successor Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first sentence of the covenant described under Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock, or
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(b) the Fixed Charge Coverage Ratio for the Successor Company and its Restricted Subsidiaries would be greater than the Fixed Charge Coverage Ratio for the Issuer and its Restricted Subsidiaries immediately prior to such transaction;
(5) each Guarantor, unless it is the other party to the transactions described above, in which case clause (1)(b) of the second succeeding paragraph shall apply, shall have by supplemental indenture confirmed that its Guarantee shall apply to such Persons obligations under the Indenture and the Notes; and
(6) the Issuer shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with the Indenture.
The Successor Company will succeed to, and be substituted for the Issuer, as the case may be, under the Indenture, the Guarantees and the Notes, as applicable.
The foregoing clauses (3), (4), (5) and (6) shall not apply to the merger contemplated by the Transaction Agreement. Notwithstanding the foregoing clauses (3) and (4),
(1) any Restricted Subsidiary may consolidate with or merge into or transfer all or part of its properties and assets to the Issuer, and
(2) the Issuer may merge with an Affiliate of the Issuer solely for the purpose of reincorporating the Issuer in a State of the United States so long as the amount of Indebtedness of the Issuer and its Restricted Subsidiaries is not increased thereby.
No Guarantor will, and the Issuer will not permit any Guarantor to, consolidate or merge with or into or wind up into (whether or not the Issuer or Guarantor is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:
(1) (a) such Guarantor is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation organized or existing under the laws of the jurisdiction of organization of such Guarantor, as the case may be, or the laws of the United States, any state thereof, the District of Columbia or any territory thereof (such Guarantor or such Person, as the case may be, being herein called the Successor Person);
(b) the Successor Person, if other than such Guarantor, expressly assumes all the obligations of such Guarantor under the Indenture and such Guarantors related Guarantee pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;
(c) immediately after such transaction, no Default exists; and
(d) the Issuer shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with the Indenture; or
(2) the transaction is made in compliance with clauses (1) and (2) of the first paragraph of the covenant described under Repurchase at the Option of HoldersAsset Sales.
Subject to certain limitations described in the Indenture, the Successor Person will succeed to, and be substituted for, such Guarantor under the Indenture and such Guarantors Guarantee. Notwithstanding the foregoing, any Guarantor may merge into or with or wind up into or transfer all or part of its properties and assets to another Guarantor or the Issuer.
Although there is a limited body of case law interpreting the phrase substantially all, there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve all or substantially all of the property or assets of a Person.
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Transactions with Affiliates
The Issuer will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Issuer (each of the foregoing, an Affiliate Transaction) involving aggregate payments or consideration in excess of $10.0 million, unless:
(1) such Affiliate Transaction is on terms that are not materially less favorable to the Issuer or its relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person on an arms-length basis; and
(2) the Issuer delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate payments or consideration in excess of $20.0 million, a resolution adopted by the majority of the board of directors of the Issuer approving such Affiliate Transaction and set forth in an Officers Certificate certifying that such Affiliate Transaction complies with clause (1) above.
The foregoing provisions will not apply to the following:
(1) transactions between or among the Issuer or any of its Restricted Subsidiaries;
(2) Restricted Payments permitted by the provisions of the Indenture described above under the covenant Limitation on Restricted Payments and Investments constituting Permitted Investments;
(3) the payment of management, consulting, monitoring and advisory fees and termination fees and related indemnities and expenses pursuant to the Sponsor Management Agreement as in effect on the Effective Date;
(4) the payment of reasonable and customary fees and compensation paid to, and indemnities and reimbursements provided on behalf of or for the benefit of, current and former officers, directors, employees, managers or consultants of the Issuer, any of its direct or indirect parent companies or any of its Restricted Subsidiaries;
(5) transactions in which the Issuer or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to the Issuer or such Restricted Subsidiary from a financial point of view or stating that the terms are not materially less favorable to the Issuer or its relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person on an arms-length basis;
(6) any agreement as in effect as of the Effective Date, or any amendment thereto (so long as any such amendment is not disadvantageous in any material respect to the Holders when taken as a whole as compared to the applicable agreement as in effect on the Effective Date);
(7) the existence of, or the performance by the Issuer, any of its Restricted Subsidiaries or any direct or indirect parent of the Issuer of its obligations under the terms of, any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Effective Date and any similar agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of obligations under, any future amendment to any such existing agreement or any similar agreement entered into after the Effective Date shall only be permitted by this clause (7) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous in any material respect to the Holders when taken as a whole as compared to the original agreement in effect on the Effective Date;
(8) transactions with customers, clients, suppliers, contractors, or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of the
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Indenture which are fair to the Issuer and its Restricted Subsidiaries, in the reasonable determination of the board of directors of the Issuer or the senior management thereof, or are on terms at least as favorable as would reasonably have been obtained at such time from an unaffiliated party;
(9) the issuance of Equity Interests (other than Disqualified Stock) of the Issuer to any direct or indirect parent of the Issuer or to any Permitted Holder or to any director, officer, employee, manager or consultant of the Issuer, any Subsidiary or any direct or indirect parent of the Issuer;
(10) sales of accounts receivable, or participations therein, in connection with any Receivables Facility;
(11) payments by the Issuer or any of its Restricted Subsidiaries to any of the Investors made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures which payments are approved by a majority of the board of directors of the Issuer in good faith or are otherwise permitted by the Indenture;
(12) payments or loans (or cancellation of loans) to employees or consultants of the Issuer, any of its direct or indirect parent companies or any of its Restricted Subsidiaries and employment agreements, stock option plans and other similar arrangements with such employees or consultants which, in each case, are approved by the Issuer in good faith;
(13) investments by the Investors in securities of the Issuer or any of its 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% of the proposed or outstanding issue amount of such class of securities; and
(14) the Transactions and the payment of all fees and expenses related to the Transactions, including Transaction Expenses, in each case as disclosed in this prospectus.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Issuer will not, and will not permit any of its Restricted Subsidiaries that are not Guarantors to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any such Restricted Subsidiary to:
(1) (a) pay dividends or make any other distributions to the Issuer or any of its Restricted Subsidiaries on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, or
(b) pay any Indebtedness owed to the Issuer or any of its Restricted Subsidiaries;
(2) make loans or advances to the Issuer or any of its Restricted Subsidiaries; or
(3) sell, lease or transfer any of its properties or assets to the Issuer or any of its Restricted Subsidiaries,
except (in each case) for such encumbrances or restrictions existing under or by reason of:
(a) contractual encumbrances or restrictions in effect on the Effective Date, including pursuant to the Senior Credit Facilities and the related documentation;
(b) the Indenture and the Notes;
(c) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature discussed in clause (3) above on the property so acquired;
(d) applicable law or any applicable rule, regulation or order;
(e) any agreement or other instrument of a Person acquired by the Issuer or any of its Restricted Subsidiaries in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person so acquired and its Subsidiaries, or the property or assets of the Person so acquired and its Subsidiaries;
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(f) contracts for the sale of assets, including customary restrictions with respect to a Subsidiary of the Issuer pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary;
(g) Secured Indebtedness otherwise permitted to be incurred pursuant to the covenants described under Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock and Liens that limit the right of the debtor to dispose of the assets securing such Indebtedness;
(h) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;
(i) other Indebtedness, Disqualified Stock or Preferred Stock of Foreign Subsidiaries permitted to be incurred or issued subsequent to the Effective Date pursuant to the provisions of the covenant described under Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock;
(j) customary provisions in any joint venture agreement and other similar agreement relating solely to such joint venture;
(k) customary provisions contained in leases, subleases, licenses or sublicenses and other agreements, in each case, entered into in the ordinary course of business;
(l) any encumbrances or restrictions of the type referred to in clauses (1), (2) and (3) above imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (a) through (k) above; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Issuer, no more restrictive in any material respect with respect to such encumbrances and other restrictions taken as a whole than those prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing;
(m) any other agreement governing Indebtedness entered into after the Effective Date that contains encumbrances and other restrictions that are, in the good faith judgment of the Issuer, no more restrictive in any material respect taken as a whole with respect to any Restricted Subsidiary than those encumbrances and other restrictions that are in effect on the Effective Date with respect to that Restricted Subsidiary pursuant to agreements in effect on the Effective Date; and
(n) restrictions created in connection with any Receivables Facility that in the good faith determination of the Issuer are necessary or advisable to effect such Receivables Facility.
Limitation on Guarantees of Indebtedness by Restricted Subsidiaries
The Issuer will not permit any of its Wholly-Owned Subsidiaries that are Restricted Subsidiaries (and non-Wholly-Owned Subsidiaries if such non-Wholly-Owned Subsidiaries guarantee other capital markets debt securities), other than a Guarantor or a Foreign Subsidiary, to guarantee the payment of any Indebtedness of the Issuer or any other Guarantor unless:
(1) such Restricted Subsidiary within 30 days executes and delivers a supplemental indenture to the Indenture providing for a Guarantee by such Restricted Subsidiary, except that with respect to a guarantee of Indebtedness of the Issuer or any Guarantor, if such Indebtedness is by its express terms subordinated in right of payment to the Notes or such Guarantors Guarantee, any such guarantee by such Restricted Subsidiary with respect to such Indebtedness shall be subordinated in right of payment to such Guarantee substantially to the same extent as such Indebtedness is subordinated to the Notes;
(2) Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Issuer or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Guarantee; and
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(3) such Restricted Subsidiary shall deliver to the Trustee an Opinion of Counsel to the effect that:
(a) such Guarantee has been duly executed and authorized; and
(b) such Guarantee constitutes a valid, binding and enforceable obligation of such Restricted Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy, insolvency or similar laws (including, without limitation, all laws relating to fraudulent transfers) and except insofar as enforcement thereof is subject to general principles of equity;
provided that this covenant shall not be applicable to any guarantee of any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary.
The Issuer may elect, in its sole discretion, to cause any Subsidiary that is not otherwise required to be a Guarantor to become a Guarantor, in which case, such Subsidiary shall only be required to comply with clauses (1) (other than with respect to any time period) and (2) above.
Reports and Other Information
Notwithstanding that the Issuer may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act or otherwise report on an annual and quarterly basis on forms provided for such annual and quarterly reporting pursuant to rules and regulations promulgated by the SEC, the Indenture requires the Issuer to file with the SEC (and make available to the Trustee and Holders of the Notes (without exhibits), without cost to any Holder, within 15 days after it files them with the SEC) from and after the Effective Date,
(1) within 90 days after the end of each fiscal year, annual reports on Form 10-K, or any successor or comparable form, containing the information required to be contained therein, or required in such successor or comparable form;
(2) within 45 days after the end of each of the first three fiscal quarters of each fiscal year, commencing with the first fiscal quarter of the fiscal year commencing January 30, 2011, reports on Form 10-Q containing all quarterly information that would be required to be contained in Form 10-Q, or any successor or comparable form;
(3) promptly from time to time after the occurrence of an event required to be therein reported, such other reports on Form 8-K, or any successor or comparable form; and
(4) any other information, documents and other reports which the Issuer would be required to file with the SEC if it were subject to Section 13 or 15(d) of the Exchange Act beginning on and after the Effective Date;
in each case, in a manner that complies in all material respects with the requirements specified in such form; provided that the Issuer shall not be so obligated to file such reports with the SEC (i) if the SEC does not permit such filing or (ii) prior to the consummation of an exchange offer or the effectiveness of a shelf registration statement as required by the Registration Rights Agreement, so long as clause (i) or (ii) is applicable, the Issuer makes available such information to prospective purchasers of Notes, in addition to providing such information to the Trustee and the Holders of the Notes, in each case within 15 days after the time the Issuer would be required to file such information with the SEC, if it were subject to Sections 13 or 15(d) of the Exchange Act, including by posting such information on the website of the Issuer or any of its parent companies (which may be password protected so long as the password is made promptly available by the Issuer to the Trustee, the Holders of the Notes and such prospective purchasers upon request). The Trustee shall have no obligation whatsoever to determine whether or not such information has been posted. To the extent any such information is not so filed or furnished, as applicable, within the time periods specified above and such information is subsequently filed or furnished, as applicable, the Issuer will be deemed to have satisfied its obligations with respect thereto at such time and any Default with respect thereto shall be deemed to have been cured; provided, that such cure shall not
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otherwise affect the rights of the Holders under Events of Default and Remedies if Holders of at least 25% in principal amount of the then total outstanding Notes have declared the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes to be due and payable immediately and such declaration shall not have been rescinded or cancelled prior to such cure. In addition, to the extent not satisfied by the foregoing, the Issuer will agree that, for so long as any Notes are outstanding, it will furnish to Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
In the event that any direct or indirect parent company of the Issuer becomes a guarantor of the Notes, the Indenture permits the Issuer to satisfy its obligations in this covenant with respect to financial information relating to the Issuer by furnishing financial information relating to such parent; provided that the same is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to such parent, on the one hand, and the information relating to the Issuer and its Restricted Subsidiaries on a standalone basis, on the other hand.
Notwithstanding the foregoing, such requirements shall be deemed satisfied prior to the commencement of the exchange offer or the effectiveness of the shelf registration statement by the filing with the SEC of any registration statement or other filing, and any amendments thereto, with such financial information that satisfies Regulation S-X of the Securities Act.
Events of Default and Remedies
The Indenture provides that each of the following is an Event of Default:
(1) default in payment when due and payable, upon redemption, acceleration or otherwise, of principal of, or premium, if any, on the Notes;
(2) default for 30 days or more in the payment when due of interest or Additional Interest on or with respect to the Notes;
(3) failure by the Issuer or any Guarantor for 60 days after receipt of written notice given by the Trustee or the Holders of not less than 25% in principal amount of the Notes to comply with any of its obligations, covenants or agreements (other than a default referred to in clauses (1) and (2) above) contained in the Indenture or the Notes;
(4) default under any mortgage, indenture or instrument under which there is issued or by which there is secured or evidenced any Indebtedness for money borrowed by the Issuer or any of its Restricted Subsidiaries or the payment of which is guaranteed by the Issuer or any of its Restricted Subsidiaries, other than Indebtedness owed to the Issuer or a Restricted Subsidiary, whether such Indebtedness or guarantee now exists or is created after the issuance of the Notes, if both:
(a) such default either results from the failure to pay any principal of such Indebtedness at its stated final maturity (after giving effect to any applicable grace periods) or relates to an obligation other than the obligation to pay principal of any such Indebtedness at its stated final maturity and results in the holder or holders of such Indebtedness causing such Indebtedness to become due prior to its stated maturity; and
(b) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay any principal at its stated final maturity (after giving effect to any applicable grace periods), or the maturity of which has been so accelerated, aggregate $25.0 million or more at any one time outstanding;
(5) failure by the Issuer or any Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, to pay final judgments aggregating in excess of $25.0 million, which final judgments remain unpaid, undischarged and unstayed for a period of more than 60 days after such judgment becomes final, and in the event such judgment is covered by insurance, an enforcement proceeding has been commenced by any creditor upon such judgment or decree which is not promptly stayed;
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(6) certain events of bankruptcy or insolvency with respect to the Issuer or any Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary; or
(7) the Guarantee of any Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, shall for any reason cease to be in full force and effect or any responsible officer of any Guarantor that is a Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, as the case may be, denies that it has any further liability under its or their Guarantee(s) or gives notice to such effect, other than by reason of the termination of the Indenture or the release of any such Guarantee in accordance with the Indenture.
If any Event of Default (other than of a type specified in clause (6) above with respect to the Issuer) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25% in principal amount of the then total outstanding Notes may declare the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes to be due and payable immediately.
Upon the effectiveness of such declaration, such principal and interest will be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising under clause (6) above with respect to the Issuer, all outstanding Notes will become due and payable without further action or notice. The Indenture provides that the Trustee may withhold from the Holders notice of any continuing Default, except a Default relating to the payment of principal, premium, if any, or interest, if it determines that withholding notice is in their interest. In addition, the Trustee shall have no obligation to accelerate the Notes if in the best judgment of the Trustee acceleration is not in the best interest of the Holders of the Notes.
The Indenture provides that the Holders of a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default and its consequences under the Indenture except a continuing Default in the payment of interest on, premium, if any, or the principal of any Note held by a non-consenting Holder. In the event of any Event of Default specified in clause (4) above, such Event of Default and all consequences thereof (excluding any resulting payment default, other than as a result of acceleration of the Notes) shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders, if within 20 days after such Event of Default arose:
(1) the Indebtedness or guarantee that is the basis for such Event of Default has been discharged; or
(2) holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default; or
(3) the default that is the basis for such Event of Default has been cured.
The Indenture provides that, at any time after a declaration of acceleration with respect to the Notes, the Holders of a majority in principal amount of the Notes may rescind and cancel such declaration and its consequences:
(1) if the rescission would not conflict with any judgment or decree;
(2) if all existing Events of Default have been cured, waived, annulled or rescinded except nonpayment of principal or interest that has become due solely because of the acceleration;
(3) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid; and
(4) if the Issuer has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances.
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Subject to the provisions of the Indenture relating to the duties of the Trustee thereunder, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders of the Notes unless the Holders have offered to the Trustee indemnity or security reasonably satisfactory to it against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder of a Note may pursue any remedy with respect to the Indenture or the Notes unless:
(1) such Holder has previously given the Trustee notice that an Event of Default is continuing;
(2) Holders of at least 25% in principal amount of the total outstanding Notes have requested the Trustee to pursue the remedy;
(3) Holders of the Notes have offered the Trustee security or indemnity reasonably satisfactory to it against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and
(5) Holders of a majority in principal amount of the total outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, under the Indenture the Holders of a majority in principal amount of the total outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder of a Note or that would involve the Trustee in personal liability.
The Indenture provides that the Issuer is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Issuer is required, within five Business Days, after becoming aware of any Default, to deliver to the Trustee a statement specifying such Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No past, present or future director, officer, employee, incorporator, member, partner or stockholder of the Issuer or any Guarantor or any of their direct or indirect parent companies shall have any liability for any obligations of the Issuer or the Guarantors under the Notes, the Guarantees or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder by accepting Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The obligations of the Issuer and the Guarantors under the Indenture will terminate (other than certain obligations) and will be released upon payment in full of all of the Notes. The Issuer may, at its option and at any time, elect to have all of its obligations discharged with respect to the Notes and have each Guarantors obligation discharged with respect to its Guarantee (Legal Defeasance) and cure all then existing Events of Default except for:
(1) the rights of Holders of Notes to receive payments in respect of the principal of, premium, if any, and interest on the Notes when such payments are due solely out of the trust created pursuant to the Indenture;
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(2) the Issuers obligations with respect to Notes concerning issuing temporary Notes, registration of such Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee, and the Issuers obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Issuer may, at its option and at any time, elect to have its obligations and those of each Guarantor released with respect to substantially all of the restrictive covenants in the Indenture (Covenant Defeasance) and thereafter any omission to comply with such obligations shall not constitute a Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including bankruptcy, receivership, rehabilitation and insolvency events pertaining to the Issuer) described under Events of Default and Remedies will no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance with respect to the Notes:
(1) the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest due on the Notes on the stated maturity date or on the redemption date, as the case may be, of such principal, premium, if any, or interest on such Notes (provided that if such redemption is made as provided under Optional Redemption, (x) the amount of cash in U.S. dollars, Government Securities, or a combination thereof, that the Issuer must irrevocably deposit or cause to be deposited will be determined using an assumed Applicable Premium calculated as of the date of such deposit and (y) the Issuer must irrevocably deposit or cause to be deposited additional money in trust on the redemption date as necessary to pay the Applicable Premium as determined on such date) and the Issuer must specify whether such Notes are being defeased to maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions,
(a) the Issuer has received from, or there has been published by, the United States Internal Revenue Service a ruling, or
(b) since the issuance of the Notes, there has been a change in the applicable U.S. federal income tax law,
in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, subject to customary assumptions and exclusions, the Holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes, as applicable, as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, the Holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to such tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;
(4) no Default (other than that resulting from borrowing funds to be applied to make such deposit and the granting of Liens in connection therewith) shall have occurred and be continuing on the date of such deposit;
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(5) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the Senior Credit Facilities have been issued or any other material agreement or instrument (other than the Indenture) to which the Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is bound;
(6) the Issuer shall have delivered to the Trustee an Opinion of Counsel to the effect that, as of the date of such opinion and subject to customary assumptions and exclusions following the deposit, the trust funds will not be subject to the effect of Section 547 of Title 11 of the United States Code;
(7) the Issuer shall have delivered to the Trustee an Officers Certificate stating that the deposit was not made by the Issuer with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuer or any Guarantor or others; and
(8) the Issuer shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel (which Opinion of Counsel may be subject to customary assumptions and exclusions) each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect as to all Notes, when either:
(1) all Notes theretofore authenticated and delivered, except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust, have been delivered to the Trustee for cancellation; or
(2) (a) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise, will become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer and the Issuer or any Guarantor have irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders of the Notes, cash in U.S. dollars, Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest to pay and discharge the entire indebtedness on the Notes not theretofore delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to the date of maturity or redemption (provided; that if such redemption is made as provided under Optional Redemption, (x) the amount of cash in U.S. dollars, Government Securities, or a combination thereof, that the Issuer must irrevocably deposit or cause to be deposited will be determined using an assumed Applicable Premium calculated as of the date of such deposit, and (y) the Issuer must irrevocably deposit or cause to be deposited additional money in trust on the redemption date as necessary to pay the Applicable Premium as determined on such date);
(b) no Default (other than that resulting from borrowing funds to be applied to make such deposit and the granting of Liens in connection therewith) with respect to the Indenture or the Notes shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, the Senior Credit Facilities or any other material agreement or instrument (other than the Indenture) to which the Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is bound;
(c) the Issuer has paid or caused to be paid all sums payable by it under the Indenture; and
(d) the Issuer has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be.
In addition, the Issuer must deliver an Officers Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.
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Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture, any Guarantee and the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding, including consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes, and any existing Default or compliance with any provision of the Indenture or the Notes issued thereunder may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a purchase of or tender offer or exchange offer for the Notes), other than Notes beneficially owned by the Issuer or its Affiliates.
The Indenture provides that, without the consent of each affected Holder of Notes, an amendment or waiver may not, with respect to any Notes held by a non-consenting Holder:
(1) reduce the principal amount of such Notes whose Holders must consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed final maturity of any such Note or alter or waive the provisions with respect to the redemption of such Notes (other than provisions relating to the covenants described above under the caption Repurchase at the Option of Holders);
(3) reduce the rate of or change the time for payment of interest on any Note;
(4) waive a Default in the payment of principal of or premium, if any, or interest on the Notes, except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration, or in respect of a covenant or provision contained in the Indenture or any Guarantee which cannot be amended or modified without the consent of all affected Holders;
(5) make any Note payable in money other than that stated therein;
(6) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders to receive payments of principal of or premium, if any, or interest on the Notes;
(7) make any change in the amendment and waiver provisions of the Indenture described herein;
(8) impair the right of any Holder to receive payment of principal of, or interest on such Holders Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holders Notes;
(9) make any change to or modify the ranking of the Notes that would adversely affect the Holders; or
(10) except as expressly permitted by the Indenture, modify the Guarantees of any Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, in any manner adverse to the Holders of the Notes.
Notwithstanding the foregoing, the Issuer, any Guarantor (with respect to a Guarantee or the Indenture to which it is a party) and the Trustee may amend or supplement the Indenture and any Guarantee or Notes without the consent of any Holder:
(1) to cure any ambiguity, omission, mistake, defect or inconsistency;
(2) to provide for uncertificated Notes of such series in addition to or in place of certificated Notes;
(3) to comply with the covenant relating to mergers, consolidations and sales of assets;
(4) to provide for the assumption of the Issuers or any Guarantors obligations to the Holders in a transaction that complies with the Indenture;
(5) to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under the Indenture of any such Holder;
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(6) to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Issuer or any Guarantor;
(7) to comply with requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act;
(8) to evidence and provide for the acceptance and appointment under the Indenture of a successor Trustee thereunder pursuant to the requirements thereof;
(9) to provide for the issuance of exchange notes or private exchange notes, which are identical to exchange notes except that they are not freely transferable;
(10) to add a Guarantor under the Indenture;
(11) to conform the text of the Indenture, Guarantees or the Notes to any provision of this Description of the Exchange Notes to the extent that such provision in this Description of the Exchange Notes was intended to be a verbatim recitation of a provision of the Indenture, Guarantee or Notes; or
(12) to make any amendment to the provisions of the Indenture relating to the transfer and legending of Notes as permitted by the Indenture, including, without limitation to facilitate the issuance and administration of the Notes; provided, however, that (i) compliance with the Indenture as so amended would not result in Notes being transferred in violation of the Securities Act or any applicable securities law and (ii) such amendment does not materially and adversely affect the rights of Holders to transfer Notes.
The consent of the Holders is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment.
Notices
Notices given by publication will be deemed given on the first date on which publication is made and notices given by first-class mail, postage prepaid, will be deemed given five calendar days after mailing.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the Trustee thereunder, should it become a creditor of the Issuer, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign.
The Indenture provides that the Holders of a majority in principal amount of the outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent person in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of the Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.
Governing Law
The Indenture, the Notes and any Guarantee are governed by and construed in accordance with the laws of the State of New York.
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Certain Definitions
Set forth below are certain defined terms used in the Indenture. For purposes of the Indenture, unless otherwise specifically indicated, the term consolidated with respect to any Person refers to such Person consolidated with its Restricted Subsidiaries, and excludes from such consolidation any Unrestricted Subsidiary as if such Unrestricted Subsidiary were not an Affiliate of such Person.
Acquired Indebtedness means, with respect to any specified Person,
(1) Indebtedness of any other Person existing at the time such other Person is merged or amalgamated with or into or became a Restricted Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such other Person merging or amalgamating with or into, or becoming a Restricted Subsidiary of, such specified Person, and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.
Acquisition means the transactions contemplated by the Transaction Agreement.
Additional Interest means all additional interest then owing pursuant to the Registration Rights Agreement.
Affiliate of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, control (including, with correlative meanings, the terms controlling, controlled by and under common control with), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.
Applicable Premium means, with respect to any Note on any Redemption Date, the greater of:
(1) 1.0% of the principal amount of such Note; and
(2) the excess, if any, of (a) the present value at such Redemption Date of (i) the redemption price of such Note at December 1 , 2014 (such redemption price being set forth in the table appearing above under the caption Optional Redemption), plus (ii) all required interest payments due on such Note through December 1, 2014 (excluding accrued but unpaid interest to the Redemption Date), computed using a discount rate equal to the Treasury Rate as of such Redemption Date plus 50 basis points; over (b) the then outstanding principal amount of such Note.
Asset Sale means:
(1) the sale, conveyance, transfer or other disposition, whether in a single transaction or a series of related transactions, of property or assets (including by way of a Sale and Lease-Back Transaction) of the Issuer or any of its Restricted Subsidiaries (each referred to in this definition as a disposition); or
(2) the issuance or sale of Equity Interests of any Restricted Subsidiary, whether in a single transaction or a series of related transactions (other than directors qualifying shares and shares issued to foreign nationals as required under applicable law);
in each case, other than:
(a) any disposition of Cash Equivalents or Investment Grade Securities or obsolete or worn out property or equipment in the ordinary course of business or any disposition of inventory or goods (or other assets) held for sale in the ordinary course of business (it being understood that the sale of inventory or goods (or other assets) in bulk in connection with the closing of any number of retail locations in the ordinary course of business shall be considered a sale in the ordinary course of business);
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(b) the disposition of all or substantially all of the assets of the Issuer in a manner permitted pursuant to the provisions described above under Certain CovenantsMerger, Consolidation or Sale of All or Substantially All Assets or any disposition that constitutes a Change of Control pursuant to the Indenture;
(c) the making of any Restricted Payment that is permitted to be made, and is made, under the covenant described above under Certain CovenantsLimitation on Restricted Payments or the making of any Permitted Investment;
(d) any disposition of assets or issuance or sale of Equity Interests of any Restricted Subsidiary in any transaction or series of transactions with an aggregate fair market value of less than $15.0 million;
(e) any disposition of property or assets or issuance of securities by a Restricted Subsidiary of the Issuer to the Issuer or by the Issuer or a Restricted Subsidiary of the Issuer to another Restricted Subsidiary of the Issuer;
(f) to the extent allowable under Section 1031 of the Internal Revenue Code of 1986, as amended, any exchange of like property (excluding any boot thereon) for use in a Similar Business;
(g) the lease, assignment, sublease, license or sublicense of any real or personal property in the ordinary course of business;
(h) any issuance or sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary;
(i) foreclosures on or expropriations of assets;
(j) sales of accounts receivable, or participations therein, in connection with any Receivables Facility, or the disposition of an account receivable in connection with the collection or compromise thereof in the ordinary course of business;
(k) the granting of a Lien that is permitted under the covenant described above under Certain CovenantsLiens;
(l) the issuance by a Restricted Subsidiary of Preferred Stock or Disqualified Stock that is permitted by the covenant described under the caption Certain CovenantsLimitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock;
(m) any financing transaction with respect to property built or acquired by the Issuer or any Restricted Subsidiary after the Effective Date, including Sale and Lease-Back Transactions and asset securitizations, permitted by the Indenture; and
(n) sales, transfers and other dispositions of Investments in joint ventures to the extent required by, or made pursuant to, customary buy/sell arrangements between the joint venture parties set forth in joint venture arrangements and similar binding arrangements.
Bank Products means any services or facilities on account of credit or debit cards, purchase cards or merchant services constituting a line of credit (including, for the avoidance of doubt, all Bank Products as defined in the Revolving Credit Facility in effect on the Effective Date).
Borrowing Base means the FILO Borrowing Base as such term is defined in the Revolving Credit Facility as in effect on the Effective Date (including, for the avoidance of doubt, all advance rates in effect on the Effective Date).
Business Day means each day which is not a Legal Holiday.
Capital Stock means:
(1) in the case of a corporation, shares in the capital of such corporation;
(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock;
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(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.
Capitalized Lease Obligation means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) prepared in accordance with GAAP.
Cash Equivalents means:
(1) United States dollars and Canadian dollars;
(2) (a) euro, or any national currency of any participating member state of the EMU; or
(b) in the case of any Foreign Subsidiary that is a Restricted Subsidiary, such local currencies held by them from time to time in the ordinary course of business;
(3) securities issued or directly and fully and unconditionally guaranteed or insured by the U.S. government or any agency or instrumentality thereof the securities of which are unconditionally guaranteed as a full faith and credit obligation of such government with maturities of 24 months or less from the date of acquisition;
(4) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any commercial bank having capital and surplus of not less than $250.0 million in the case of U.S. banks and, in the case of any Foreign Subsidiary that is a Restricted Subsidiary, $100.0 million (or the U.S. dollar equivalent as of the date of determination) in the case of non-U.S. banks, and in each case in a currency permitted under clause (1) or (2) above;
(5) repurchase obligations for underlying securities of the types described in clauses (3) and (4) entered into with any financial institution meeting the qualifications specified in clause (4) above, and in each case in a currency permitted under clause (1) or (2) above;
(6) commercial paper rated at least P-2 by Moodys or at least A-2 by S&P and in each case maturing within 24 months after the date of creation thereof, and in each case in a currency permitted under clause (1) or (2) above;
(7) marketable short-term money market and similar securities having a rating of at least P-2 or A-2 from either Moodys or S&P, respectively (or, if at any time neither Moodys nor S&P shall be rating such obligations, an equivalent rating from another Rating Agency) and in each case maturing within 24 months after the date of creation thereof and in a currency permitted under clause (1) or (2) above;
(8) readily marketable direct obligations issued by any state, commonwealth or territory of the United States or any political subdivision or taxing authority thereof having an Investment Grade Rating from either Moodys or S&P with maturities of 24 months or less from the date of acquisition;
(9) Indebtedness or Preferred Stock issued by Persons with a rating of A or higher from S&P or A2 or higher from Moodys with maturities of 24 months or less from the date of acquisition and in each case in a currency permitted under clause (1) or (2) above;
(10) Investments with average maturities of 12 months or less from the date of acquisition in money market funds rated AAA- (or the equivalent thereof) or better by S&P or Aaa3 (or the equivalent thereof) or better by Moodys and in each case in a currency permitted under clause (1) or (2) above;
(11) investment funds investing substantially all of their assets in securities of the types described in clauses (1) through (10) above; and
(12) credit card receivables and debit card receivables so long as such are considered cash equivalents under GAAP and are so reflected on the Issuers balance sheet.
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Notwithstanding the foregoing, Cash Equivalents shall include amounts denominated in currencies other than those set forth in clauses (1) and (2) above, provided that such amounts are converted into any currency listed in clauses (1) and (2) as promptly as practicable and in any event within ten Business Days following the receipt of such amounts.
Cash Management Services means any of the following to the extent not constituting a line of credit: ACH transactions, treasury and/or cash management services, including, without limitation, controlled disbursement services, foreign exchange facilities, deposit and other accounts and merchant services (including, for the avoidance of doubt, all Cash Management Services as defined in the Revolving Credit Facility in effect on the Effective Date).
Change of Control means the occurrence of any of the following after the Effective Date:
(1) the sale, lease or transfer, in one or a series of related transactions (other than by way of merger or consolidation), of all or substantially all of the assets of the Issuer and its Subsidiaries, taken as a whole, to any Person other than one or more Permitted Holders; or
(2) the Issuer becomes aware of (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) the acquisition by
(A) any Person (other than one or more Permitted Holders) or (B) Persons (other than one or more Permitted Holders) that are together (1) a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), or (2) are acting, for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), as a group, in a single transaction or in a related series of transactions, by way of merger, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision) of 50% or more of the total voting power of the Voting Stock of the Issuer or any of its direct or indirect parent companies holding directly or indirectly 100% of the total voting power of the Voting Stock of the Issuer.
Code means the Internal Revenue Code of 1986, as amended from time to time.
Consolidated Depreciation and Amortization Expense means with respect to any Person for any period, the total amount of depreciation and amortization expense, including the amortization of deferred financing fees of such Person and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP.
Consolidated Interest Expense means, with respect to any Person for any period, without duplication, the sum of:
(1) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted (and not added back) in computing Consolidated Net Income (including (a) amortization of original issue discount resulting from the issuance of Indebtedness at less than par, (b) all commissions, discounts and other fees and charges owed with respect to letters of credit or bankers acceptances, (c) non-cash interest payments (but excluding any non-cash interest expense attributable to the movement in the mark to market valuation of Hedging Obligations or other derivative instruments pursuant to GAAP), (d) the interest component of Capitalized Lease Obligations, and (e) net payments, if any, made (less net payments, if any, received) pursuant to interest rate Hedging Obligations with respect to Indebtedness, and excluding (v) penalties and interest related to taxes, (w) any Additional Interest with respect to the Notes, (x) amortization of deferred financing fees, debt issuance costs, discounted liabilities, commissions, fees and expenses, (y) any expensing of bridge, commitment and other financing fees and (z) commissions, discounts, yield and other fees and charges (including any interest expense) related to any Receivables Facility); plus
(2) consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued; less
(3) interest income for such period.
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For purposes of this definition, interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by such Person to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP.
Consolidated Net Income means, with respect to any Person for any period, the aggregate of the Net Income, of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP; provided, however, that, without duplication,
(1) any after-tax effect of extraordinary, non-recurring or unusual gains or losses (less all fees and expenses relating thereto) or expenses, Transaction Expenses to the extent incurred on or prior to December 31, 2011, severance, relocation costs, Public Company Costs, integration costs, pre-opening, opening, consolidation and closing costs for facilities (including stores), signing, retention or completion bonuses, transition costs, costs incurred in connection with acquisitions after the Effective Date, restructuring costs, and curtailments or modifications to pension and post-retirement employee benefit plans shall be excluded,
(2) the Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period,
(3) any net after-tax gains or losses on disposal of disposed, abandoned or discontinued operations shall be excluded,
(4) any after-tax effect of gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions other than in the ordinary course of business, as determined in good faith by the Issuer, shall be excluded,
(5) the Net Income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Issuer shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) to the referent Person or a Restricted Subsidiary thereof in respect of such period by such Person,
(6) solely for the purpose of determining the amount available for Restricted Payments under clause (3)(a) of the first paragraph of Certain CovenantsLimitation on Restricted Payments, the Net Income for such period of any Restricted Subsidiary (other than any Guarantor) shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived, provided that Consolidated Net Income of the Issuer will be increased by the amount of dividends or other distributions or other payments actually paid in cash (or to the extent converted into cash) to the Issuer or a Restricted Subsidiary thereof in respect of such period, to the extent not already included therein,
(7) effects of fair value adjustments (including the effects of such adjustments pushed down to the Issuer and its Restricted Subsidiaries) in the merchandise inventory, property and equipment, goodwill, intangible assets, deferred revenue and debt line items in such Persons consolidated financial statements pursuant to GAAP resulting from the application of purchase accounting in relation to the Transactions or any consummated acquisition and the amortization or write-off or removal of revenue otherwise recognizable of any amounts thereof, net of taxes, shall be excluded or added back in the case of lost revenue,
(8) any after-tax effect of income (loss) from the early extinguishment or conversion of Indebtedness or Hedging Obligations or other derivative instruments shall be excluded,
(9) any impairment charge or asset write-up, write-off or write-down, in each case, pursuant to GAAP and the amortization of intangibles arising pursuant to GAAP shall be excluded,
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(10) any non-cash compensation charge or expense, including any such charge or expense arising from the grant of stock appreciation or similar rights, stock options, restricted stock or other equity-incentive programs, and any cash charges associated with the rollover, acceleration or payment of management equity in connection with the Transactions shall be excluded,
(11) any fees and expenses incurred during such period, or any amortization or write-off thereof for such period in connection with any acquisition, Investment, Asset Sale, issuance or repayment of Indebtedness, issuance of Equity Interests, refinancing transaction or amendment or modification of any debt instrument (in each case, including any such transaction consummated prior to the Effective Date and any such transaction undertaken but not completed) and any charges or non-recurring merger costs incurred during such period as a result of any such transaction shall be excluded,
(12) accruals and reserves that are established within twelve months after , 2010 that are so required to be established as a result of the Transactions in accordance with GAAP shall be excluded,
(13) any net gain or loss resulting from currency translation gains or losses related to currency remeasurements of Indebtedness (including any net loss or gain resulting from hedge agreements for currency exchange risk) and any foreign currency translation gains or losses shall be excluded, and
(14) any unrealized net gains and losses resulting from Hedging Obligations and the application of Statement of Financial Accounting Standards No. 133 shall be excluded.
In addition, to the extent not already included in the Net Income of such Person and its Restricted Subsidiaries, notwithstanding anything to the contrary in the foregoing, Consolidated Net Income shall include the amount of proceeds received from business interruption insurance and reimbursements of any expenses and charges that are covered by indemnification or other reimbursement provisions in connection with any Permitted Investment or any sale, conveyance, transfer or other disposition of assets permitted under the Indenture.
Notwithstanding the foregoing, for the purpose of the covenant described under Certain CovenantsLimitation on Restricted Payments only (other than clause (3)(d) of the first paragraph thereof), there shall be excluded from Consolidated Net Income any income arising from any sale or other disposition of Restricted Investments made by the Issuer and its Restricted Subsidiaries, any repurchases and redemptions of Restricted Investments from the Issuer and its Restricted Subsidiaries, any repayments of loans and advances which constitute Restricted Investments by the Issuer or any of its Restricted Subsidiaries, any sale of the stock of an Unrestricted Subsidiary or any distribution or dividend from an Unrestricted Subsidiary, in each case only to the extent such amounts increase the amount of Restricted Payments permitted under such covenant pursuant to clause (3)(d) of the first paragraph thereof.
Consolidated Secured Debt Ratio means, as of any date of determination, the ratio of (1) Consolidated Total Indebtedness of the Issuer and its Restricted Subsidiaries that is secured by Liens as of the end of the most recent fiscal quarter for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur to (2) the Issuers EBITDA for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur, in each case with such pro forma adjustments to Consolidated Total Indebtedness and EBITDA as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of Fixed Charge Coverage Ratio.
Consolidated Total Indebtedness means, as at any date of determination, an amount equal to (x) the sum of (1) the aggregate amount of all outstanding Indebtedness of the Issuer and its Restricted Subsidiaries on a consolidated basis consisting of Indebtedness for borrowed money, Obligations in respect of Capitalized Lease Obligations and debt obligations evidenced by promissory notes and similar instruments (and excluding, for the avoidance of doubt, all obligations relating to Receivables Facilities) and (2) the aggregate amount of all outstanding Disqualified Stock of the Issuer and all Preferred Stock of its Restricted Subsidiaries on a consolidated basis, with the amount of such Disqualified Stock and Preferred Stock equal to the greater of their respective voluntary or involuntary liquidation preferences and maximum fixed repurchase prices, in each case
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determined on a consolidated basis in accordance with GAAP, less (y) an amount equal to the lesser of (i) $50 million and (ii) the aggregate amount of unrestricted cash and Cash Equivalents included on the consolidated balance sheet of the Issuer and any Restricted Subsidiaries as of such date; provided that Indebtedness of the Issuer and its Restricted Subsidiaries under any revolving credit facility as at any date of determination shall be determined using the Average Monthly Balance of such Indebtedness for the most recently ended four fiscal quarters for which internal financial statements are available as of such date of determination (the Reference Period). For purposes hereof, (a) the maximum fixed repurchase price of any Disqualified Stock or Preferred Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock or Preferred Stock as if such Disqualified Stock or Preferred Stock were purchased on any date on which Consolidated Total Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock or Preferred Stock, such fair market value shall be determined reasonably and in good faith by the Issuer, (b) Average Monthly Balance means, with respect to any Indebtedness incurred by the Issuer or its Restricted Subsidiaries under a revolving facility, the quotient of (x) the sum of each Individual Monthly Balance for each fiscal month ended on or prior to such date of determination and included in the Reference Period divided by (y) 12, and (c) Individual Monthly Balance means, with respect to any Indebtedness incurred by the Issuer or its Restricted Subsidiaries under a revolving credit facility during any fiscal month of the Issuer, the quotient of (x) the sum of the aggregate outstanding principal amount of all such Indebtedness at the end of each day of such fiscal month divided by (y) the number of days in such fiscal month.
Contingent Obligations means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness (primary obligations) of any other Person (the primary obligor) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent,
(1) to purchase any such primary obligation or any property constituting direct or indirect security therefor,
(2) to advance or supply funds
(a) for the purchase or payment of any such primary obligation, or
(b) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, or
(3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.
Default means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.
Designated Non-cash Consideration means the fair market value of non-cash consideration received by the Issuer or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Non-cash Consideration pursuant to an Officers Certificate, setting forth the basis of such valuation, executed by the principal financial officer of the Issuer, less the amount of Cash Equivalents received in connection with a subsequent sale, redemption, repurchase of, or collection or payment on, such Designated Non-cash Consideration.
Designated Preferred Stock means Preferred Stock of the Issuer or any parent company thereof (in each case other than Disqualified Stock) that is issued for cash (other than to a Restricted Subsidiary or an employee stock ownership plan or trust established by the Issuer or any of its Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to an Officers Certificate executed by the principal financial officer of the Issuer or the applicable parent company thereof, as the case may be, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in clause (3) of the first paragraph of the Certain CovenantsLimitation on Restricted Payments covenant.
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Disqualified Stock means, with respect to any Person, any Capital Stock of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is putable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable (other than solely as a result of a change of control or asset sale) pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof (other than solely as a result of a change of control or asset sale), in whole or in part, in each case prior to the date 91 days after the earlier of the maturity date of the Notes or the date the Notes are no longer outstanding; provided, however, that if such Capital Stock is issued to any plan for the benefit of employees of the Issuer or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Issuer or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations.
EBITDA means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period
(1) increased (without duplication) by:
(a) provision for taxes based on income or profits or capital, including, without limitation, state, franchise and similar taxes (such as the Pennsylvania capital tax and Texas margin tax) and foreign withholding taxes of such Person paid or accrued during such period deducted (and not added back) in computing Consolidated Net Income; plus
(b) Fixed Charges of such Person for such period plus bank fees and costs of surety bonds in connection with financing activities plus amounts excluded from Consolidated Interest Expense as set forth in clauses (v), (w), (x), (y) and (z) in the definition thereof, to the extent the same were deducted (and not added back) in calculating such Consolidated Net Income; plus
(c) Consolidated Depreciation and Amortization Expense of such Person for such period to the extent the same was deducted (and not added back) in computing Consolidated Net Income; plus
(d) any expenses or charges (other than depreciation or amortization expense) related to any Equity Offering, Permitted Investment, acquisition, disposition, recapitalization or the incurrence of Indebtedness permitted to be incurred by the Indenture (including a refinancing thereof) (whether or not successful), including (i) such fees, expenses or charges related to the offering of the Notes and (ii) any amendment or other modification of the Notes or any Senior Credit Facility, in each case, deducted (and not added back) in computing Consolidated Net Income; plus
(e) the amount of any restructuring charge or reserve deducted (and not added back) in such period in computing Consolidated Net Income; plus
(f) any other non-cash charges, including (i) any write offs or write downs, (ii) equity-based awards compensation expense, (iii) losses on sales, disposals or abandonment of, or any impairment charges or asset write off related to, intangible assets, long-lived assets and investments in debt and equity securities, (iv) all losses from investments recorded using the equity method, and (v) other non-cash charges, non-cash expenses or non-cash losses reducing Consolidated Net Income for such period (provided that if any such non-cash charges represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period); plus
(g) the amount of any minority interest expense consisting of Subsidiary income attributable to minority equity interests of third parties in any non-Wholly-Owned Subsidiary deducted (and not added back) in such period in calculating Consolidated Net Income; plus
(h) the amount of management, monitoring, consulting and advisory fees (including termination fees) and related indemnities and expenses paid or accrued in such period to the Investors to the extent otherwise permitted under Certain CovenantsTransactions with Affiliates and deducted (and not added back) in such period in computing Consolidated Net Income; plus
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(i) the amount of net cost savings and operating expense reductions projected by the Issuer in good faith to be realized as a result of specified actions taken within 24 months after the Effective Date, or committed or expected to be taken (in either case, whether or not actually taken within such period) within 24 months after the Effective Date (calculated on a pro forma basis as though such cost savings and operating expense reductions had been realized on the first day of such period and as if such cost savings and operating expense reductions were realized during the entirety of such period), net of the amount of actual benefits realized during such period from such actions; provided that (x) such cost savings are reasonably identifiable and factually supportable and (y) the aggregate amount of cost savings and operating expense reductions added pursuant to this clause (i) shall not exceed $30.0 million for any four consecutive quarter period (which adjustments may be incremental to pro forma adjustments made pursuant to the definition of Fixed Charge Coverage Ratio); plus
(j) the amount of loss on sale of receivables and related assets to the Receivables Subsidiary in connection with a Receivables Facility; plus
(k) any costs or expense incurred by the Issuer or a Restricted Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such cost or expenses are funded with cash proceeds contributed to the capital of the Issuer or net cash proceeds of an issuance of Equity Interest of the Issuer (other than Disqualified Stock) solely to the extent that such net cash proceeds are excluded from the calculation set forth in clause (3) of the first paragraph under Certain CovenantsLimitation on Restricted Payments; plus
(l) any net loss from disposed or discontinued operations; plus
(m) cash receipts (or any netting arrangements resulting in reduced cash expenditures) not representing EBITDA or Net Income in any period to the extent non-cash gains relating to such income were deducted in the calculation of EBITDA pursuant to clause (2) below for any previous period and not added back,
(2) decreased (without duplication) by:
(a) non-cash gains increasing Consolidated Net Income of such Person for such period, excluding any non-cash gains to the extent they represent the reversal of an accrual or reserve for a potential cash item that reduced EBITDA in any prior period and any non-cash gains with respect to cash actually received in a prior period so long as such cash did not increase EBITDA in such prior period, plus
(b) any net income from disposed or discontinued operations; and
(3) increased or decreased by (without duplication), as applicable, any adjustments resulting from the application of FASB Interpretation No. 45 (Guarantees).
Effective Date means the Issue Date.
EMU means economic and monetary union as contemplated in the Treaty on European Union.
Equity Interests means Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.
Equity Offering means any public or private sale of common stock or Preferred Stock of the Issuer or any of its direct or indirect parent companies (excluding Disqualified Stock), other than:
(1) public offerings with respect to the Issuers or any direct or indirect parent companys common stock registered on Form S-8;
(2) issuances to any Subsidiary of the Issuer; and
(3) any such public or private sale that constitutes an Excluded Contribution.
euro means the single currency of participating member states of the EMU.
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Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.
Excluded Contribution means net cash proceeds, marketable securities or Qualified Proceeds received by the Issuer from
(1) contributions to its common equity capital, and
(2) the sale (other than to a Subsidiary of the Issuer or to any management equity plan or stock option plan or any other management or employee benefit plan or agreement of the Issuer) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Issuer,
in each case designated as Excluded Contributions pursuant to an Officers Certificate executed by the principal financial officer of the Issuer on the date such capital contributions are made or the date such Equity Interests are sold, as the case may be, which are excluded from the calculation set forth in clause (3) of the first paragraph under Certain CovenantsLimitation on Restricted Payments.
Exempted Subsidiary means (x) Gymboree, Inc. (Canada corporation)/Gymboree Canada, Inc. (Delaware corporation), a dual-status entity, and (y) Gymboree Island, LLC (Puerto Rico limited liability company).
Fixed Charge Coverage Ratio means, with respect to any Person for any period, the ratio of EBITDA of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Issuer or any Restricted Subsidiary incurs, assumes, guarantees, redeems, retires or extinguishes any Indebtedness (other than Indebtedness incurred or repaid under any revolving credit facility in the ordinary course of business for working capital purposes) or issues or redeems Disqualified Stock or Preferred Stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to or simultaneously with the event for which the calculation of the Fixed Charge Coverage Ratio is made (the Fixed Charge Coverage Ratio Calculation Date), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, redemption, retirement or extinguishment of Indebtedness, or such issuance or redemption of Disqualified Stock or Preferred Stock, as if the same had occurred at the beginning of the applicable four-quarter period.
For purposes of making the computation referred to above, Investments, acquisitions, dispositions, amalgamations, mergers and consolidations that have been made by the Issuer or any of its Restricted Subsidiaries during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Fixed Charge Coverage Ratio Calculation Date shall be calculated on a pro forma basis assuming that all such Investments, acquisitions, dispositions, amalgamations, mergers and consolidations (and the change in any associated fixed charge obligations and the change in EBITDA resulting therefrom) had occurred on the first day of the four-quarter reference period. If since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged, amalgamated or consolidated with or into the Issuer or any of its Restricted Subsidiaries since the beginning of such period shall have made any Investment, acquisition, disposition, amalgamation, merger or consolidation that would have required adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect thereto for such period as if such Investment, acquisition, disposition, merger or consolidation had occurred at the beginning of the applicable four-quarter period.
For purposes of this definition, whenever pro forma effect is to be given to an Investment, acquisition, disposition, amalgamation, merger or consolidation (including the Transactions) and the amount of income or earnings relating thereto, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Issuer (and may include, for the avoidance of doubt, cost savings and operating expense reductions resulting from such Investment, acquisition, disposition, amalgamation, merger or consolidation (including the Transactions) which is being given pro forma effect that have been or are expected to be realized
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and for which the actions necessary to realize such cost savings and operating expense reductions are taken or expected to be taken no later than 24 months after the date of any such Investment, acquisition, disposition, amalgamation, merger or consolidation). If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Fixed Charge Coverage Ratio Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness). Interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Issuer to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Issuer may designate.
Fixed Charges means, with respect to any Person for any period, the sum, without duplication, of:
(1) Consolidated Interest Expense of such Person for such period;
(2) all cash dividends or other distributions paid (excluding items eliminated in consolidation) on any series of Preferred Stock during such period; and
(3) all cash dividends or other distributions paid (excluding items eliminated in consolidation) on any series of Disqualified Stock during such period.
Foreign Subsidiary means, (x) with respect to any Person, any Restricted Subsidiary of such Person that is not organized or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof and any Restricted Subsidiary of such Foreign Subsidiary and (y) each Exempted Subsidiary.
GAAP means generally accepted accounting principles in the United States which are in effect on the Issue Date. For purposes of this Description of the Exchange Notes, the term consolidated with respect to any Person means such Person consolidated with its Restricted Subsidiaries and does not include any Unrestricted Subsidiary.
Government Securities means securities that are:
(1) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged; or
(2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America,
which, in either case, are not callable or redeemable at the option of the issuers thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt.
guarantee means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations.
Guarantee means the guarantee by any Guarantor of the Issuers Obligations under the Indenture and the Notes.
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Guarantor means each Restricted Subsidiary that Guarantees the Notes in accordance with the terms of the Indenture.
Hedging Obligations means, with respect to any Person, the obligations of such Person under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, commodity swap agreement, commodity cap agreement, commodity collar agreement, foreign exchange contract, currency swap agreement or similar agreement providing for the transfer or mitigation of interest rate, commodity price or currency risks either generally or under specific contingencies (including, for the avoidance of doubt, under all Swap Contracts as defined in the Revolving Credit Facility and the Term Loan Facility in effect on the Effective Date).
Holder means the Person in whose name a Note is registered on the registrars books.
Indebtedness means, with respect to any Person, without duplication:
(1) any indebtedness (including principal and premium) of such Person, whether or not contingent:
(a) in respect of borrowed money;
(b) evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers acceptances (or, without duplication, reimbursement agreements in respect thereof);
(c) representing the balance deferred and unpaid of the purchase price of any property (including Capitalized Lease Obligations), except (i) any such balance that constitutes an obligation in respect of a commercial letter of credit, a trade payable or similar obligation, in each case accrued in the ordinary course of business and (ii) any earn-out obligations until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP and is not paid after becoming due and payable; or
(d) representing any Hedging Obligations;
if and to the extent that any of the foregoing Indebtedness (other than letters of credit (other than commercial letters of credit) and Hedging Obligations) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP;
(2) to the extent not otherwise included, any obligation by such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the obligations of the type referred to in clause (1) of a third Person (whether or not such items would appear upon the balance sheet of such obligor or guarantor), other than by endorsement of negotiable instruments for collection in the ordinary course of business; and
(3) to the extent not otherwise included, the obligations of the type referred to in clause (1) of a third Person secured by a Lien on any asset owned by such first Person, whether or not such Indebtedness is assumed by such first Person;
provided, however, that notwithstanding the foregoing, Indebtedness shall be deemed not to include (a) Contingent Obligations incurred in the ordinary course of business or (b) obligations under or in respect of Receivables Facilities.
Independent Financial Advisor means an accounting, appraisal, investment banking firm or consultant to Persons engaged in Similar Businesses of nationally recognized standing that is, in the good faith judgment of the Issuer, qualified to perform the task for which it has been engaged.
Initial Purchasers means Morgan Stanley & Co. Incorporated and Credit Suisse Securities (USA) LLC.
Investment Grade Rating means a rating equal to or higher than Baa3 (or the equivalent) by Moodys and BBB- (or the equivalent) by S&P, or, in either case, an equivalent rating by any other Rating Agency.
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Investment Grade Securities means:
(1) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (other than Cash Equivalents);
(2) debt securities or debt instruments with an Investment Grade Rating, but excluding any debt securities or instruments constituting loans or advances among the Issuer and its Subsidiaries;
(3) investments in any fund that invests exclusively in investments of the type described in clauses (1) and (2) which fund may also hold immaterial amounts of cash pending investment or distribution; and
(4) corresponding instruments in countries other than the United States customarily utilized for high quality investments.
Investments means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances or capital contributions (excluding accounts receivable, credit card and debit card receivables, trade credit, advances to customers, commission, travel and similar advances to officers, directors, distributors, consultants and employees, in each case made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities issued by any other Person and investments that are required by GAAP to be classified on the balance sheet (excluding the footnotes) of the Issuer in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property. For purposes of the definition of Unrestricted Subsidiary and the covenant described under Certain CovenantsLimitation on Restricted Payments:
(1) Investments shall include the portion (proportionate to the Issuers equity interest in such Subsidiary) of the fair market value of the net assets of a Subsidiary of the Issuer at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Issuer shall be deemed to continue to have a permanent Investment in an Unrestricted Subsidiary in an amount (if positive) equal to:
(a) the Issuers Investment in such Subsidiary at the time of such redesignation; less
(b) the portion (proportionate to the Issuers equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Issuer.
Investors means Bain Capital, LLC, each of its respective Affiliates and any investment funds advised or managed by any of the foregoing, but not including, however, any portfolio companies of any of the foregoing.
Issue Date means November 23, 2010.
Issuer has the meaning set forth in the first paragraph under General; provided that when used in the context of determining the fair market value of an asset or liability under the Indenture, Issuer shall be deemed to mean the board of directors of the Issuer when the fair market value is equal to or in excess of $30.0 million (unless otherwise expressly stated).
Legal Holiday means a Saturday, a Sunday or a day on which commercial banking institutions are not required to be open in the State of New York.
Lien means, with respect to any asset, any mortgage, lien (statutory or otherwise), pledge, hypothecation, charge, security interest, preference, priority or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction; provided that in no event shall an operating lease be deemed to constitute a Lien.
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Moodys means Moodys Investors Service, Inc. and any successor to its rating agency business.
Net Income means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends.
Net Proceeds means the aggregate cash proceeds received by the Issuer or any of its Restricted Subsidiaries in respect of any Asset Sale, including any cash received upon the sale or other disposition of any Designated Non-cash Consideration received in any Asset Sale, net of the direct costs relating to such Asset Sale and the sale or disposition of such Designated Non-cash Consideration, including legal, accounting and investment banking fees, and brokerage and sales commissions, any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements directly relating to such Asset Sale), amounts required to be applied to the repayment of principal, premium, if any, and interest on Indebtedness (other than Subordinated Indebtedness) secured by a Lien on the assets disposed of required (other than required by clause (1) of the second paragraph of Repurchase at the Option of HoldersAsset Sales) to be paid as a result of such transaction and any deduction of appropriate amounts to be provided by the Issuer or any of its Restricted Subsidiaries as a reserve in accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by the Issuer or any of its Restricted Subsidiaries after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction.
Obligations means any principal, interest (including any interest accruing subsequent to the filing of a petition in bankruptcy, reorganization or similar proceeding at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable state, federal or foreign law), penalties, fees, indemnifications, reimbursements (including reimbursement obligations with respect to letters of credit and bankers acceptances), damages and other liabilities, and guarantees of payment of such principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities, payable under the documentation governing any Indebtedness.
Officer means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer or the Secretary of the Issuer.
Officers Certificate means a certificate signed on behalf of the Issuer by an Officer of the Issuer, who must be the principal executive officer, the principal financial officer or the principal accounting officer of the Issuer, that meets the requirements set forth in the Indenture.
Opinion of Counsel means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Issuer or the Trustee.
Permitted Asset Swap means the substantially concurrent purchase and sale or exchange of Related Business Assets or a combination of Related Business Assets and Cash Equivalents between the Issuer or any of its Restricted Subsidiaries and another Person; provided that any Net Proceeds received must be applied in accordance with the Repurchase at the Option of HoldersAsset Sales covenant.
Permitted Holders means each of the Investors and members of management of the Issuer (or its direct parent) who are holders of Equity Interests of the Issuer (or any of its direct or indirect parent companies) on the Effective Date and any group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or any successor provision) of which any of the foregoing are members; provided that, in the case of such group and without giving effect to the existence of such group or any other group, such Investors and members of management, collectively, have beneficial ownership of more than 50% of the total voting power of the Voting Stock of the Issuer or any of its direct or indirect parent companies. Any person or group whose acquisition of
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beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision) constitutes a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of the covenant described under Repurchase at the Option of HoldersChange of Control (or would result in a Change of Control Offer in the absence of the waiver of such requirement by Holders in accordance with the covenant described under Repurchase at the Option of HoldersChange of Control) will thereafter, together with its Affiliates, constitute an additional Permitted Holder.
Permitted Investments means:
(1) any Investment in the Issuer or any of its Restricted Subsidiaries;
(2) any Investment in cash and Cash Equivalents or Investment Grade Securities;
(3) any Investment by the Issuer or any of its Restricted Subsidiaries in a Person that is engaged in a Similar Business if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary; or
(b) such Person, in one transaction or a series of related transactions, is merged, amalgamated or consolidated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Issuer or a Restricted Subsidiary,
and, in each case, any Investment held by such Person; provided that such Investment was not acquired by such Person in contemplation of such acquisition, merger, consolidation or transfer;
(4) any Investment in securities or other assets not constituting cash, Cash Equivalents or Investment Grade Securities and received in connection with an Asset Sale made pursuant to the first paragraph under Repurchase at the Option of HoldersAsset Sales or any other disposition of assets not constituting an Asset Sale;
(5) any Investment existing on the Effective Date and any extension, modification, replacement or renewal of any such Investments existing on the Effective Date, but only to the extent not involving additional advances, contributions or other Investments of cash or other assets or other increases thereof other than as a result of the accrual or accretion of interest or original issue discount or the issuance of pay-in-kind securities, in each case, pursuant to the terms of such Investment as in effect on the Effective Date (or as subsequently amended or otherwise modified in a manner not disadvantageous to the Holders of the Notes in any material respect);
(6) any Investment acquired by the Issuer or any of its Restricted Subsidiaries:
(a) exchange for any other Investment or accounts receivable held by the Issuer or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable; or
(b) as a result of a foreclosure by the Issuer or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;
(7) Hedging Obligations permitted under clause (10) of the covenant described in Certain CovenantsLimitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock;
(8) any Investment in a Similar Business having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (8) that are at that time outstanding, not to exceed the greater of (x) $60.0 million and (y) 2.85% of Total Assets (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value);
(9) Investments the payment for which consists of Equity Interests (exclusive of Disqualified Stock) of the Issuer, or any of its direct or indirect parent companies; provided, however, that such Equity Interests will not increase the amount available for Restricted Payments under clause (3) of the first paragraph under the covenant described in Certain CovenantsLimitations on Restricted Payments;
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(10) guarantees (including Guarantees) of Indebtedness of the Issuer or any Restricted Subsidiary permitted under the covenant described in Certain CovenantsLimitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock, performance guarantees and Contingent Obligations in the ordinary course of business and the creation of liens on the assets of the Issuer or any of its Restricted Subsidiaries in compliance with the covenant described in Certain Covenants Liens;
(11) any transaction to the extent it constitutes an Investment that is permitted and made in accordance with the provisions of the second paragraph of the covenant described under Certain CovenantsTransactions with Affiliates (except transactions described in clauses (2), (5) and (8) of the second paragraph thereof);
(12) Investments consisting of purchases and acquisitions of inventory, supplies, material or equipment;
(13) Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (13) that are at that time outstanding (without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of, or have not been subsequently sold or transferred for, cash or marketable securities), not to exceed the greater of (x) $80.0 million and (y) 3.70% of Total Assets (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value);
(14) Investments relating to a Receivables Subsidiary that, in the good faith determination of the Issuer, are necessary or advisable to effect any Receivables Facility;
(15) advances to, or guarantees of Indebtedness of, employees not in excess of $12.0 million outstanding at any one time, in the aggregate;
(16) loans and advances to officers, directors and employees for business-related travel expenses, moving expenses and other similar expenses, in each case incurred in the ordinary course of business or consistent with past practices or to fund such Persons purchase of Equity Interests of the Issuer or any direct or indirect parent company thereof; and
(17) Investments consisting of licensing of intellectual property pursuant to joint marketing arrangements with other Persons.
Permitted Liens means, with respect to any Person:
(1) pledges, deposits or security by such Person under workmens compensation laws, unemployment insurance, employers health tax and other social security laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or U.S. government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case incurred in the ordinary course of business;
(2) Liens imposed by law, such as carriers, warehousemens, materialmens, repairmens and mechanics Liens, in each case for sums not yet overdue for a period of more than 30 days or being contested in good faith by appropriate actions or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;
(3) Liens for taxes, assessments or other governmental charges not yet overdue for a period of more than 30 days or which are being contested in good faith by appropriate actions diligently conducted, if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP, or for property taxes on property that the Issuer or one of its Subsidiaries has determined to abandon if the sole recourse for such tax, assessment, charge, levy or claim is to such property;
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(4) Liens in favor of issuers of performance, surety, bid, indemnity, warranty, release, appeal or similar bonds or with respect to other regulatory requirements or letters of credit or bankers acceptances issued, and completion guarantees provided for, in each case pursuant to the request of and for the account of such Person in the ordinary course of its business or consistent with past practice prior to the Effective Date;
(5) minor survey exceptions, minor encumbrances, ground leases, easements or reservations of, or rights of others for, licenses, rights-of-way, servitudes, sewers, electric lines, drains, telegraph and telephone and cable television lines, gas and oil pipelines and other similar purposes, or zoning, building codes or other restrictions (including, without limitation, minor defects or irregularities in title and similar encumbrances) as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not incurred in connection with Indebtedness and which do not in the aggregate materially impair their use in the operation of the business of such Person;
(6) Liens securing Indebtedness permitted to be incurred pursuant to clause (4), (12)(b), or (18) of the second paragraph under Certain CovenantsLimitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock; provided that Liens securing Indebtedness permitted to be incurred pursuant to clause (18) extend only to the assets of Foreign Subsidiaries;
(7) Liens existing on the Effective Date;
(8) Liens existing on property or shares of stock of a Person at the time such Person becomes a Subsidiary; provided, however, such Liens are not created or incurred in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided, further, however, that such Liens may not extend to any other property owned by the Issuer or any of its Restricted Subsidiaries;
(9) Liens existing on property at the time the Issuer or a Restricted Subsidiary acquired the property, including any acquisition by means of a merger, amalgamation or consolidation with or into the Issuer or any of its Restricted Subsidiaries; provided, however, that such Liens are not created or incurred in connection with, or in contemplation of, such acquisition, merger, amalgamation or consolidation; provided, further, however, that the Liens may not extend to any other property owned by the Issuer or any of its Restricted Subsidiaries;
(10) Liens securing Indebtedness or other obligations of a Restricted Subsidiary owing to the Issuer or another Restricted Subsidiary permitted to be incurred in accordance with the covenant described under Certain CovenantsLimitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock;
(11) Liens securing Hedging Obligations so long as the related Indebtedness is permitted to be incurred under the Indenture;
(12) Liens on specific items of inventory or other goods and proceeds of any Person securing such Persons obligations in respect of bankers acceptances or letters of credit issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
(13) leases, subleases, licenses or sublicenses granted to others in the ordinary course of business which do not materially interfere with the ordinary conduct of the business of the Issuer or any of its Restricted Subsidiaries and do not secure any Indebtedness;
(14) Liens arising from Uniform Commercial Code (or equivalent statutes) financing statement filings regarding operating leases, consignments or accounts entered into by the Issuer and its Restricted Subsidiaries in the ordinary course of business;
(15) Liens in favor of the Issuer or any Guarantor;
(16) Liens on equipment of the Issuer or any of its Restricted Subsidiaries granted in the ordinary course of business to the Issuers clients;
(17) Liens on accounts receivable and related assets incurred in connection with a Receivables Facility;
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(18) Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancing, refunding, extensions, renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (6), (7), (8) and (9); provided, however, that (a) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property), and (b) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (i) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (6), (7), (8) and (9) at the time the original Lien became a Permitted Lien under the Indenture, and (ii) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement;
(19) deposits made or other security provided to secure liabilities to insurance carriers under insurance or self-insurance arrangements in the ordinary course of business;
(20) Liens securing judgments for the payment of money not constituting an Event of Default under clause (5) under the caption Events of Default and Remedies so long as such Liens are adequately bonded and any appropriate legal proceedings that may have been duly initiated for the review of such judgment have not been finally terminated or the period within which such proceedings may be initiated has not expired;
(21) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;
(22) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (ii) attaching to commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business, and (iii) in favor of banking institutions arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;
(23) Liens deemed to exist in connection with Investments in repurchase agreements or other Cash Equivalents permitted under Certain CovenantsLimitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock; provided that such Liens do not extend to any assets other than those that are the subject of such repurchase agreement or other Cash Equivalent;
(24) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;
(25) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Issuer or any of its Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Issuer and its Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Issuer or any of its Restricted Subsidiaries in the ordinary course of business;
(26) Liens solely on any cash earnest money deposits made by the Issuer or any of its Restricted Subsidiaries in connection with any letter of intent or purchase agreement permitted under the Indenture;
(27) the rights reserved or vested in any Person by the terms of any lease, license, franchise, grant or permit held by the Issuer or any of its Restricted Subsidiaries or by a statutory provision, to terminate any such lease, license, franchise, grant or permit, or to require annual or periodic payments as a condition to the continuance thereof;
(28) restrictive covenants affecting the use to which real property may be put; provided, however, that the covenants are complied with;
(29) security given to a public utility or any municipality or governmental authority when required by such utility or authority in connection with the operations of that Person in the ordinary course of business;
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(30) zoning by-laws and other land use restrictions, including, without limitation, site plan agreements, development agreements and contract zoning agreements;
(31) Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods entered into by the Issuer or any Restricted Subsidiary in the ordinary course of business;
(32) Liens arising from Personal Property Security Act financing statement filings regarding leases entered into by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business;
(33) rights of a supplier of unpaid goods to have access to and repossess such goods under the Bankruptcy and Insolvency Act (Canada) and under the provisions in the legislation of Canadian provinces;
(34) the reservations, limitations, provisos and conditions, if any, expressed in any original grants from the crown under Canadian law and any statutory exceptions to title under Canadian law;
(35) customary transfer restrictions and purchase options in joint venture and similar agreements; and
(36) other Liens securing obligations not to exceed $15.0 million at any one time outstanding.
For purposes of this definition, the term Indebtedness shall be deemed to include interest on such Indebtedness.
Person means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
Preferred Stock means any Equity Interest with preferential rights of payment of dividends or upon liquidation, dissolution, or winding up.
Public Company Costs shall mean costs relating to compliance with the Sarbanes-Oxley Act of 2002, as amended, and other expenses arising out of or incidental to the Issuers status as a public company, including costs, fees and expenses (including legal, accounting and other professional fees) relating to compliance with provisions of the Securities Act and the Exchange Act, as applicable to companies with equity securities held by the public, the rules of national securities exchange companies with listed equity securities, directors compensation, fees and expense reimbursement, shareholder meetings and reports to shareholders, directors and officers insurance and other executive costs, legal and other professional fees, and listing fees in each case incurred or accrued prior to the Effective Date.
Qualified Proceeds means assets that are used or useful in, or Capital Stock of any Person engaged in, a Similar Business; provided that the fair market value of any such assets or Capital Stock shall be determined by the Issuer in good faith.
Rating Agencies means Moodys and S&P or if Moodys or S&P or both shall not make a rating on the Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Issuer which shall be substituted for Moodys or S&P or both, as the case may be.
Receivables Facility means any of one or more receivables financing facilities as amended, supplemented, modified, extended, renewed, restated or refunded from time to time, the Obligations of which are non-recourse (except for customary representations, warranties, covenants and indemnities made in connection with such facilities) to the Issuer or any of its Restricted Subsidiaries (other than a Receivables Subsidiary) pursuant to which the Issuer or any of its Restricted Subsidiaries sells its accounts receivable to either (a) a Person that is not a Restricted Subsidiary or (b) a Receivables Subsidiary that in turn sells its accounts receivable to a Person that is not a Restricted Subsidiary.
Receivables Fees means distributions or payments made directly or by means of discounts with respect to any accounts receivable or participation interest therein issued or sold in connection with, and other fees paid to a Person that is not a Restricted Subsidiary in connection with, any Receivables Facility.
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Receivables Subsidiary means any Subsidiary formed for the purpose of, and that solely engages only in one or more Receivables Facilities and other activities reasonably related thereto.
Registration Rights Agreement means the Registration Rights Agreement related to the Notes dated as of the Effective Date, among the Issuer, the Guarantors and the Initial Purchasers.
Related Business Assets means assets (other than cash or Cash Equivalents) used or useful in a Similar Business, provided that any assets received by the Issuer or a Restricted Subsidiary in exchange for assets transferred by the Issuer or a Restricted Subsidiary shall not be deemed to be Related Business Assets if they consist of securities of a Person, unless upon receipt of the securities of such Person, such Person would become a Restricted Subsidiary.
Restricted Investment means an Investment other than a Permitted Investment.
Restricted Subsidiary means, at any time, any direct or indirect Subsidiary of the Issuer (including any Foreign Subsidiary) that is not then an Unrestricted Subsidiary; provided, however, that upon the occurrence of an Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of Restricted Subsidiary.
Revolving Credit Facility means the credit facility provided under the Credit Agreement, to be dated the Effective Date among the Issuer, the other borrowers party thereto, the facility guarantors party thereto from time to time, the lenders party thereto from time to time in their capacities as lenders thereunder Bank of America, N.A., as administrative agent and collateral agent, including any notes, mortgages, guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, replacements, renewals, restatements, refundings or refinancings thereof and any one or more indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or investors that extend, replace, refund, refinance, renew or defease any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder or alters the maturity thereof or adds Restricted Subsidiaries as additional borrowers or guarantors thereunder and whether by the same or any other agent, lender or group of lenders.
S&P means Standard & Poors, a division of The McGraw-Hill Companies, Inc., and any successor to its rating agency business.
Sale and Lease-Back Transaction means any arrangement providing for the leasing by the Issuer or any of its Restricted Subsidiaries of any real or tangible personal property, which property has been or is to be sold or transferred by the Issuer or such Restricted Subsidiary to a third Person in contemplation of such leasing.
SEC means the U.S. Securities and Exchange Commission.
Secured Indebtedness means any Indebtedness of the Issuer or any of its Restricted Subsidiaries secured by a Lien.
Securities Act means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.
Senior Credit Facilities means the Revolving Credit Facility and the Term Loan Facility.
Significant Subsidiary means any Restricted Subsidiary that would be a significant subsidiary as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such regulation is in effect on the Effective Date.
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Similar Business means any business conducted or proposed to be conducted by the Issuer and its Restricted Subsidiaries on the Effective Date or any business that is a reasonable extension, development or expansion of any of the foregoing or is similar, reasonably related, incidental or ancillary thereto (including, for the avoidance of doubt, any sourcing companies created in connection with any of the foregoing).
Specified Premium means an amount equal to 1.0% of the Initial Issue Price.
Sponsor Management Agreement means that certain Management Agreement, entered into as of October 23, 2010, by and among Giraffe Holding, Inc., Giraffe Acquisition Corporation and Bain Capital Partners, LLC.
Subordinated Indebtedness means, with respect to the Notes,
(1) any Indebtedness of the Issuer which is by its terms subordinated in right of payment to the Notes, and
(2) any Indebtedness of any Guarantor which is by its terms subordinated in right of payment to the Guarantee of such entity of the Notes.
Subsidiary means, with respect to any Person:
(1) any corporation, association, or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof or is consolidated under GAAP with such Person at such time; and
(2) any partnership, joint venture, limited liability company or similar entity of which
(x) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof whether in the form of membership, general, special or limited partnership or otherwise, and
(y) such Person or any Restricted Subsidiary of such Person is a controlling general partner or otherwise controls such entity.
Term Loan Facility means the credit facility provided under the Credit Agreement, to be dated the Effective Date among the Issuer, the guarantors party thereto from time to time, the lenders party thereto from time to time in their capacities as lenders thereunder and Credit Suisse AG, as administrative agent and collateral agent for the lenders, including any notes, mortgages, guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, replacements, renewals, restatements, refundings or refinancings thereof and any one or more indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or investors that extend, replace, refund, refinance, renew or defease any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder or alters the maturity thereof or adds Restricted Subsidiaries as additional borrowers or guarantors thereunder and whether by the same or any other agent, lender or group of lenders.
Total Assets means the total assets of the Issuer and its Restricted Subsidiaries on a consolidated basis, as shown on the most recent balance sheet of the Issuer or such other Person as may be expressly stated.
Transaction Agreement means the Agreement and Plan of Merger, dated as of October 11, 2010 among Giraffe Holding, Inc., Giraffe Acquisition Corporation and the Issuer.
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Transaction Expenses means any fees or expenses incurred or paid by the Issuer or any Restricted Subsidiary in connection with the Transactions, including payments to officers, employees and directors as change of control payments, severance payments, special or retention bonuses and charges for repurchase or rollover of, or modifications to, stock options and/or restricted stock.
Transactions means the transactions contemplated by the Transaction Agreement, the issuance of the Notes and borrowings under the Senior Credit Facilities.
Treasury Rate means, as of any Redemption Date, the yield to maturity as of such Redemption Date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the Redemption Date to December 1, 2014; provided, however, that if the period from the Redemption Date to December 1, 2014 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.
Trust Indenture Act means the Trust Indenture Act of 1939, as amended (15 U.S.C. §§ 77aaa-77bbbb).
Unrestricted Subsidiary means:
(1) any Subsidiary of the Issuer which at the time of determination is an Unrestricted Subsidiary (as designated by the Issuer, as provided below); and
(2) any Subsidiary of an Unrestricted Subsidiary.
The Issuer may designate any Subsidiary of the Issuer (including any existing Subsidiary and any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or holds any Lien on, any property of, the Issuer or any Subsidiary of the Issuer (other than solely any Subsidiary of the Subsidiary to be so designated); provided that
(1) any Unrestricted Subsidiary must be an entity of which the Equity Interests entitled to cast at least a majority of the votes that may be cast by all Equity Interests having ordinary voting power for the election of directors or Persons performing a similar function are owned, directly or indirectly, by the Issuer;
(2) such designation complies with the covenants described under Certain CovenantsLimitation on Restricted Payments; and
(3) each of:
(a) the Subsidiary to be so designated; and
(b) its Subsidiaries
has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Issuer or any Restricted Subsidiary.
The Issuer may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that, immediately after giving effect to such designation, no Default shall have occurred and be continuing and either:
(1) the Issuer could incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test described in the first paragraph under Certain CovenantsLimitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock; or
(2) the Fixed Charge Coverage Ratio for the Issuer and its Restricted Subsidiaries would be greater than such ratio for the Issuer and its Restricted Subsidiaries immediately prior to such designation, in each case on a pro forma basis taking into account such designation.
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Any such designation by the Issuer shall be notified by the Issuer to the Trustee by promptly filing with the Trustee a copy of the resolution of the board of directors of the Issuer or any committee thereof giving effect to such designation and an Officers Certificate certifying that such designation complied with the foregoing provisions.
Voting Stock of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the board of directors of such Person.
Weighted Average Life to Maturity means, when applied to any Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, at any date, the quotient obtained by dividing:
(1) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Disqualified Stock or Preferred Stock multiplied by the amount of such payment; by
(2) the sum of all such payments.
Wholly-Owned Subsidiary of any Person means a Subsidiary of such Person, 100% of the outstanding Equity Interests of which (other than directors qualifying shares and shares issued to foreign nationals as required under applicable law) shall at the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person or by such Person and one or more Wholly-Owned Subsidiaries of such Person.
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DESCRIPTION OF OTHER INDEBTEDNESS
Senior Secured Asset-Based Revolving Credit Facility
Overview. In connection with the Acquisition, we entered into a credit agreement and related security and other agreements for a senior secured asset-based revolving credit facility (also referred to in this prospectus as the ABL Facility) with certain lenders, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as lead arranger and bookrunner, and Bank of America, N.A., as administrative agent and collateral agent.
In connection with the Acquisition, we entered into a senior secured asset-based revolving credit facility which provides senior secured financing of up to $225.0 million, subject to a borrowing base, and which consists of a $213.0 million Tranche A sub-facility and a $12.0 million first-in, last out Tranche A-1 sub-facility. Substantially all of the Companys domestic subsidiaries are co-borrowers with the Company under the ABL Facility. Availability under the ABL Facility is subject to the assets of the Company, its co-borrowers and any subsidiary guarantors (as described below) that are available to collateralize the borrowing and is reduced by the level of outstanding letters of credit. As of January 29, 2011, availability under the ABL Facility was approximately $148.4 million. The borrowing base for the Tranche A sub-facility at any time equals the sum of 90% of the appraised net orderly liquidation value of eligible inventory, eligible in-transit inventory and eligible letter of credit inventory, plus 85% of eligible trade accounts receivable, plus 90% of eligible credit card receivables, minus reserves established and modified from time to time. The borrowing base for the Tranche A-1 sub-facility at any time equals 5% (stepping down to 2.5% on November 23, 2012) of the appraised net orderly liquidation value of the eligible inventory, eligible in-transit inventory and eligible letter of credit inventory, minus reserves established and modified from time to time. Borrowings under the senior secured asset-based revolving credit facility are incurred first under the Tranche A-1 sub-facility, and no borrowings are permitted under the Tranche A sub-facility until the Tranche A-1 sub-facility has been fully utilized. Repayments of the senior secured asset-based revolving credit facility are applied to the Tranche A-1 sub-facility only after the Tranche A sub-facility has been fully paid down. The borrowings incurred under the Tranche A-1 sub-facility are at a higher interest rate, as described in Interest Rate and Fees below. Our senior secured asset-based revolving credit facility includes borrowing capacity available for letters of credit and for borrowings on same-day notice, referred to as the swingline loans, and is available in U.S. dollars.
The senior secured asset-based revolving credit facility provides us with the right to request up to $75.0 million of additional commitments under this facility, provided that the aggregate amount of additional commitments incurred under both the senior secured asset-based revolving credit facility and the senior secured term loan facility described below may not exceed $200.0 million in the aggregate. The lenders under this facility will not be under any obligation to provide any such additional commitments under this facility, and any increase in commitments is subject to customary conditions precedent. If we were to request any such additional commitments and the existing lenders or new lenders were to agree to provide such commitments, the facility size could be increased to up to $300.0 million, but our ability to borrow under this facility would still be limited by the amount of the borrowing base.
Interest Rate and Fees. Borrowings under our senior secured asset-based revolving credit facility bear interest at a rate per annum equal to, at our option, either (a) a base rate determined by reference to the highest of (1) the prime rate of Bank of America, N.A., (2) the federal funds effective rate plus 0.50% and (3) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for an interest period of one month adjusted for certain additional costs, plus 1.00% or (b) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs (Adjusted LIBOR), in each case plus an applicable margin. The applicable margin is currently for 1.50% base rate loans and 2.50% for LIBOR loans borrowed under the Tranche A sub-facility, and 3.00% for base rate loans and 4.00% for LIBOR loans borrowed under the Tranche A-1 sub-facility. Commencing with the fiscal quarter beginning on July 23, 2011, the applicable margin for borrowings thereunder will be subject to adjustment each fiscal quarter, based on excess availability. Swingline loans bear interest at a rate per annum equal to the base rate plus the applicable margin.
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In addition to paying interest on outstanding principal under our senior secured asset-based revolving credit facility, we are required to pay a commitment fee in respect of the unutilized commitments thereunder, which is currently 0.625% per annum. Commencing with the fiscal quarter beginning on May 1, 2011, the commitment fee has been subject to adjustment based on the amount of unutilized commitments. We must also pay customary letter of credit fees and agency fees.
Mandatory Prepayments. If at any time the aggregate amount of outstanding loans, unreimbursed letter of credit drawings and undrawn letters of credit under our senior secured asset-based revolving credit facility exceeds the lesser of (a) the commitment amount and (b) the borrowing base, we will be required to repay outstanding loans and/or cash collateralize letters of credit in an aggregate amount equal to such excess, with no reduction of the commitment amount. In addition, from the time that the amount available under our senior secured asset-based revolving credit facility is less than the greater of (a) 15% of the lesser of (1) the commitment amount and (2) the borrowing base and (b) $25.0 million for five consecutive business days, until the time when we have excess availability equal to or greater than the greater of (a) 15% of the lesser of (1) the commitment amount and (2) the borrowing base and (b) $25.0 million for 30 consecutive days, or during the continuance of certain events of default, including a payment or bankruptcy event of default and any event of default arising from failure to deliver a borrowing base certificate, failure to comply with the fixed charge coverage ratio described below, failure to comply with certain covenants relating to the bank accounts holding our cash or a breach of a representation or warranty made in any borrowing base certificate or any certificate accompanying the delivery of any financial statement, has occurred, we will be required to repay outstanding loans with the cash that we are required to deposit daily in a collection account maintained with the administrative agent under our senior secured asset-based revolving credit facility.
Voluntary Prepayments. We may voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans at any time subject, in the case of a reduction of the commitments with respect to the Tranche A-1 sub-facility only, to our having pro forma excess availability on a projected six-month basis of greater than 20% of the lesser of (1) the commitment amount and (2) the borrowing base. Prepayments of the loans may be made without premium or penalty other than customary breakage costs with respect to LIBOR loans.
Amortization and Final Maturity. There is no scheduled amortization under our senior secured asset-based revolving credit facility. The principal amount outstanding of the loans under our senior secured asset-based revolving credit facility will be due and payable in full on November 23, 2015.
Guarantees and Security. All obligations under our senior secured asset-based revolving credit facility are unconditionally guaranteed by our parent and substantially all of our existing 100%-owned domestic subsidiaries and will be required to be guaranteed by certain of our future domestic 100%-owned subsidiaries. All obligations under our senior secured asset-based revolving credit facility, and the guarantees of those obligations, are secured, subject to certain exceptions, by substantially all of our assets and the assets of our parent and our subsidiaries that are co-borrowers under, or that have guaranteed, our senior secured asset-based revolving credit facility (or subsidiary guarantors), including:
| a first-priority security interest in personal property consisting of accounts receivable arising from the sale of inventory (and other goods and services), inventory, cash and cash equivalents, deposit accounts (other than any designated deposit accounts containing solely the proceeds of collateral with respect to which the obligations under the senior secured asset-based revolving credit facility have only a second-priority security interest), certain securities accounts and certain assets related to the foregoing and, in each case, proceeds thereof; |
| a second-priority pledge of all of our capital stock directly held by our parent and a second-priority pledge of all of the capital stock directly held by us, any co-borrower, our parent and any subsidiary guarantors (which pledge, in the case of the capital stock of any foreign subsidiary, is limited to 65% of the voting stock of such foreign subsidiary); and |
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| a second-priority security interest in substantially all other tangible and intangible assets, including substantially all of our real property and intellectual property. |
Certain Covenants and Events of Default. Our senior secured asset-based revolving credit facility contains a number of covenants that, among other things and subject to certain exceptions, restrict our ability and the ability of our subsidiaries to:
| incur additional indebtedness; |
| pay dividends on our capital stock or redeem, repurchase or retire our capital stock or our other indebtedness; |
| make investments, loans and acquisitions; |
| create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries; |
| engage in transactions with our affiliates; |
| sell assets, including capital stock of our subsidiaries; |
| alter the business we conduct; |
| consolidate or merge; |
| incur liens; and |
| engage in sale-leaseback transactions. |
Each of the covenants limiting dividends and other restricted payments, investments, loans and acquisitions, incurrence of unsecured or subordinated debt, and prepayments or redemptions of certain indebtedness permit the restricted actions in an unlimited amount so long as certain payment conditions are satisfied, principally that we must have pro forma and six month projected excess availability under the senior secured asset-based revolving credit facility greater than the greater of (a) 20% of the lesser of (1) the commitment amount and (2) the borrowing base and (b) $40.0 million, and that our pro forma Consolidated Fixed Charge Coverage Ratio (as defined in the ABL Facility) is at least 1.1 to 1.0 (in the case of dividends and other restricted payments or prepayments or redemptions of certain indebtedness) or 1.0 to 1.0 (in the case of investments, loans and acquisitions or the incurrence of unsecured or subordinated debt).
From the time when we have excess availability less than the greater of (a) 12.5% of the lesser of (1) the commitment amount and (2) the borrowing base and (b) $20.0 million, until the time when we have excess availability greater than the greater of (a) 12.5% of the lesser of (1) the commitment amount and (2) the borrowing base and (b) $20.0 million for 30 consecutive days, the credit agreement governing our senior secured asset-based revolving credit facility will require us to maintain a Consolidated Fixed Charge Coverage Ratio (as defined in the ABL Facility) of at least 1.0 to 1.0.
The credit agreement governing our senior secured asset-based revolving credit facility also contains certain customary representations and warranties, affirmative covenants and provisions relating to events of default.
Senior Secured Term Loan Facility
Overview. In connection with the Acquisition, we entered into a credit agreement and related security and other agreements for a $820.0 million senior secured term loan facility (referred to in this prospectus, together with the ABL Facility, as the Senior Credit Facilities) with certain lenders, Credit Suisse Securities (USA) LLC, as joint lead arranger and joint bookrunner, Morgan Stanley Senior Funding, Inc., as joint lead arranger and joint bookrunner, and Credit Suisse AG, as administrative agent and collateral agent. The full amount of the senior secured term loan facility was drawn in connection with the Acquisition.
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Effective February 11, 2011, we amended and restated the terms of the senior secured term loan facility to, among other things, lower the interest rate by 50 basis points and remove select financial covenants. The following description of the senior secured term loan facility reflects such facilities as amended and restated.
The senior secured term loan facility permits us to request additional tranches of term loans in an aggregate amount not to exceed $200.0 million, provided that such amount will be subject to reduction by the amount of any additional commitments incurred under the senior secured asset-based revolving credit facility described above. Availability of such additional tranches of term loans will be subject to the absence of any default, pro forma compliance with a maximum consolidated net leverage ratio and a minimum consolidated cash interest coverage ratio, each set at levels that become more restrictive over time, compliance with a consolidated net first lien leverage ratio no greater than the level of such leverage ratio on the closing date and, among other things, the receipt of commitments by existing or additional financial institutions.
Interest Rate and Fees. Borrowings under our senior secured term loan facility bear interest at a rate per annum equal to, at our option, either (a) the sum of (x) a base rate determined by reference to the higher of (1) the prime rate of Credit Suisse AG, (2) the federal funds effective rate plus 0.50% and (3) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for an interest period of one month adjusted for certain additional costs, plus 1.00%, plus (y) 2.50% or (b) Adjusted LIBOR plus 3.50%.
Mandatory Prepayments. The credit agreement governing our senior secured term loan facility requires us to prepay outstanding term loans, subject to certain exceptions, with:
| 50% (subject to reduction to 25% and 0% based upon our leverage ratio) of our annual excess cash flow; |
| 100% of the net cash proceeds of certain asset sales and casualty and condemnation events, subject to reinvestment rights and certain other exceptions; and |
| 100% of the net cash proceeds of any issuance of certain debt, other than debt permitted under our senior secured term loan facility. |
Voluntary Prepayments. We are able to voluntarily prepay outstanding loans under our senior secured term loan facility at any time without premium or penalty other than customary breakage costs with respect to LIBOR loans.
Amortization and Final Maturity. We are required to make scheduled quarterly payments each equal to 0.25% of the original principal amount of the term loans made on the closing date, with the balance due on February 23, 2018.
Guarantees and Security. All obligations under our senior secured term loan facility are unconditionally guaranteed by our parent and substantially all of our existing 100%-owned domestic subsidiaries, and will be required to be guaranteed by certain of our future domestic 100%-owned subsidiaries. All obligations under the senior secured term loan facility, and the guarantees of those obligations, are secured, subject to certain exceptions, by substantially all of our assets and the assets of our parent and our subsidiary guarantors, including:
| a first-priority pledge of all of the capital stock directly held by us and our subsidiary guarantors (which pledge, in the case of the capital stock of any foreign subsidiary, is limited to 65% of the voting stock of such foreign subsidiary and 100% of the non-voting stock of such subsidiary); |
| a first-priority pledge of all of our capital stock directly held by our parent and a first-priority security interest in substantially all of our parents, our and each subsidiary guarantors other tangible and intangible assets (other than the assets described in the following bullet point), including substantially all of our real property and intellectual property, certain securities accounts and any designated deposit accounts containing solely the proceeds of collateral with respect to which the obligations under the senior secured term loan facility have a first-priority security interest; and |
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| a second-priority security interest in personal property consisting of accounts receivable arising from the sale of inventory (and other goods and services), inventory, cash, all other deposit accounts and certain securities accounts and certain assets related to the foregoing. |
Our senior secured term loan facility contains a number of covenants that, among other things and subject to certain exceptions, restrict our ability and the ability of our subsidiaries to:
| incur additional indebtedness; |
| pay dividends on our capital stock or redeem, repurchase or retire our capital stock or our other indebtedness; |
| make investments, loans and acquisitions; |
| make capital expenditures; |
| create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries; |
| engage in transactions with our affiliates; |
| sell assets, including capital stock of our subsidiaries; |
| alter the business we conduct; |
| consolidate or merge; |
| incur liens; and |
| engage in sale-leaseback transactions. |
The credit agreement governing our senior secured term loan facility also contains certain customary representations and warranties, affirmative covenants and provisions relating to events of default.
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Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for existing notes where such existing notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of up to 180 days after consummation of the exchange offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 2011, all dealers effecting transactions in the exchange notes may be required to deliver a prospectus.
We will not receive any proceeds from any sale of the exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an underwriter within the meaning of the Securities Act and any profit on any such resale of exchange notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the Securities Act.
We have agreed to pay all expenses incident to the exchange offer, and we will indemnify the holders of the existing notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.
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CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
TO ENSURE COMPLIANCE WITH REQUIREMENTS IMPOSED BY THE INTERNAL REVENUE SERVICE, WE INFORM YOU THAT ANY DISCUSSION OF U.S. FEDERAL TAX ISSUES CONTAINED OR REFERRED TO IN THIS REGISTRATION STATEMENT OR ANY DOCUMENT REFERRED TO HEREIN (I) IS WRITTEN IN CONNECTION WITH THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN, AND (II) IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING U.S. TAX PENALTIES. EACH TAXPAYER SHOULD SEEK ADVICE BASED ON THE TAXPAYERS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.
The following discussion is a summary of certain material U.S. federal income tax consequences applicable to the exchange of existing notes for exchange notes pursuant to the exchange offer (the Exchange) and the ownership and disposition of the exchange notes, but does not purport to be a complete analysis of all potential U.S. federal income tax consequences. This summary is based on the Internal Revenue Code of 1986, as amended (the Code), U.S. Treasury regulations promulgated thereunder, Internal Revenue Service (IRS) rulings and judicial decisions now in effect or in existence as of the date of this registration statement. All of these are subject to change, possibly with retroactive effect, or different interpretations, which may result in U.S. federal tax consequences different from those summarized below. Moreover, there is no assurance that the IRS will not successfully challenge some of the conclusions reached herein.
This summary does not address all aspects of U.S. federal income taxation that may be relevant to particular holders of the existing notes or the exchange notes in light of their specific circumstances (for example, U.S. Holders, as defined below, subject to the alternative minimum tax provisions of the Code and holders subject to the Medicare tax on unearned income) or to holders that may be subject to special rules under U.S. federal income tax law, including:
| broker-dealers in stocks, securities or currencies; |
| securities traders that use a mark-to-market accounting method; |
| banks and financial institutions; |
| insurance companies; |
| regulated investment companies; |
| real estate investment trusts; |
| tax-exempt organizations; |
| persons holding existing notes or exchange notes as part of a synthetic security, a straddle or a hedging, integrated, conversion or constructive sale transaction; |
| persons who or that are, or may become, subject to the expatriation provisions of the Code; |
| individual retirement accounts or other tax deferred accounts; |
| U.S. persons whose functional currency is not the U.S. dollar; |
| Non-U.S. Holders (as defined below), except as described below; or |
| pass-through entities, including partnerships and entities and arrangements classified as partnerships for U.S. federal tax purposes, or investors in such entities. |
The summary also does not discuss any aspect of state, local or foreign law, or U.S. federal estate and gift tax law, as applicable to holders of the existing notes or the exchange notes.
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Further, this discussion assumes (i) that the existing notes were issued for cash in an amount equal to their stated redemption price at maturity and (ii) addresses only tax consequences to investors that exchange their existing notes for exchange notes in the Exchange. Moreover, this discussion assumes that the existing notes and exchange notes are both held as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment).
For purposes of this summary, U.S. Holder means the beneficial holder of an existing note or an exchange note who or that for U.S. federal income tax purposes is:
| an individual who is a citizen or resident of the United States; |
| a corporation or other entity treated as a corporation for U.S. federal income tax purposes formed in or under the laws of the United States, any state thereof or the District of Columbia; |
| an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or |
| 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 U.S. persons (within the meaning of the Code) have the authority to control all substantial decisions of the trust, or if a valid election is in effect under applicable U.S. Treasury regulations for the trust to be treated as a U.S. person. |
The term Non-U.S. Holder means any beneficial owner of an existing note or an exchange note that is, for U.S. federal income tax purposes, an individual, corporation, trust or estate that is not a U.S. Holder.
If any entity or arrangement treated as a partnership for U.S. federal income tax purposes holds existing notes or exchange notes, the U.S. federal income tax treatment of a partner generally will depend on the status of the partner and the activities of the partnership. If you are a partnership or a partner in a partnership, you should consult your own tax advisor as to the tax consequences of the partnerships exchange, purchase, ownership and disposition of the existing notes or exchange notes.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE APPLICATION OF THE TAX CONSEQUENCES DESCRIBED BELOW TO THEIR PARTICULAR SITUATIONS, AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS, INCLUDING GIFT AND ESTATE TAX LAWS.
Taxation of U.S. Holders
Treatment of the Exchange
The exchange of an existing note for an exchange note by a U.S. Holder pursuant to the Exchange will not constitute a taxable exchange for U.S. federal income tax purposes. A U.S. Holder will not recognize any gain or loss upon the receipt of an exchange note for an existing note and a U.S. Holder will continue to be taxed in the same manner as for an existing note. A U.S. Holders holding period for an exchange note will include the holding period for the existing note exchanged therefor, and such U.S. Holders basis in the exchange note immediately after the Exchange will be the same as such U.S. Holders basis in such existing note immediately before the Exchange.
Interest
This discussion assumes that the existing notes were issued for cash in an amount equal to their stated redemption price at maturity. Accordingly, following the Exchange, stated interest on an exchange note generally will be taxable to a U.S. Holder as ordinary interest income at the time such amounts are accrued or received, in accordance with the U.S. Holders method of accounting for U.S. federal income tax purposes.
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In certain circumstances, we may be obligated to pay amounts in excess of the stated interest or principal on the exchange notes (e.g., as described under Description of the Exchange NotesRepurchase at the Option of HoldersChange of Control). These potential payments may implicate the provisions of U.S. Treasury regulations relating to contingent payment debt instruments. According to the applicable U.S. Treasury regulations, certain contingencies will not cause a debt instrument to be treated as a contingent payment debt instrument if such contingencies, as of the date of issuance, are either remote or incidental. We intend to take the position that the foregoing contingencies are remote and/or incidental, and we do not intend to treat the exchange notes as contingent payment debt instruments. Our position that such contingencies are remote and/or incidental is binding on a U.S. holder unless such holder discloses its contrary position in the manner required by applicable U.S. Treasury regulations. If any additional amounts are in fact paid, U.S. Holders will be required to recognize such amounts as income at the time such payments are received or accrued, in accordance with the holders usual method of accounting for U.S. federal income tax purposes. In the event the IRS takes the position that the likelihood of certain of the payments described above was not remote and/or incidental, it would affect the amount and timing (and possibly character) of the income recognized by a U.S. Holder. In addition, if we exercise our option to repurchase the exchange notes prior to the maturity date, the yield on such exchange notes may be greater than it would otherwise be. Under special rules governing this type of unconditional option, we will be deemed not to exercise this option, and the possibility of this increased yield will not affect the amount and timing of interest income you recognize in advance of such events.
The remainder of this discussion assumes that the determinations above are correct. U.S. Holders should consult their own tax advisors regarding the tax considerations relating to the contingent payments and optional redemption rights described above.
Market Discount
In general, the existing notes will have market discount if such notes were acquired after their original issuance at a discount of more than a de minimis amount to their adjusted issue price. Market discount generally will be treated as accruing on a straight line basis over the term of the exchange notes or, at the holders election, under a constant yield method. If the constant yield election is made, it may not be revoked. U.S. Holders of existing notes that have accrued market discount in such notes will carry over that market discount to the exchange notes received in the Exchange.
A U.S. Holder may elect to include market discount in income as it accrued over the remaining term of the exchange notes. Once made, this accrual election applies to all market discount obligations acquired by the holder on or before the first taxable year to which the election applies and may not be revoked without the consent of the IRS. A U.S. Holders tax basis in an exchange note will be increased by the amount of market discount included in such holders income under this election. If a U.S. Holder does not elect to include accrued market discount in income over the remaining term of the exchange notes, the holder may be required to defer the deduction of a portion of the interest on any indebtedness incurred or maintained to purchase or carry the exchange note until maturity or a taxable disposition of the exchange note.
If an exchange note is treated as including market discount, the U.S. Holder will be required to treat any gain recognized on its disposition as ordinary income to the extent of the accrued market discount not previously included in income. If the holder disposes of the exchange note in certain otherwise nontaxable transactions, the holder will be required to include accrued market discount in income as ordinary income as if the holder sold the property at its then fair market value, or the market discount may carry over in certain other nonrecognition transactions.
Amortizable Bond Premium
A U.S. Holder who acquired existing notes at a premium (i.e., the excess of the holders adjusted tax basis over the notes stated redemption price at maturity) will carryover that premium to the exchange notes acquired
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in the Exchange. A U.S. Holder generally may elect to amortize that premium (amortizable bond premium) from the acquisition date to the notes maturity date under a constant yield method based on the notes payment period. Amortizable bond premium is treated as an offset to interest income on the exchange notes and not as a separate deduction. The election to amortize bond premium, once made, applies to all debt obligations held or subsequently acquired by the electing U.S. Holder on or after the first day of the first taxable year to which the election applies and may not be revoked without the consent of the IRS. If such an election to amortize bond premium is not made, a U.S. Holder must include all amounts of taxable interest in income without reduction for such premium, and may receive a tax benefit from the premium only in computing such U.S. Holders gain or loss upon a disposition of an exchange note.
Sale, Exchange, Retirement, Redemption or Other Disposition of an Exchange Note
A U.S. Holder generally will recognize gain or loss upon the sale, exchange (other than in a tax-free transaction), retirement, redemption or other taxable disposition of an exchange note, equal to the difference, if any, between:
| the amount of cash and the fair market value of any property received (less any portion allocable to the payment of accrued but unpaid stated interest not previously included in income, which amount will be taxable as ordinary interest income as discussed above); and |
| the U.S. Holders adjusted tax basis in the exchange note. |
A U.S. Holders initial tax basis in an exchange note immediately after the Exchange will be the same as such U.S. Holders basis in the existing note exchanged therefor and such tax basis will be increased by any amount includible in income as accrued market discount (if current inclusion is elected as described in more detail above) and decreased the amount of any premium amortized by the holder and used to offset interest income, and by payments from the Issuer other than qualified stated interest.
Subject to the discussion of market discount above, any such gain or loss generally will be capital gain or loss and generally will be long-term capital gain or loss if the exchange note has been held for more than one year at the time of the disposition (determined, as described above, by including the holding period of the existing note exchanged therefor). Long-term capital gains of non-corporate U.S. Holders, including individuals, may be taxed at preferential rates. The ability of a U.S. Holder to offset capital losses against ordinary income is limited.
Information Reporting and Backup Withholding
Information reporting requirements generally will apply with respect to payments of principal, payments of stated interest, and the proceeds of sales or other dispositions (including a retirement or redemption) of the exchange notes unless an exemption exists. In addition, backup withholding may apply to such payments and proceeds if a U.S. Holder fails to provide its correct taxpayer identification number and certify that it is exempt from backup withholding. All individuals are subject to these requirements. In general, corporations are exempt from these requirements, provided that their exemptions are properly established. Under current law, the backup withholding rate is 28% through 2012, and 31% thereafter.
Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be credited against a U.S. Holders U.S. federal income tax liability (or refunded), provided that the required information is timely provided to the IRS. U.S. Holders should consult their own tax advisors regarding the application of backup withholding in their particular situation, the availability of an exemption from backup withholding and the procedure for obtaining such an exemption, if available.
Taxation of Non-U.S. Holders
The rules governing the U.S. federal income taxation of Non-U.S. Holders are complex. Non-U.S. Holders should consult their own tax advisors to determine the effect of U.S. federal, state, local and foreign income tax laws, as well as treaties, with regard to an investment in the exchange notes, including any reporting requirements.
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Exchange Offer
As discussed above with respect to U.S. Holders, the exchange of an existing note pursuant to the Exchange will not constitute a taxable exchange for U.S. federal income tax purposes for a beneficial owner of existing notes that is a Non-U.S. Holder.
Interest
This discussion assumes that the existing notes were issued for cash in an amount equal to their stated redemption price at maturity. Under U.S. federal income tax law, and subject to the discussion below, no withholding of U.S. federal income tax generally will be required with respect to the payment by us or our paying agent of principal and interest that qualifies as portfolio interest. Interest on an exchange note owned by a Non-U.S. Holder will qualify as portfolio interest if (1) such interest is not effectively connected with the conduct of a U.S. trade or business by such Non-U.S. Holder, (2) such Non-U.S. Holder does not actually or constructively own 10% or more of the total combined voting power of all classes of our stock entitled to vote within the meaning of the Code and applicable U.S. Treasury regulations, (3) such Non-U.S. Holder is not a controlled foreign corporation that is related to us actually or constructively within the meaning of the Code and applicable U.S. Treasury regulations, (4) such Non-U.S. Holder is not a bank whose receipt of interest on the exchange notes is described in Section 881(c)(3)(A) of the Code, and (5) either (a) such Non-U.S. Holder provides its name and address on an IRS Form W-8BEN (or other applicable form), and certifies, under penalties of perjury, that it is not a United States person as defined under the Code or (b) such Non-U.S. Holder holds exchange notes through certain financial intermediaries and the certification requirements of applicable U.S. Treasury regulations are satisfied.
A Non-U.S. Holder with interest income that does not qualify as portfolio interest will be subject to a 30% U.S. federal withholding tax unless, under current procedures, it delivers a properly completed IRS Form W-8ECI stating that interest paid on its exchange notes is not subject to withholding tax because it is effectively connected to its conduct of a trade or business in the United States or a properly completed IRS Form W-8BEN claiming an exemption from or reduction in withholding tax under an applicable income tax treaty.
Interest that is effectively connected income generally will be taxable on a net basis as if the Non-U.S. Holder were a U.S. Holder (unless an applicable income tax treaty provides otherwise). Moreover, a Non-U.S. Holder that is a corporation may be subject to a branch profits tax of 30% (or a lower applicable treaty rate) on such Non-U.S. Holders effectively connected earnings and profits.
The Issuer may, in certain circumstances, be required to make additional payments to holders of such exchange notes. As noted above with respect to U.S. Holders, we intend to take the position that such additional payments do not cause the exchange notes to be treated as contingent payment debt instruments. Such payments may be treated as interest (or OID), subject to the rules described above, as gain realized on the sale, exchange or other disposition of an exchange note, or as other income subject to U.S. federal withholding tax. Non-U.S. Holders should consult their own tax advisors as to the tax considerations relating to debt instruments that provide for one or more contingent payments, particularly as to the availability of the portfolio interest exemption, and the ability of Non-U.S. Holders to claim the benefits of income tax treaty exemptions from U.S. withholding tax on interest, in respect of any such additional payments.
Sale, Exchange, Retirement, Redemption or Other Disposition of an Exchange Note
Subject to the discussion below concerning backup withholding, a Non-U.S. Holder will generally not be subject to U.S. federal income tax on any gain realized on the sale, exchange, retirement, redemption or other disposition of an exchange note (except to the extent proceeds are attributable to accrued but unpaid stated interest not previously included in income, in which case the above rules regarding interest would apply), unless (1) such gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the
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United States (and, if required by an applicable income tax treaty, attributable to a U.S. permanent establishment), in which case the Non-U.S. Holder will be taxed in the same manner discussed above with respect to effectively connected income (and, in the case of a Non-U.S. Holder that is a corporation, branch profits tax), or (2) in the case of a Non-U.S. Holder that is an individual, the holder is present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met, in which case the Non-U.S. Holder will be subject to a 30% U.S. federal income tax on any gain recognized (except as otherwise provided by an applicable income tax treaty), which may be offset by certain U.S. source losses.
Information Reporting and Backup Withholding
Generally, we must report to the IRS and to a Non-U.S. Holder the amount of interest paid to a Non-U.S. Holder and the amount of tax, if any, withheld with respect to those payments. Copies of the information returns reporting such interest payments and any withholding may also be made available to the tax authorities in the country in which the Non-U.S. Holder resides under the provisions of an applicable income tax treaty or agreement.
In general, a Non-U.S. Holder will not be subject to backup withholding with respect to payments of interest on the exchange notes, provided that the Non-U.S. Holder provides the required certification described above that it is a Non-U.S. Holder.
Information reporting and, depending on the circumstances, backup withholding, will apply to the proceeds of a sale or other disposition (including a retirement or redemption) of the exchange notes within the United States or conducted through certain United States-related financial intermediaries, unless the Non-U.S. Holder certifies to the payor under penalties of perjury that such holder is a Non-U.S. Holder or otherwise establishes an exemption.
Under current law, the backup withholding rate is 28% through 2012, and 31% thereafter. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be credited against a Non-U.S. Holders U.S. federal income tax liability (or refunded), provided that the required information is timely provided to the IRS. Non-U.S. Holders should consult their tax advisors regarding the application of information reporting and backup withholding in their particular situation, the availability of an exemption from backup withholding and the procedure for obtaining such an exemption, if available.
Recent Legislation
The recently enacted Hiring Incentives to Restore Employment Act (the Hire Act) modifies some of the withholding, information reporting and certification rules above with respect to certain holders (other than U.S. Holders who fail to comply with the Hire Acts new reporting and disclosure obligations. If applicable, additional withholding could apply to most types of U.S. source payments (including payments of interest) to such holders after December 31, 2012. However, the Hire Act contains an exception that provides that withholding tax will not apply to payments made on debt instruments that are outstanding on March 18, 2012. Nonetheless, because the Hire Act is new and the U.S. Treasury has broad authority to interpret the new rules and promulgate regulations, such holders should consult their tax advisors concerning the rules in the Hire Act that may be relevant to their investment in the exchange notes.
153
The validity of the exchange notes and the guarantees has been passed upon for us by Ropes & Gray LLP, Boston, Massachusetts. In passing on the validity of the exchange notes and the guarantees, Ropes & Gray LLP relied upon the opinion of Holland & Knight LLP as to certain matters of the laws of the State of Virginia. Ropes & Gray LLP and some attorneys of Ropes & Gray LLP are members of RGIP, LLC, which is an investor in certain investment funds sponsored by Bain Capital and often a co-investor with such funds. RGIP, LLC indirectly owns less than 1% of the outstanding equity interests of the Company.
The financial statements included in this prospectus have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such financial statements are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-4 under the Securities Act with respect to the exchange notes being offered hereby. This prospectus, which forms a part of the registration statement, does not contain all of the information set forth in the registration statement. For further information with respect to us, the guarantors or the exchange notes, we refer you to the registration statement. You should be aware that the statements made in this prospectus as to the contents of any agreement or other document filed as an exhibit to the registration statement are not complete. Although we believe that we have summarized the material terms of these documents in the prospectus, these statements should be read along with the full and complete text of the related documents. We are not currently subject to the informational requirements of the Exchange Act. As a result of the offering of the exchange notes, we will become subject to the informational requirements of the Exchange Act, and, in accordance therewith, will file reports and other information with the SEC. The registration statement, such reports and other information can be inspected and copied at the Public Reference Room of the SEC located at Room 1580, 100 F Street, N.E., Washington D.C. 20549. Copies of such materials, including copies of all or any portion of the registration statement, can be obtained from the Public Reference Room of the SEC at prescribed rates. You can call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room. Such materials may also be accessed electronically by means of the SECs home page on the Internet (http://www.sec.gov).
Under the terms of the indenture relating to the notes, we have agreed that, whether or not we are required to do so by the rules and regulations of the SEC, for so long as any of the notes remain outstanding, we will furnish to the trustee and holders of the notes the information specified therein in the manner specified therein. See Description of the Exchange NotesReports and Other Information.
154
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page | ||||
Audited Consolidated Financial Statements |
||||
F-2 | ||||
Consolidated Balance Sheets as of January 29, 2011 (Successor) and January 30, 2010 (Predecessor) |
F-3 | |||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
The Gymboree Corporation
We have audited the accompanying consolidated balance sheets of The Gymboree Corporation and subsidiaries (the Company) as of January 29, 2011 (Successor) and January 30, 2010 (Predecessor), and the related consolidated statements of operations, stockholders equity, and cash flows for the period from November 23, 2010 to January 29, 2011 (Successor), the period from January 31, 2010 to November 22, 2010, and for each of the two years in the period ended January 30, 2010 (Predecessor). These financial statements are the responsibility of the Companys 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the Successor financial statements referred to above present fairly, in all material respects, the financial position of the Successor as of January 29, 2011, and the results of its operations and its cash flows for the period from November 23, 2010 to January 29, 2011 in conformity with accounting principles generally accepted in the United States of America. Further, in our opinion, the Predecessor financial statements referred to above present fairly, in all material respects, the financial position of the Predecessor as of January 30, 2010, and the results of its operations and its cash flows for the period from January 30, 2010 to November 22, 2010, and for each of the two years in the period ended January 30, 2010, in conformity with accounting principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP |
San Francisco, CA |
April 28, 2011 (May 13, 2011 as to Note 19) |
F-2
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
January 29, 2011 |
January 30, 2010 |
|||||||||||
(Successor) | (Predecessor) | |||||||||||
ASSETS | ||||||||||||
Current Assets: |
||||||||||||
Cash and cash equivalents |
$ | 32,124 | $ | 257,672 | ||||||||
Accounts receivable, net of allowance of $- and $434 |
13,669 | 9,911 | ||||||||||
Merchandise inventories |
184,268 | 121,133 | ||||||||||
Prepaid income taxes |
16,116 | | ||||||||||
Prepaid expenses |
4,856 | 5,315 | ||||||||||
Deferred income taxes |
6,697 | 14,463 | ||||||||||
Total current assets |
257,730 | 408,494 | ||||||||||
Property and Equipment: |
||||||||||||
Land and buildings |
26,782 | 25,713 | ||||||||||
Leasehold improvements |
120,768 | 218,317 | ||||||||||
Furniture, fixtures, and equipment |
71,286 | 192,520 | ||||||||||
218,836 | 436,550 | |||||||||||
Less accumulated depreciation and amortization |
(6,345 | ) | (231,089 | ) | ||||||||
212,491 | 205,461 | |||||||||||
Deferred Income Taxes |
| 17,417 | ||||||||||
Goodwill |
934,639 | 239 | ||||||||||
Other Intangible Assets |
606,210 | 1,210 | ||||||||||
Deferred Financing Costs |
61,983 | | ||||||||||
Other Assets |
15,072 | 3,309 | ||||||||||
Total Assets |
$ | 2,088,125 | $ | 636,130 | ||||||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||||||
Current Liabilities: |
||||||||||||
Accounts payable |
$ | 54,494 | $ | 46,470 | ||||||||
Accrued liabilities |
81,100 | 69,295 | ||||||||||
Income tax payable |
| 5,381 | ||||||||||
Current portion of long-term debt |
8,200 | | ||||||||||
Total current liabilities |
143,794 | 121,146 | ||||||||||
Long-Term Liabilities: |
||||||||||||
Long-term debt |
1,207,791 | | ||||||||||
Lease incentives and other deferred liabilities |
18,352 | 70,859 | ||||||||||
Unrecognized tax benefits |
7,779 | 5,372 | ||||||||||
Deferred income taxes |
224,598 | | ||||||||||
Total Liabilities |
1,602,314 | 197,377 | ||||||||||
Commitments and Contingencies (see Note 3) |
| | ||||||||||
Stockholders Equity: |
||||||||||||
Successor Company Common stock, including additional paid-in capital ($.001 par value: 1,000 shares authorized; 1,000 shares issued and outstanding at January 29, 2011) |
508,617 | | ||||||||||
Predecessor Company Common stock, including additional paid-in capital ($.001 par value: 100,000,000 shares authorized; 29,369,126 shares issued and outstanding at January 30, 2010) |
| 198,879 | ||||||||||
Retained earnings (deficit) |
(23,044 | ) | 239,531 | |||||||||
Accumulated other comprehensive income |
238 | 343 | ||||||||||
Total Stockholders Equity |
485,811 | 438,753 | ||||||||||
Total Liabilities and Stockholders Equity |
$ | 2,088,125 | $ | 636,130 | ||||||||
See Notes to Consolidated Financial Statements.
F-3
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
Successor | Predecessor | |||||||||||||||||||
Year Ended | ||||||||||||||||||||
November 23, 2010 to January 29, 2011 |
January 31, 2010 to November 22, 2010 |
January 30, 2010 |
January 31, 2009 |
|||||||||||||||||
Net sales: |
||||||||||||||||||||
Retail |
$ | 244,287 | $ | 814,863 | $ | 1,001,527 | $ | 987,859 | ||||||||||||
Play & Music |
2,814 | 10,847 | 13,384 | 12,819 | ||||||||||||||||
Other |
447 | 1,173 | | | ||||||||||||||||
Total net sales |
247,548 | 826,883 | 1,014,911 | 1,000,678 | ||||||||||||||||
Cost of goods sold, including buying and occupancy expenses |
(184,483 | ) | (431,675 | ) | (535,005 | ) | (524,477 | ) | ||||||||||||
Gross profit |
63,065 | 395,208 | 479,906 | 476,201 | ||||||||||||||||
Selling, general and administrative expenses |
(78,843 | ) | (307,361 | ) | (316,268 | ) | (327,893 | ) | ||||||||||||
Operating (loss) income |
(15,778 | ) | 87,847 | 163,638 | 148,308 | |||||||||||||||
Interest income |
36 | 295 | 728 | 1,690 | ||||||||||||||||
Interest expense |
(17,387 | ) | (248 | ) | (243 | ) | (208 | ) | ||||||||||||
Other income (expense), net |
53 | 119 | 610 | (151 | ) | |||||||||||||||
(Loss) income before income taxes |
(33,076 | ) | 88,013 | 164,733 | 149,639 | |||||||||||||||
Income tax benefit (expense) |
10,032 | (36,449 | ) | (62,814 | ) | (56,159 | ) | |||||||||||||
Net (loss) income |
$ | (23,044 | ) | $ | 51,564 | $ | 101,919 | $ | 93,480 | |||||||||||
See Notes to Consolidated Financial Statements.
F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Successor | Predecessor | |||||||||||||||||||
Year Ended | ||||||||||||||||||||
November 23, 2010 to January 29, 2011 |
January 31, 2010 to November 22, 2010 |
January 30, 2010 |
January 31, 2009 |
|||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||||||||||
Net (loss) income |
$ | (23,044 | ) | $ | 51,564 | $ | 101,919 | $ | 93,480 | |||||||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
||||||||||||||||||||
Depreciation and amortization |
10,250 | 32,550 | 37,302 | 34,854 | ||||||||||||||||
Amortization of deferred financing costs and accretion of original issue discount |
1,357 | | | | ||||||||||||||||
(Benefit) provision for deferred income taxes |
(11,246 | ) | 4,128 | 2,727 | (3,841 | ) | ||||||||||||||
Share-based compensation expense |
482 | 41,042 | 18,462 | 19,850 | ||||||||||||||||
Loss on disposal/impairment of assets |
1,150 | 880 | 1,336 | 448 | ||||||||||||||||
Excess tax benefits from exercise and vesting of share-based awards |
| (12,584 | ) | (3,750 | ) | (6,023 | ) | |||||||||||||
Tax benefit from exercise of stock options and vesting of restricted stock awards and units |
| 12,254 | 2,629 | 6,440 | ||||||||||||||||
Change in assets and liabilities: |
||||||||||||||||||||
Accounts receivable |
7,035 | (10,791 | ) | 8,831 | (6,122 | ) | ||||||||||||||
Merchandise inventories |
48,607 | (55,512 | ) | (6,046 | ) | 3,895 | ||||||||||||||
Prepaid expenses and other assets |
1,295 | (1,346 | ) | (3,865 | ) | 7,408 | ||||||||||||||
Accounts payable |
(11,782 | ) | 19,749 | 1,854 | (8,113 | ) | ||||||||||||||
Income tax payable/prepaid income taxes |
(345 | ) | (27,312 | ) | 6,659 | (7,877 | ) | |||||||||||||
Accrued liabilities |
(4,820 | ) | 32,959 | 4,843 | 5,652 | |||||||||||||||
Lease incentives and other deferred liabilities |
2,141 | 3,370 | 3,694 | 14,973 | ||||||||||||||||
Net cash provided by operating activities |
21,080 | 90,951 | 176,595 | 155,024 | ||||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||||||||||
Proceeds from sales and maturities of marketable securities |
| | | 34,700 | ||||||||||||||||
Purchases of marketable securities |
| | | (34,700 | ) | |||||||||||||||
Acquisition of business, net of cash acquired |
(1,828,308 | ) | | | | |||||||||||||||
Capital expenditures |
(5,054 | ) | (42,214 | ) | (39,579 | ) | (56,114 | ) | ||||||||||||
Other |
(46 | ) | (1,238 | ) | | | ||||||||||||||
Net cash used in investing activities |
(1,833,408 | ) | (43,452 | ) | (39,579 | ) | (56,114 | ) | ||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||||||||||
Proceeds from long-term debt-term loan |
815,900 | | | | ||||||||||||||||
Proceeds from senior notes |
400,000 | | | | ||||||||||||||||
Proceeds from ABL facility |
30,000 | | | | ||||||||||||||||
Principal payments on ABL facility |
(30,000 | ) | | | | |||||||||||||||
Deferred financing costs |
(63,266 | ) | | | | |||||||||||||||
Purchase of interest rate cap contracts |
(12,079 | ) | | | | |||||||||||||||
Proceeds from issuance of common stock |
508,135 | 1,371 | 6,055 | 9,296 | ||||||||||||||||
Excess tax benefits from exercise and vesting of share-based awards |
| 12,584 | 3,750 | 6,023 | ||||||||||||||||
Repurchases of common stock |
| (124,610 | ) | (31,340 | ) | (5,591 | ) | |||||||||||||
Net cash provided by (used in) financing activities |
1,648,690 | (110,655 | ) | (21,535 | ) | 9,728 | ||||||||||||||
Net (decrease) increase in cash and cash equivalents |
(163,638 | ) | (63,156 | ) | 115,481 | 108,638 | ||||||||||||||
Effect of exchange rate fluctuations on cash |
852 | 394 | 1,719 | (1,479 | ) | |||||||||||||||
CASH AND CASH EQUIVALENTS: |
||||||||||||||||||||
Beginning of Period |
194,910 | 257,672 | 140,472 | 33,313 | ||||||||||||||||
End of Period |
$ | 32,124 | $ | 194,910 | $ | 257,672 | $ | 140,472 | ||||||||||||
NON-CASH INVESTING AND FINANCING ACTIVITIES: |
||||||||||||||||||||
Capital expenditures incurred, but not yet paid |
$ | 3,737 | $ | 5,817 | $ | 3,047 | $ | 2,992 | ||||||||||||
Acquisition costs incurred, but not yet paid |
$ | 1,352 | $ | | $ | | $ | | ||||||||||||
Deferred financing costs incurred, but not yet paid |
$ | | $ | 1,306 | $ | | $ | | ||||||||||||
OTHER CASH FLOW INFORMATION: |
||||||||||||||||||||
Cash paid during the year for income taxes |
$ | 966 | $ | 46,888 | $ | 53,747 | $ | 62,615 | ||||||||||||
Cash paid during the year for interest |
$ | 3,818 | $ | 77 | $ | 64 | $ | 90 |
See Notes to Consolidated Financial Statements
F-5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(Dollars in thousands)
Common Stock | Additional Paid In Capital |
Retained Earnings (Deficit) |
Accumulated Other Comprehensive Income (Loss) |
Total | Total Comprehensive Income (Loss) |
|||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||
PREDECESSOR: |
||||||||||||||||||||||||||||
BALANCE AT FEBRUARY 2, 2008 |
28,344,205 | $ | 28 | $ | 139,984 | $ | 67,340 | $ | 943 | $ | 208,295 | |||||||||||||||||
Issuance of common stock under equity incentive and purchase plans |
751,241 | 1 | 9,295 | 9,296 | ||||||||||||||||||||||||
Share-based compensation |
19,850 | 19,850 | ||||||||||||||||||||||||||
Stock repurchases |
(18,000 | ) | | (81 | ) | (642 | ) | (723 | ) | |||||||||||||||||||
Tax benefit from exercise of stock options and vesting of restricted stock awards and units |
6,442 | 6,442 | ||||||||||||||||||||||||||
Translation adjustments and unrealized net loss on cash flow hedges, net of tax of $(115) |
(2,365 | ) | (2,365 | ) | $ | (2,365 | ) | |||||||||||||||||||||
Net income |
93,480 | 93,480 | 93,480 | |||||||||||||||||||||||||
$ | 91,115 | |||||||||||||||||||||||||||
BALANCE AT JANUARY 31, 2009 |
29,077,446 | 29 | 175,490 | 160,178 | (1,422 | ) | 334,275 | |||||||||||||||||||||
Issuance of common stock under equity incentive plan |
918,836 | 1 | 6,054 | 6,055 | ||||||||||||||||||||||||
Share-based compensation |
18,462 | 18,462 | ||||||||||||||||||||||||||
Stock repurchases |
(627,156 | ) | (1 | ) | (3,785 | ) | (22,566 | ) | (26,352 | ) | ||||||||||||||||||
Tax benefit from exercise of stock options and vesting of restricted stock awards and units |
2,629 | 2,629 | ||||||||||||||||||||||||||
Translation adjustments and unrealized net gains on cash flow hedges, net of tax of $54 |
1,765 | 1,765 | $ | 1,765 | ||||||||||||||||||||||||
Net income |
101,919 | 101,919 | 101,919 | |||||||||||||||||||||||||
$ | 103,684 | |||||||||||||||||||||||||||
BALANCE AT JANUARY 30, 2010 |
29,369,126 | 29 | 198,850 | 239,531 | 343 | 438,753 | ||||||||||||||||||||||
Issuance of common stock under equity incentive plan |
619,280 | 1 | 1,371 | 1,372 | ||||||||||||||||||||||||
Share-based compensation |
41,042 | 41,042 | ||||||||||||||||||||||||||
Stock repurchases |
(2,613,375 | ) | (3 | ) | (17,512 | ) | (96,132 | ) | (113,647 | ) | ||||||||||||||||||
Tax benefit from exercise of stock options and vesting of restricted stock awards and units |
12,254 | 12,254 | ||||||||||||||||||||||||||
Translation adjustments and unrealized net loss on cash flow hedges, net of tax of $(83) |
(1,194 | ) | (1,194 | ) | $ | (1,194 | ) | |||||||||||||||||||||
Net income |
51,564 | 51,564 | 51,564 | |||||||||||||||||||||||||
$ | 50,370 | |||||||||||||||||||||||||||
BALANCE AT NOVEMBER 22, 2010 |
27,375,031 | $ | 27 | $ | 236,005 | $ | 194,963 | $ | (851 | ) | $ | 430,144 | ||||||||||||||||
SUCCESSOR: |
||||||||||||||||||||||||||||
BALANCE AT NOVEMBER 23, 2010 |
| $ | | $ | | $ | | $ | | $ | | |||||||||||||||||
Issuance of common stock |
1,000 | | 508,000 | | | 508,000 | ||||||||||||||||||||||
Investment by Parent |
135 | 135 | ||||||||||||||||||||||||||
Share-based compensation |
482 | 482 | ||||||||||||||||||||||||||
Translation adjustments and unrealized net gains on cash flow hedges, net of tax of $- |
238 | 238 | 238 | |||||||||||||||||||||||||
Net loss |
(23,044 | ) | (23,044 | ) | $ | (23,044 | ) | |||||||||||||||||||||
$ | (22,806 | ) | ||||||||||||||||||||||||||
BALANCE AT JANUARY 29, 2011 |
1,000 | $ | | $ | 508,617 | $ | (23,044 | ) | $ | 238 | $ | 485,811 | ||||||||||||||||
See Notes to Consolidated Financial Statements.
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. | Summary of Significant Accounting Policies |
Nature of the Business
The Gymboree Corporation is a specialty retailer operating stores selling high-quality apparel and accessories for children under the GYMBOREE®, GYMBOREE OUTLET, JANIE AND JACK®, and CRAZY 8® brands, as well as play programs for children under the GYMBOREE PLAY & MUSIC® brand. The Company operates two reportable segments, retail stores and Gymboree Play & Music (see Note 12). As of January 29, 2011, the retail segment operated a total of 1,065 retail stores, including 1,023 stores in the United States (594 Gymboree stores, 149 Gymboree Outlet stores, 123 Janie and Jack shops and 157 Crazy 8 stores), 37 Gymboree stores in Canada, 2 Gymboree stores in Australia, 2 Gymboree stores in Puerto Rico and 1 Gymboree Outlet store in Puerto Rico, as well as 3 online stores at www.gymboree.com, www.janieandjack.com and www.crazy8.com.
Gymboree Play & Music offers an array of classes developed by early childhood experts, as well as birthday parties and developmental toys, books and music. As of January 29, 2011, Gymboree Play & Music programs were offered at 8 Company-operated play centers (3 in California, 4 in Florida and 1 in Arizona) and 680 franchisee-operated play centers, of which approximately 32% are located in the United States.
Basis of Presentation
On October 11, 2010, The Gymboree Corporation, a Delaware corporation (the Company), entered into an Agreement and Plan of Merger (the Merger Agreement) with Giraffe Holding, Inc., a Delaware corporation (Parent or Holding), and Giraffe Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Parent (Acquisition Sub), whereby Acquisition Sub merged with and into the Company in accordance with the short-form merger provisions available under Delaware law. The Company is continuing as the surviving corporation and 100%-owned indirect subsidiary of the Parent (the Merger). Bain Capital Partners, LLC (Bain) owns a controlling interest in Holding. The Merger was consummated on November 23, 2010 (Transaction Date). Under the Merger Agreement, the former holders of the Companys common stock, par value $0.001 per share, received $65.40 per share. The Merger consideration was funded through the use of the Companys available cash, equity contributions from the Parent and the debt financings described below. The November 23, 2010 Merger is also referred to as the Transaction.
The following principal equity capitalization and financing transactions occurred in connection with the Transaction:
| Immediately prior to the closing of the Transaction, Acquisition Sub exercised the Top-Up Option in the Merger Agreement and irrevocably elected to purchase from the Predecessor Company a total of 30,713,523 Top-Up Option shares at an aggregate price of approximately $2 billion. Acquisition Sub executed a promissory note as payment for the Top-Up Option shares. The Top-Up Option shares and the promissory note were cancelled upon the closing of the Transaction; |
| Aggregate cash equity contributions of approximately $508 million were made by the Parent; and |
| The Successor Company (1) entered into a new $225 million asset based revolving credit facility (ABL), of which $30 million was drawn at closing, (2) entered into a new $820 million secured term loan agreement (Term Loan), of which all but the original issue discount of $4.1 million was drawn at closing, and (3) issued $400 million face amount 9.125% senior notes (Notes) due 2018. These financing transactions are described in more detail in Notes 5 and 6. |
The proceeds from the equity capitalization and financing transactions, together with approximately $164.9 million of the Companys cash, were used to fund the:
| Purchase of Predecessor Company common stock outstanding of approximately $1.8 billion; |
F-7
| Settlement of all unvested stock options and restricted stock units of the Predecessor Company of approximately $39.3 million; and |
| Fees and expenses related to the Transaction and the related financing transactions of approximately $17.9 million in the period from January 31, 2010 to November 22, 2010 and $71.2 million in the period from November 23, 2010 to January 29, 2011. |
The accompanying consolidated balance sheets, statements of operations and cash flows and the notes to the consolidated financial statements are presented for the Predecessor and Successor periods, which relate to the periods preceding the Transaction Date (periods prior to November 23, 2010) and the period succeeding the Transaction Date (November 23, 2010 to January 29, 2011), respectively.
Classification Error
The Company corrected the classification of approximately $9.9 million in building costs from leasehold improvements to land and buildings to properly present such amounts in the consolidated balance sheet as of January 30, 2010. The Companys net property and equipment balance as of January 30, 2010 did not change from the amount previously reported.
Reclassifications
Goodwill and other intangible assets, previously reported in other assets as of January 30, 2010, have been separately disclosed to conform to the current year presentation.
Principles of Consolidation
The consolidated financial statements include the Company and its subsidiaries, all of which are wholly owned. All intercompany balances and transactions have been eliminated in consolidation.
Fiscal Year
The Companys year end is on the Saturday closest to January 31. The Predecessor and Successor periods presented relate to the period preceding the Transaction Date (January 31, 2010 to November 22, 2010) and the period succeeding the Transaction Date (November 23, 2010 to January 29, 2011), respectively. Fiscal 2009 and fiscal 2008, which included 52 weeks, ended on January 30, 2010 and January 31, 2009, respectively.
Use of Estimates
The preparation of financial statements in conformity 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 at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cost of Goods Sold
Cost of goods sold (COGS) includes cost of goods, buying expenses, occupancy expenses and shipping costs. Cost of goods consists of cost of merchandise, inbound freight and other inventory-related costs, such as shrink and lower of cost or market adjustments. Buying expenses include costs incurred to design, produce and allocate merchandise. Occupancy expenses consist of rent and other occupancy costs, including common area maintenance and utilities. Shipping costs consist of third-party delivery services to customers.
F-8
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses consist of non-occupancy-related costs associated with the Companys retail stores, distribution center and shared corporate services. These costs include payroll and benefits, depreciation and amortization, credit card fees, advertising and other general expenses. SG&A also includes fees and expenses related to the Transaction.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investment instruments with a maturity of three months or less at date of purchase.
Accounts Receivable
Accounts receivable primarily include amounts due from landlord construction allowances, amounts due from Gymboree Play & Music franchisees for royalties and consumer product sales, as well as amounts due from major credit card companies. Construction allowance receivable due dates vary. Royalties are due within 30 days of each calendar quarter end and receivables from consumer product sales are generally due upon shipment. Amounts due from major credit card companies are generally collected within five days. The Company estimates its allowance for doubtful accounts by considering a number of factors, including the length of time accounts receivable are past due and the Companys previous loss history. The provision for doubtful accounts receivable is included in SG&A expenses. A summary of activity in the allowance for doubtful accounts is as follows (in thousands):
Successor | Predecessor | |||||||||||||||||||
November 23, 2010 to January 29, 2011 |
January 31, 2010 to November 22, 2010 |
Fiscal 2009 | Fiscal 2008 | |||||||||||||||||
Balance at beginning of period |
$ | | $ | 434 | $ | 388 | $ | 498 | ||||||||||||
Provision for doubtful accounts receivable |
287 | (7 | ) | 110 | 274 | |||||||||||||||
Accounts written off |
(287 | ) | | (64 | ) | (384 | ) | |||||||||||||
Balance at end of period |
$ | | $ | 427 | $ | 434 | $ | 388 | ||||||||||||
Concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents. At times, cash balances held at financial institutions are in excess of federally insured limits.
In the period from November 23, 2010 to January 29, 2011, the period from January 31, 2010 to November 22, 2010, fiscal 2009 and fiscal 2008, one company acting as the Companys buying agent managed approximately 90%, 80%, 90% and 90%, respectively, of the Companys inventory purchases, which may potentially subject the Company to risks of concentration related to sourcing of its inventory.
Fair Value Measurements
The accounting guidance for fair value measurements and disclosure defines and establishes a framework for measuring fair value and expands related disclosures (see Note 17).
Merchandise Inventories
Merchandise inventories are recorded at the lower of cost or market (LCM), determined on a weighted-average basis. The Company reviews its inventory levels to identify slow-moving merchandise and broken assortments (items no longer in stock in a sufficient range of sizes) and records an adjustment when the future
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estimated selling price is less than cost. The Company takes a physical count of inventories in all stores once a year and in some stores twice a year, and performs cycle counts throughout the year in its distribution center. The Company records an inventory shrink adjustment based upon physical counts and also provides for estimated shrink adjustments for the period between the last physical inventory count and each balance sheet date. The Companys inventory shrink estimate can be affected by changes in merchandise mix and changes in actual shrink trends. The Companys LCM estimate can be affected by changes in consumer demand and the promotional environment.
Property and Equipment
Property and equipment acquired in the Transaction are stated at estimated fair value as of the Transaction Date, less accumulated depreciation and amortization recorded subsequent to the Transaction. Property and equipment acquired prior to and subsequent to the Transaction Date are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from approximately 3 to 25 years, except for the Companys distribution center in Dixon, California, which has a useful life of 39 years. Leasehold improvements, which include an allocation of directly-related internal payroll costs for employees dedicated to real estate construction projects, are amortized over the lesser of the applicable lease term, which ranges from 5 to 13 years, or the estimated useful life of the improvements. Software costs are amortized using the straight-line method based on an estimated useful life of three to seven years. Construction in progress was $3.7 million and $6.4 million as of January 29, 2011 and January 30, 2010, respectively. Repair and maintenance costs are expensed as incurred.
Deferred Financing Costs
As a result of the Transaction, the Company recorded approximately $63.3 million of deferred financing costs related to the financing transactions described in Notes 5 and 6. Deferred financing costs allocated to the Term Loan and Notes are amortized over the term of the related financing agreements using the effective interest method. Deferred financing costs allocated to the asset-based revolving credit facility are amortized on a straight-line basis. The weighted-average amortization period is approximately 7.3 years. Amortization of deferred financing costs is recorded in interest expense and was approximately $1.4 million during the period from November 23, 2010 to January 29, 2011. Amortization expense for each of the next five fiscal years is estimated to be as follows: fiscal 2011$7.6 million; fiscal 2012$8.0 million; fiscal 2013$8.4 million; fiscal 2014$8.9 million; and fiscal 2015$9.1 million.
Goodwill
Goodwill represents the excess of the acquisition cost over the estimated fair value of tangible assets and other identifiable intangible assets acquired, less liabilities assumed. Goodwill is not amortized, but is tested for impairment at least annually. The impairment test compares the carrying value of the assets and liabilities associated with a reporting unit, including goodwill, with the fair value of the reporting unit. If the carrying value of the assets and liabilities exceeds the fair value of the reporting unit, the Company would calculate the implied fair value of its reporting unit goodwill as compared with the carrying value of its reporting unit goodwill to determine the appropriate impairment charge. The Company will test goodwill for impairment in November of each fiscal year. Calculating the fair value of a reporting unit and the implied fair value of reporting unit goodwill requires significant judgment. Actual results could vary significantly from these estimates and could result in material impairment charges in the future.
Intangible Assets and Liabilities
Intangible assets primarily represent trade names for each of the Companys brands, contractual customer relationships, and below market leases. Intangible liabilities represent above market leases and are included in deferred liabilities. Trade names have been assigned an indefinite life and are reviewed for impairment at least annually. The Company will test trade names for impairment in November of each fiscal year. The impairment
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test will compare the fair value of these intangible assets with their carrying amounts. Calculating the fair value of trade names requires significant judgment. Actual results could vary significantly from these estimates and could result in material impairment charges in the future. All other intangible assets and liabilities will be amortized on a straight-line basis over their estimated useful lives (see Note 4). Intangible assets and liabilities with finite lives are evaluated for impairment using a process similar to that used to evaluate other long-lived assets as described below. An impairment loss is recognized for the amount by which the carrying value exceeds fair value.
Asset Impairment
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the undiscounted future cash flows from the asset group are less than the carrying value, a loss is recognized equal to the difference between the carrying value of the asset group and its fair value. The fair value of the asset group is estimated based on discounted future cash flows using a discount rate commensurate with the risk. The asset group is determined based on the lowest level for which identifiable cash flows are available. Decisions to close a store or facility can also result in accelerated depreciation over the revised useful life. For locations to be closed that are under long-term leases, the Company records a charge for lease buyout expense or the difference between its rent and the rate at which it expects to be able to sublease the properties and related costs, as appropriate. Most closures occur upon the lease expiration. The estimate of future cash flows is based on historical experience and typically third-party advice or market data. These estimates can be affected by factors such as future store profitability, real estate demand and economic conditions that can be difficult to predict.
Asset Retirement Obligations
An asset retirement obligation represents a legal obligation associated with the retirement of a tangible long-lived asset that is incurred upon the acquisition, construction, development or normal operation of that long-lived asset. The Company recognizes asset retirement obligations in the period in which they are incurred, if a reasonable estimate of fair value can be made. The asset retirement obligation is subsequently adjusted for changes in fair value. The associated estimated asset retirement costs are capitalized in other assets and depreciated over their useful life. The Companys asset retirement obligations relate to restoration provisions in leases for retail store locations and the Companys corporate offices and are not significant.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities. The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is warranted, the Company takes into account such factors as prior earnings history, expected future earnings, carryback and carryforward periods, and tax planning strategies that could potentially enhance the likelihood of realization of a deferred tax asset. The Company is subject to periodic audits by the Internal Revenue Service and other taxing authorities. These audits may challenge certain of the Companys tax positions such as the timing and amount of deductions and allocation of taxable income to the various tax jurisdictions. Determining income tax expense for tax contingencies requires management to make assumptions that are subject to factors such as proposed assessments by tax authorities, changes in facts and circumstances, issuance of new regulations, and resolution of tax audits. Actual results could materially differ from these estimates and could significantly affect the effective tax rate and cash flows in future years.
Rent Expense
Many of the Companys operating leases contain free rent periods and predetermined fixed increases of the minimum rental rate during the initial lease term. For these leases, the Company recognizes the related rental expense on a straight-line basis over the life of the lease, starting at the time the Company takes physical
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possession of the property. Certain leases provide for contingent rents that are not measurable at inception. These amounts are excluded from minimum rent and are included in the determination of rent expense when it is probable that an expense has been incurred and the amount is reasonably estimable.
Construction Allowance
As part of many lease agreements, the Company may receive construction allowances from landlords. The construction allowances are included in lease incentives and other deferred liabilities and are amortized as a reduction of rent expense on a straight-line basis over the term of the lease, starting at the time the Company takes physical possession of the property. Construction allowances of $1.0 million, $8.8 million, $8.7 million and $9.2 million were granted during the period from November 23, 2010 to January 29, 2011, the period from January 31, 2010 to November 22, 2010, fiscal 2009 and fiscal 2008, respectively.
Workers Compensation Liabilities
The Company is partially self-insured for workers compensation insurance. The Company records a liability based on claims filed and an actuarially determined amount of claims incurred, but not yet reported. This liability approximated $3.0 million and $3.6 million as of January 29, 2011 and January 30, 2010, respectively. Any actuarial projection of losses is subject to a high degree of variability due to external factors, including future inflation rates, litigation trends, legal interpretations, benefit level changes and claim settlement patterns. If the actual amount of claims filed exceeds our estimates, reserves recorded may not be sufficient and additional accruals may be required in future periods.
Foreign Currency Translation
Assets and liabilities of foreign subsidiaries are translated into United States dollars at the exchange rates effective on the balance sheet date. Revenues, costs of sales, expenses and other income are translated at average rates of exchange prevailing during the year. Translation adjustments resulting from this process are recorded as other comprehensive income within stockholders equity.
Store Pre-opening Costs
Store pre-opening costs are expensed as incurred.
Advertising
The Company capitalizes direct costs for the development, production, and circulation of direct response advertising and amortizes such costs over the expected sales realization cycle, typically four to six weeks. Deferred direct response costs, included in prepaid expenses, were $0.6 million as of January 29, 2011 and $0.7 million as of January 30, 2010.
All other advertising costs are expensed as incurred. Advertising expense, including costs related to direct mail campaigns, totaled approximately $2.7 million, $14.5 million, $16.7 million and $14.3 million in the period from November 23, 2010 to January 29, 2011, the period from January 31, 2010 to November 22, 2010, fiscal 2009 and fiscal 2008, respectively.
Revenue Recognition
Revenue is recognized at the point of sale in retail stores. Online revenue is recorded when the Company estimates merchandise is delivered to the customer. Online customers generally receive merchandise within three to six days of shipment. Shipping fees received from customers are included in net sales and the associated shipping costs are included in cost of goods sold. The Company also sells gift cards in its retail store locations,
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through its online stores and through third parties. Revenue is recognized in the period that the gift card is redeemed. The Company recognizes unredeemed gift card and merchandise credit balances when it can determine the portion of the liability for which redemption is remote (generally three years after issuance). These amounts are recorded as other income within SG&A expenses and totaled $0.4 million, $1.2 million, $1.5 million and $1.5 million in the period from November 23, 2010 to January 29, 2011, the period from January 31, 2010 to November 22, 2010, fiscal 2009 and fiscal 2008, respectively. From time to time, customers may earn Gymbucks or Rise and Shine coupons and redeem them for merchandise at a discount during the redemption period. One-half of the coupon value is earned by customers when the minimum purchase requirement is met during the earnings period, and the other half is earned when the additional purchase requirement is met during the redemption period. A liability is recorded for coupons earned, but not redeemed within an accounting period, based on expected redemption rates. Sales are presented net of a sales return reserve, which is estimated based on historical return trends. Net retail sales also include revenue from the Companys co-branded credit card (see Note 13). The Company presents taxes collected from customers and remitted to governmental authorities on a net basis (excluded from revenues).
For the Gymboree Play & Music operations, initial franchise and transfer fees for all sites sold in a territory are recognized as revenue when the franchisee has paid the initial franchise or transfer fee, in the form of cash and/or a note payable, the franchisee has fully executed a franchise agreement and the Company has substantially completed its obligations under such agreement. The Company receives royalties based on each franchisees gross receipts from operations. Such royalty fees are recorded when earned. The Company also recognizes revenues from consumer products and equipment sold to franchisees at the time title transfers to the franchisees.
A summary of activities in the sales return reserve is as follows (in thousands):
Successor | Predecessor | |||||||||||||||||||
November 23, 2010 to January 29, 2011 |
January 31, 2010 to November 22, 2010 |
Fiscal 2009 | Fiscal 2008 | |||||||||||||||||
Balance at beginning of period |
$ | 4,763 | $ | 2,608 | $ | 3,202 | $ | 1,746 | ||||||||||||
Provision for sales returns |
6,015 | 25,867 | 29,712 | 29,455 | ||||||||||||||||
Actual sales returns |
(8,554 | ) | (23,712 | ) | (30,306 | ) | (27,999 | ) | ||||||||||||
Balance at end of period |
$ | 2,224 | $ | 4,763 | $ | 2,608 | $ | 3,202 | ||||||||||||
Loyalty Program
Customers who enroll in the Gymboree Rewards program earn points with every purchase at Gymboree and Gymboree Outlet stores. Those customers who reach a cumulative purchase threshold receive a coupon that can be used towards the future purchase of goods at Gymboree and Gymboree Outlet stores. The Company estimates the cost of rewards that will ultimately be redeemed and records this cost in net retail sales as reward points are accumulated. This liability was approximately $1.1 million and $0.9 million at January 29, 2011 and January 30, 2010, respectively.
Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income (loss), foreign currency translation adjustments and fluctuations in the fair market value of certain derivative financial instruments and is shown in the consolidated statements of stockholders equity.
Derivative Instruments
The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship
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has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. All of the Companys derivatives are cash flow hedges. Hedge accounting for cash flow hedges generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the earnings effect of the hedged forecasted transactions. See Note 16.
Share-Based Compensation
The Company recognizes compensation expense on a straight-line basis for options and awards with time-based service conditions and on an accelerated basis for awards with performance conditions (see Note 9).
Recently Issued Accounting Standards
In January 2010, the FASB issued guidance that amends and clarifies existing guidance related to fair value measurements and disclosures. This guidance requires new disclosures for (1) transfers in and out of Level 1 and Level 2 and reasons for such transfers; and (2) the separate presentation of purchases, sales, issuances and settlement in the Level 3 reconciliation. It also clarifies guidance around disaggregation and disclosures of inputs and valuation techniques for Level 2 and Level 3 fair value measurements. The Company adopted this guidance as of January 31, 2010, except for the new disclosures in the Level 3 reconciliation, which will be adopted during the first quarter of fiscal 2011. The adoption of this guidance did not have and is not expected to have a material impact on the Companys consolidated financial statements.
Subsequent Events
The Company has evaluated subsequent events through April 28, 2011, the date on which the consolidated financial statements were available to be issued.
2. | Acquisitions |
As described in Note 1, on November 23, 2010, affiliates of Bain, consummated the acquisition of the Company, whereby the Company became a 100%-owned indirect subsidiary of Giraffe Holding, Inc. (a Delaware corporation). The Transaction was funded as follows on the Transaction Date (in thousands):
Term Loan |
$ | 815,900 | ||
ABL |
30,000 | |||
Notes |
400,000 | |||
Cash equity contributions |
508,000 | |||
Cash from Companys balance sheet |
164,917 | |||
$ | 1,918,817 | |||
The terms of the Term Loan, ABL and Notes are described in detail in Notes 5 and 6. The funds in the table above were used as follows (in thousands):
Consideration paid to equity holders |
$ | 1,829,660 | ||
Transaction costs |
89,157 | |||
$ | 1,918,817 | |||
Equity holders received $65.40 per share of Company common stock owned on November 23, 2010. Option holders received $65.40 per option held as of November 23, 2010, less the option exercise price. Transaction costs include legal and accounting fees and other external costs directly related to the Transaction and to the
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issuance of debt. Approximately $74.4 million in transaction costs were incurred in the period from November 23, 2010 to January 29, 2011, and $17.9 million were incurred in the period from January 31, 2010 to November 22, 2010. Approximately $63.3 million of these costs were determined to be related to the issuance of debt and were deferred (see Note 1).
The acquisition of the Company was accounted for as a business combination. The purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the Transaction Date. The excess of the purchase price over the net tangible and identifiable intangible assets acquired less liabilities assumed was recorded as goodwill. Goodwill was assigned to the Companys retail segment (see Note 12). None of the goodwill recognized is expected to be deductible for income tax purposes.
The following table summarizes the allocation of the purchase price to assets acquired and liabilities assumed at the Transaction Date (in thousands):
Inventory |
$ | 232,839 | ||
Other current assets |
222,094 | |||
Property and equipment |
218,179 | |||
Goodwill |
934,639 | |||
Trade names |
560,100 | |||
Franchise agreements |
1,900 | |||
Below market leases |
7,049 | |||
Customer relationships |
36,400 | |||
Co-branded credit card agreement |
4,000 | |||
Other long-term assets |
4,515 | |||
Gift card and merchandise credit liability |
(15,981 | ) | ||
Current deferred income tax liability |
(8,983 | ) | ||
Other current liabilities |
(122,532 | ) | ||
Above market leases |
(16,623 | ) | ||
Long-term deferred income tax liability |
(220,021 | ) | ||
Other long-term liabilities |
(7,915 | ) | ||
Total purchase price |
$ | 1,829,660 | ||
InventoryThe Company determined the fair value of inventory as of the Transaction Date using the cost approach. Under this approach, the fair value of an asset is determined by adjusting the assets reproduction or replacement cost by losses in value attributable to physical and functional depreciation, and economic obsolescence. As a result of its valuation, the Company recorded an increase in inventory of approximately $56.2 million as of November 23, 2010. This adjustment is estimated to have a weighted-average remaining useful life of 3 months, based on the Companys inventory turns.
Property and equipmentThe Company determined the fair value of property and equipment as of the Transaction Date using the cost approach. As a result of its valuation, the Company recorded an increase in property and equipment of approximately $1.9 and a decrease in land of approximately $0.8 million as of November 23, 2010. The increase in property and equipment is amortized over the remaining useful lives of the related assets, which approximates 25 years.
Trade namesThe Company determined the fair value of its trade names to be approximately $560.1 million as of the Transaction Date using the relief from royalty method of the income approach, which is based on the projected cost savings attributable to the ownership of the trade names. The Company assigned indefinite lives to its trade names because these assets are expected to generate cash flows indefinitely.
Franchise agreementsThe Company determined the fair value of its franchise agreements to be approximately $1.9 million as of the Transaction Date using the multi-period excess earnings (MPEE) method of the income approach. Under the MPEE method, the value of an intangible asset is equal to the present value of
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the incremental after-tax cash flows attributable only to the subject intangible asset after deducting contributory asset charges. The Company assigned the franchise agreements intangible asset a useful life of 14 years based on the average life of a franchise relationship.
Below and above market leasesThe intangible asset and liability recorded were determined as the difference between market rent and the contract rent for the remainder of the lease term, discounted back to a net present value. The below market lease asset of approximately $7.0 million and above market lease liability of approximately $16.6 million are amortized over the remaining term of the related leases.
Customer relationshipsThe Company determined the fair value of its contractual customer relationships to be approximately $36.4 million as of the Transaction Date using the MPEE method. The Company concluded that it has contractual customer relationships with customers that enrolled in the Gymboree Rewards program. The customer relationship intangible asset is amortized over 2.3 years, which is estimated to be the average length of a customer relationship based on customer attrition data.
Co-branded credit card agreementThe Company determined the fair value of its co-branded credit card agreement (see Note 13) to be approximately $4.0 million as of the Transaction Date using the MPEE method. This intangible asset is amortized over 6.5 years, which is the estimated remaining contract term.
Gift card and merchandise credit liabilityThe Company determined the fair value of its gift card and merchandise credit liability as of the Transaction Date using the discounted cash flow method of the income approach, whereby expected cash flows are directly assigned to the asset and discounted with an appropriate discount rate. As a result of its valuation, the Company reduced its gift card and merchandise credit liability by approximately $1.6 million. This adjustment is amortized over three years, which is the estimated life of a gift card or merchandise credit based on historical redemption trends.
Deferred revenueAs of the Transaction Date, the Company had deferred revenue of approximately $13.7 million related to its co-branded credit card agreement. These amounts were assigned a fair value of zero in purchase accounting because they do not represent a performance obligation as of the Transaction Date.
Deferred rent and lease incentivesAs of the Transaction Date, the Company had deferred rent and lease incentives of approximately $65.2 million. These amounts were assigned a fair value of zero in purchase accounting because they do not represent a performance obligation as of the Transaction Date.
Deferred income taxesBecause the purchase price allocated to assets acquired and liabilities assumed differs for financial reporting and tax purposes, the Company has recognized deferred tax assets or liabilities for the deferred tax effects of those temporary differences. As a result, the Company has recognized net deferred tax liabilities of $229.0 million on the Transaction Date.
The following table reflects supplemental pro-forma net sales and net income for the periods presented as though the Transaction had taken place on February 1, 2009 (in thousands):
Year Ended | ||||||||
January 29, 2011 |
January 30, 2010 |
|||||||
Supplemental pro-forma net sales |
$ | 1,069,299 | $ | 1,008,608 | ||||
Supplemental pro-forma net income |
$ | 32,586 | $ | 28,622 |
3. | Commitments and Contingencies |
Commitments
The Company leases its retail store locations, corporate headquarters, and certain fixtures and equipment under operating leases. The leases expire at various dates through fiscal 2021. Store leases typically have 10-year terms and include a cancellation clause if minimum revenue levels are not achieved during a specified 12-month
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period during the lease term. Some leases are structured with a minimum rent component plus a percentage rent based on the stores net sales in excess of a certain threshold. Substantially all of the leases require the Company to pay insurance, utilities, real estate taxes, and common area repair and maintenance expenses.
Future minimum rental payments under non-cancelable operating leases as of January 29, 2011 are as follows (in thousands):
Fiscal |
||||
2011 |
$ | 83,484 | ||
2012 |
79,618 | |||
2013 |
73,234 | |||
2014 |
68,059 | |||
2015 |
62,244 | |||
Later years |
161,672 | |||
Total |
$ | 528,311 | ||
Rent expense for all operating leases totaled $24.6 million, $99.7 million, $112.8 million and $101.3 million in the period from November 23, 2010 to January 29, 2011, the period from January 31, 2010 to November 22, 2010, fiscal 2009 and fiscal 2008, respectively, and includes common area maintenance expenses, real estate taxes, utilities, percentage rent expense and other lease required expenses of $8.2 million, $35.1 million, $40.4 million and $35.8 million in the period from November 23, 2010 to January 29, 2011, the period from January 31, 2010 to November 22, 2010, fiscal 2009 and fiscal 2008, respectively. Percentage rent expense was approximately $0.1 million, $0.5 million, $0.5 million and $0.8 million in the period from November 23, 2010 to January 29, 2011, the period from January 31, 2010 to November 22, 2010, fiscal 2009 and fiscal 2008 respectively. Rent expense for the period from November 23, 2010 to January 29, 2011 includes approximately $0.4 million in income related to amortization of below and above market leases.
Contingencies
Between October 12 and October 18, 2010, three purported class action complaints were filed in the Superior Court of the State of California, County of San Francisco, captioned Halliday v. The Gymboree Corporation, et al., Case No. CGC-10-504544, Himmel v. Gymboree Corp., et al., Case No. CGC-10-504550, and Harris v. The Gymboree Corporation, et al., Case No. CGC-10-504693. The complaints challenged the proposed transaction pursuant to which Bain commenced a tender offer for the outstanding shares of the Company, which was followed by a merger of a subsidiary of Bain with and into the Company as described in Notes 1 and 2. The various complaints name as defendants the Company, the Companys Board of Directors, the Companys Chief Financial Officer (collectively, the Individual Defendants), Bain and the two subsidiaries of Bain created to consummate the Merger (collectively, the Bain Defendants). The suits alleged generally that the Individual Defendants breached their fiduciary duties in connection with the Transaction and that the Company and the Bain Defendants aided and abetted those alleged breaches. The complaints sought, among other things, to (1) enjoin the Transaction unless and until the Company adopts and implements a procedure to obtain the highest possible value for shareholders, and (2) rescind the merger agreement between Bain and the Company.
While the Company believes that each of the aforementioned complaints is without merit and that it and the other defendants named therein (collectively with the Company, the Defendants) have valid defenses to all claims, in an effort to minimize the burden and expense of further litigation relating to such complaints, on November 12, 2010, the Defendants reached an agreement in principle with the plaintiffs in these actions (collectively, the Plaintiffs) to settle the litigation in its entirety and resolve all allegations by the Plaintiffs against the Defendants in connection with the Transaction. The estimated settlement amount is approximately $0.8 million and is included in accrued liabilities as of January 29, 2011. The settlement, which is subject to further definitive documentation and court approval, provides for a settlement and release by the purported class
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of the Companys stockholders of all claims against the Defendants in connection with the Transaction. In exchange for such settlement and release, and after arms length discussions between and among the Defendants and the Plaintiffs, the Company provided certain additional supplemental disclosures to its Schedule 14D-9, although the Company did not make any admission that such additional supplemental disclosures were material or otherwise required. After reaching agreement on the substantive terms of the settlement, the parties agreed that Plaintiffs may apply to the court for an award of attorneys fees and reimbursement of expenses, which, under certain circumstances, Defendants have agreed not to oppose. In the event the settlement is not approved by the court or the conditions to settlement are not satisfied, the Defendants will continue to vigorously defend against these actions.
The Company is also subject to various legal proceedings and claims arising in the ordinary course of business. Management does not expect that the results in any of these legal proceedings, either individually or in the aggregate, will have a material adverse effect on the Companys financial position, results of operations or cash flows.
4. | Intangible Assets and Liabilities |
Intangible assets and liabilities consist of the following (in thousands):
January 29, 2011 | ||||||||||||
Gross Carrying Amount |
Accumulated Amortization |
Net Amount |
||||||||||
Intangible Assets Not Subject to Amortization: |
||||||||||||
Trade Names |
$ | 560,127 | $ | | $ | 560,127 | ||||||
Intangible Assets Subject to Amortization: |
||||||||||||
Customer relationships |
36,400 | (2,874 | ) | 33,526 | ||||||||
Below market leases |
7,049 | (255 | ) | 6,794 | ||||||||
Co-branded credit card agreement |
4,000 | (112 | ) | 3,888 | ||||||||
Franchise agreements |
1,900 | (25 | ) | 1,875 | ||||||||
49,349 | (3,266 | ) | 46,083 | |||||||||
Total intangible assets |
$ | 609,476 | $ | (3,266 | ) | $ | 606,210 | |||||
Intangible Liabilities Subject to Amortization: |
||||||||||||
Above market leases (included in Lease Incentives and Other Deferred Liabilities) |
$ | (16,623 | ) | $ | 642 | $ | (15,981 | ) | ||||
The Company had intangible assets of approximately $2.4 million prior to the Transaction Date, which were assigned a fair value of zero in purchase accounting. The Company had goodwill of approximately $0.2 million prior to the Transaction Date, which was assigned a fair value of zero in purchase accounting.
The Company assigned the following useful lives to its intangible assets:
Useful Life | Location of Amortization Expense |
|||||
Trade Names |
Indefinite | | ||||
Customer relationships |
2.3 years | SG&A | ||||
Below market leases |
Remaining lease term | COGS | ||||
Co-branded credit card agreement |
6.5 years | SG&A | ||||
Franchise agreements |
14 years | SG&A | ||||
Above market leases |
Remaining lease term | COGS |
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During the period from November 23, 2010 to January 29, 2011, the Company recorded amortization income of approximately $0.4 million in COGS and amortization expense of approximately $3.0 million in SG&A. The Company estimates that amortization expense (income) related to intangible assets and liabilities will be as follows in each of the next five fiscal years (in thousands):
Fiscal |
Below
Market Leases |
Above
Market Leases |
Other Intangibles |
Total | ||||||||||||
2011 |
$ | 1,376 | $ | (3,426 | ) | $ | 16,577 | $ | 14,527 | |||||||
2012 |
1,376 | (3,271 | ) | 16,577 | 14,682 | |||||||||||
2013 |
1,162 | (2,669 | ) | 2,626 | 1,119 | |||||||||||
2014 |
1,066 | (2,071 | ) | 751 | (254 | ) | ||||||||||
2015 |
843 | (1,612 | ) | 751 | (18 | ) |
The Companys policy is to capitalize the legal costs incurred in registering and renewing trademarks and service marks.
5. | Line of Credit |
Predecessor Company
The Company had an unsecured revolving credit facility for borrowings of up to $90 million (subject to an option to increase the borrowing limit up to $100 million with the approval of the lender). This credit facility could be used for the issuance of documentary and standby letters of credit, working capital, and capital expenditure needs. This credit facility was terminated in connection with the Transaction.
Successor Company
In connection with the Transaction, the Company entered into a senior secured asset-based revolving credit facility (ABL) which provides senior secured financing of up to $225 million, subject to a borrowing base. Availability under the ABL is subject to the assets of the Company, any co-borrowers and any subsidiary guarantors (see Note 19) and is reduced by the level of outstanding letters of credit. As of January 29, 2011, availability under the ABL Facility was approximately $148.4 million. The ABL provides the Company with the right to request up to $75 million of additional commitments under this facility, provided that the aggregate amount of additional commitments incurred under both the ABL and the senior secured term loan facility described in Note 6 may not exceed $200 million in the aggregate. Borrowings under the ABL bear interest at a rate per annum equal to, at the Companys option, either (a) a base rate determined by reference to the highest of (1) the prime rate of Bank of America, N.A., (2) the federal funds effective rate plus 0.50% and (3) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for an interest period of one month adjusted for certain additional costs, plus 1.00% or (b) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs (Adjusted LIBOR), in each case plus an applicable margin. In addition to paying interest on outstanding principal under the ABL, the Company is required to pay a commitment fee on unutilized commitments thereunder, which is initially 0.625% per annum. If at any time the aggregate amount of outstanding loans, unreimbursed letter of credit drawings and undrawn letters of credit under the ABL exceeds the lesser of (a) the commitment amount and (b) the borrowing base, the Company will be required to repay outstanding loans and/or cash collateralize letters of credit in an aggregate amount equal to such excess, with no reduction of the commitment amount. Principal amounts outstanding under the ABL are due and payable in full in November 2015. The ABL contains financial and other covenants that, among other things, restrict the Companys ability to incur additional indebtedness and pay dividends. As of January 29, 2011, the Company is in compliance with these covenants. At the date of the Transaction, the Company borrowed $30 million under this facility. As of January 29, 2011, there were no borrowings outstanding and $76.6 million of commercial and standby letters of credit were outstanding. The obligations under the ABL are secured, subject to certain exceptions, by substantially all of the Companys assets. The Company and its 100%-owned domestic subsidiaries have fully and unconditionally guaranteed the Companys obligations under the ABL (see Note 19).
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6. | Long-Term Debt |
Long-term debt consists of (in thousands):
January 29, 2011 |
||||
Senior secured term loan facility, net of discount of $4,010 |
$ | 815,991 | ||
9.125% senior subordinated notes |
400,000 | |||
Subtotal |
1,215,991 | |||
Less current portion |
(8,200 | ) | ||
Long-term debtless current portion |
$ | 1,207,791 | ||
In connection with the Transaction, the Company entered into agreements with several lenders to establish an $820 million senior secured term loan facility (Term Loan). At the date of the Transaction, the Company borrowed $820 million under this facility. The Term Loan allows the Company to request additional tranches of term loans in an aggregate amount not to exceed $200 million, provided that such amount will be subject to reduction by the amount of any additional commitments incurred under the ABL described in Note 5. The interest rate for borrowings under the Term Loan will be, at the option of the Company, a base rate plus an additional marginal rate of 3.0% or the Adjusted LIBOR rate (with a 1.5% floor) plus an additional rate of 4.0%. At January 29, 2011, the interest rate related to the Term Loan was 5.5%. The Term Loan has mandatory and voluntary pre-payment provisions beginning in fiscal 2012. The mandatory pre-payment provisions depend on the Companys excess cash flow as defined in the Term Loan agreement. The Term Loan requires the Company to make quarterly payments beginning in March 2011, each equal to 0.25% of the original principal amount of the Term Loan made on the closing date plus accrued interest, with the balance due in November 2017. The Term Loan contains financial covenants and other covenants that, among other things, restrict the Companys ability to incur additional indebtedness and pay dividends. As of January 29, 2011, the Company is in compliance with these covenants. The Term Loan is presented net of the related original issue discount (OID), which was $4.1 million on the Transaction closing date. Accretion of OID is included in interest expense and approximated $91,000 in the period from November 23, 2010 to January 29, 2011. Accretion of OID for each of the next five fiscal years is estimated to be as follows: fiscal 2011$0.5 million; fiscal 2012$0.5 million; fiscal 2013$0.6 million; fiscal 2014$0.6 million; and fiscal 2015$0.6 million. The obligations under the Term Loan are secured, subject to certain exceptions, by substantially all of the Companys assets. The Company and its 100%-owned domestic subsidiaries have fully and unconditionally guaranteed the Companys obligations under the Term Loan (see Note 19). In February 2011, the Company refinanced the Term Loan to lower the interest rate 50 basis points and remove select financial covenants. The Company estimates that it will record a loss of approximately $20 million as a result of the refinancing in the first quarter of fiscal 2011.
In connection with the Transaction, the Company issued $400 million aggregate principal amount of 9.125% senior subordinated notes (the Notes) due in December 2018. Interest is payable semi-annually beginning June 1, 2011. The Company may be required to redeem some or all of the Notes on or prior to December 1, 2014 at a redemption price equal to 100% of the principal amount of the Notes redeemed plus accrued and unpaid interest. Upon a change in control, the Company may also be required to make an offer to purchase all of the Notes at a redemption price equal to 101% of the principal amount of the Notes redeemed plus accrued and unpaid interest. The Notes also contain optional redemption provisions. The Notes are unsecured senior obligations of the Company. The Company and its 100%-owned domestic subsidiaries have fully and unconditionally guaranteed the Companys obligations under the Notes (see Note 19).
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Interest expense was $17.4 million during the period from November 23, 2010 to January 29, 2011, including $1.4 million in amortization of deferred financing costs and accretion of OID. Scheduled future minimum principal payments on long-term debt as of January 29, 2011 are as follows (in thousands):
Fiscal |
||||
2011 |
$ | 8,200 | ||
2012 |
8,200 | |||
2013 |
8,200 | |||
2014 |
8,200 | |||
2015 |
8,200 | |||
Thereafter |
1,179,000 | |||
Total |
$ | 1,220,000 | ||
7. | Accrued Liabilities |
Accrued liabilities consist of the following (in thousands):
Successor | Predecessor | |||||||||||
January 29, 2011 |
January 30, 2010 |
|||||||||||
Store operating expenses and other corporate expenses |
$ | 27,381 | $ | 24,906 | ||||||||
Accrued interest |
12,226 | | ||||||||||
Employee compensation |
14,749 | 17,346 | ||||||||||
Gift card liabilities and merchandise credits |
17,903 | 18,237 | ||||||||||
Customer deposits |
4,733 | | ||||||||||
Deferred revenue primarily related to Gymboree Visa program (see Note 13) |
| 6,446 | ||||||||||
Sales taxes |
4,108 | 2,360 | ||||||||||
Total |
$ | 81,100 | $ | 69,295 | ||||||||
8. | Income Taxes |
The provision (benefit) for income taxes consists of the following (in thousands):
Successor | Predecessor | |||||||||||||||||||
November 23, 2010 to January 29, 2011 |
January 31, 2010 to November 22, 2010 |
Year Ended January 30, 2010 |
Year Ended January 31, 2009 |
|||||||||||||||||
Current: |
||||||||||||||||||||
Federal |
$ | 45 | $ | 25,853 | $ | 51,750 | $ | 50,836 | ||||||||||||
State |
364 | 4,070 | 8,833 | 7,620 | ||||||||||||||||
Foreign |
805 | 2,398 | (496 | ) | 1,735 | |||||||||||||||
Total current |
1,214 | 32,321 | 60,087 | 60,191 | ||||||||||||||||
Deferred: |
||||||||||||||||||||
Federal |
(9,335 | ) | 3,583 | 1,140 | (3,001 | ) | ||||||||||||||
State |
(1,923 | ) | 248 | 538 | 224 | |||||||||||||||
Foreign |
12 | 297 | 1,049 | (1,255 | ) | |||||||||||||||
Total deferred |
(11,246 | ) | 4,128 | 2,727 | (4,032 | ) | ||||||||||||||
Total provision (benefit) |
$ | (10,032 | ) | $ | 36,449 | $ | 62,814 | $ | 56,159 | |||||||||||
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A reconciliation of the statutory federal income tax rate with the Companys effective income tax rate is as follows:
Successor | Predecessor | |||||||||||||||||||
November 23, 2010 to January 29, 2011 |
January 31, 2010 to November 22, 2010 |
Year Ended January 30, 2010 |
Year Ended January 31, 2009 |
|||||||||||||||||
Statutory federal rate |
35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||||||
State income taxes, net of income tax benefit |
3.2 | 2.9 | 3.7 | 3.7 | ||||||||||||||||
Non-deductible Transaction costs |
(5.9 | ) | 2.6 | | | |||||||||||||||
Increase (decrease) in valuation allowances |
| | (0.2 | ) | 0.7 | |||||||||||||||
Other |
(2.0 | ) | 0.9 | (0.4 | ) | (1.9 | ) | |||||||||||||
Effective tax rate |
30.3 | % | 41.4 | % | 38.1 | % | 37.5 | % | ||||||||||||
The amount of pre-tax income attributable to foreign operations for the period from November 23, 2010 to January 29, 2011, the period from January 31, 2010 to November 22, 2010, fiscal 2009 and fiscal 2008 was $0.7 million, $2.7 million, $2.7 million and $6.9 million, respectively.
Temporary differences and carryforwards, which give rise to deferred tax assets and liabilities, are as follows (in thousands):
Successor | Predecessor | |||||||||||
January 29, 2011 |
January 30, 2010 |
|||||||||||
Deferred tax assets: |
||||||||||||
Inventory valuation |
$ | 1,809 | $ | 4,326 | ||||||||
Deferred revenue |
2,546 | 13,047 | ||||||||||
Reserves |
4,710 | 6,601 | ||||||||||
Stock compensation |
185 | 10,782 | ||||||||||
Deferred rent |
4,231 | 7,888 | ||||||||||
Net operating loss carryforwards |
24,577 | 545 | ||||||||||
Foreign tax credits |
1,723 | 901 | ||||||||||
Other |
1,019 | 821 | ||||||||||
40,800 | 44,911 | |||||||||||
Deferred tax liabilities: |
||||||||||||
Prepaid expenses |
(1,614 | ) | (1,846 | ) | ||||||||
State taxes |
(3,015 | ) | (2,446 | ) | ||||||||
Fixed asset basis differences |
(30,523 | ) | (7,838 | ) | ||||||||
Intangibles |
(222,204 | ) | | |||||||||
(257,356 | ) | (12,130 | ) | |||||||||
Total |
(216,556 | ) | 32,781 | |||||||||
Valuation allowance |
(1,345 | ) | (901 | ) | ||||||||
Net deferred tax assets (liabilities) |
$ | (217,901 | ) | $ | 31,880 | |||||||
As of January 29, 2011, the Company has federal net operating loss carryforwards of approximately $62.2 million for tax purposes. These net operating loss carryforwards will expire in 2031. As of January 29, 2011, the Company has state net operating loss carryforwards of approximately $39.4 million for tax purposes. These net operating loss carryforwards will expire between 2011 and 2025. As of January 29, 2011, the Company has foreign tax credit carryforwards of approximately $1.7 million. These credit carryforwards will expire between 2016 and 2020. Using its best estimates, the Company has recorded a valuation allowance of $1.3 million and
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$0.9 million as of January 29, 2011 and January 30, 2010, respectively, on its deferred tax assets for foreign tax credits as it is more likely than not that they will not be realized. The utilization of net operating losses and foreign tax credits may be subject to a substantial annual limitation due to any future changes in ownership as defined by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. Should the Company become subject to this annual limitation, the net operating loss and foreign tax credit carryforwards may expire before utilization.
The Company had unrecognized tax benefits of $7.3 million, $6.4 million and $6.7 million as of January 29, 2011, January 30, 2010 and January 31, 2009, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits follows (in thousands):
Successor | Predecessor | |||||||||||||||||||
November 23, 2010 to January 29, 2011 |
January 31, 2010 to November 22, 2010 |
Year Ended January 30, 2010 |
Year Ended January 31, 2009 |
|||||||||||||||||
Balance at beginning of period |
$ | 6,976 | $ | 6,439 | $ | 6,667 | 6,874 | |||||||||||||
Gross increasestax positions in current period |
356 | 793 | 766 | 1,404 | ||||||||||||||||
Gross increasestax positions in prior period |
| 2,111 | 771 | 813 | ||||||||||||||||
Gross decreasestax positions in prior period |
| (161 | ) | (970 | ) | (937 | ) | |||||||||||||
Settlements |
| (1,086 | ) | (1,014 | ) | (904 | ) | |||||||||||||
Lapsed statutes of limitations |
(73 | ) | (1,227 | ) | | (228 | ) | |||||||||||||
Increases (decreases) based on currency translation adjustments |
65 | 107 | 219 | (355 | ) | |||||||||||||||
Balance at end of period |
$ | 7,324 | $ | 6,976 | $ | 6,439 | $ | 6,667 | ||||||||||||
At January 29, 2011, January 30, 2010 and January 31, 2009, $7.1 million, $5.3 million and $4.6 million, respectively, of unrecognized tax benefits would affect the effective tax rate if recognized. Additionally, at January 29, 2011, January 30, 2010 and January 31, 2009, $1.3 million, $1.1 million and $2.1 million, respectively, of unrecognized tax benefits would result in adjustments to other tax accounts, primarily deferred taxes, if recognized.
The Company recognizes interest and penalties on income tax contingencies in income tax expense. Income tax (benefit) expense included charges of $46,000, $298,000 and $374,000 in the period from November 23, 2010 to January 29, 2011, the period from January 31, 2010 to November 22, 2010, and fiscal 2009, respectively, and a benefit of $142,000 in fiscal 2008, related to interest expense on income taxes. Income tax expense also included charges of $19,000, $26,000, $111,000 and $157,000 in the period from November 23, 2010 to January 29, 2011, the period from January 31, 2010 to November 22, 2010, fiscal 2009 and fiscal 2008, respectively, related to penalties on income taxes. As of January 29, 2011, the Company had a liability for interest on income taxes of $1.6 million and a liability for penalties on income taxes of $764,000. As of January 30, 2010, the Company had a liability for interest on income taxes of $1.4 million and a liability for penalties on income taxes of $719,000.
The Company does not anticipate that total unrecognized tax benefits will significantly change within the next 12 months.
The Company and its domestic subsidiaries file income tax returns with federal, state and local tax authorities within the United States. The Companys foreign affiliates file income tax returns in various foreign jurisdictions, the most significant of which is Canada. With few exceptions, the Company is no longer subject to United States federal, state, or local examinations by tax authorities for tax years before 2007 and is no longer subject to foreign examinations by tax authorities for tax years before 2003.
F-23
9. | Stockholders Equity |
Equity Incentive PlanSuccessor
Holding maintains the Giraffe Holding, Inc. 2010 Equity Incentive Plan (the 2010 Plan) under which non-qualified stock options and other equity-based awards may be granted to eligible employees and directors of, and consultants and advisors to, Holding and its subsidiaries. A maximum of 11,622,231 shares of Holdings Class A common stock (Class A common stock) and 1,291,359 shares of Holdings Class L common stock (Class L common stock) may be delivered in satisfaction of awards granted under the Plan. As of January 29, 2011, there were 2,101,131 shares of Class A common stock and 233,459 shares of Class L common stock available for the grant of future awards under the Plan. Shares of stock delivered under the Plan may be authorized but unissued shares of stock or previously issued shares of stock acquired by Holding.
Class L common stock is a combination of preferred stock and common stock. Each share of Class L common stock, whenever issued, has a liquidation preference that initially equals $36.00 and will grow at a rate equal to fifteen percent (15%) per year, compounded quarterly. Each share of Class L common stock also includes all of the economic rights included in one share of Class A common stock.
Class A common stock behaves like standard common stock. Class A common stock does not have a specified liquidation preference like the Class L common stock described above. The shares of Class A common stock will participate in all future appreciation of the value of Holding after the Class L common stock liquidation preference has been satisfied. The holders of Class A common stock and Class L common stock generally vote as a single class.
Upon liquidation, after the payment of all required distributions to the holders of Class L common stock, the holders of all of the common shares (both Class A and Class L) will receive all remaining distributions ratably as a single class. The Class A and Class L common stock will share ratably in any non-liquidating distributions. Class L common stock will convert into Class A common stock if Holding is taken public in the future. Upon a change in control, Bain and its affiliated investors may vote to convert the Class L common stock into Class A common stock.
Stock Options (Successor)
The following table summarizes stock option activity during the period from November 23, 2010 to January 29, 2011:
Number of shares (in thousands) |
Weighted-average exercise price per share |
Weighted-average remaining contractual life (in years) |
Aggregate intrinsic value (in thousands) |
|||||||||||||
Successor |
||||||||||||||||
Outstanding at November 22, 2010 |
| $ | | |||||||||||||
Granted |
1,058 | 45.00 | ||||||||||||||
Forfeited |
(6 | ) | 45.00 | |||||||||||||
Outstanding at January 29, 2011 |
1,052 | $ | 45.00 | 9.9 | $ | | ||||||||||
Vested and expected to vest at January 29, 2011 (1) |
827 | $ | 45.00 | 9.9 | $ | | ||||||||||
Exercisable at January 29, 2011 |
| $ | | | $ | | ||||||||||
(1) | The expected to vest options are the result of applying the pre-vesting forfeiture rate assumptions to total unvested options outstanding. |
Holding granted stock options to employees of the Company during the period from November 23, 2010 to January 29, 2011. These options allow each grantee to purchase units of shares of Holdings Class A and Holdings Class L common stock. Each unit consists of nine shares of Holdings Class A and one share of Holdings Class L
F-24
common stock. Options granted pursuant to the 2010 Plan (successor) were granted with an exercise price equal to the fair value of a unit. The fair value of a unit was determined to be $45 by the Company using the Option Pricing Method, which considers the various equity securities as call options on the total equity value, giving consideration to the rights and preferences of each class of equity. The various classes of equity are modeled as call options that give their owners the right, but not the obligation, to buy the underlying equity value at a predetermined (or exercise) price. The exercise price of all options granted during the period from November 23, 2010 to January 29, 2011, was $45. The options each have a term of ten years and vest over a five-year period based only on time-based service conditions. There were no exercisable stock options as of January 29, 2011.
The fair value of options granted under the 2010 Plan was estimated to be $29.57 per unit on the date of grant using the Black-Scholes option valuation model. For purposes of this model, no dividends have been assumed. Expected stock price volatility was determined based on the historical and implied volatilities of comparable companies and based on each of the guideline companys longest term traded options, where available. The risk-free interest rate was based on United States Treasury yields in effect at the time of the grant for notes with comparable terms as the awards. The expected term of options granted was based on the simplified method described in ASC 718-10-S99-1. Assumptions used in the Black-Scholes valuation model are presented below:
Successor | ||||
November 23, 2010
to January 29, 2011 |
||||
Expected dividend rate |
0.0% | |||
Expected volatility |
70.0% | |||
Risk-free interest rate |
2.5% | |||
Expected lives (years) |
6.50 |
As of January 29, 2011, there was approximately $24.0 million of unrecognized compensation cost, which is expected to be recognized over a weighted-average period of 4.9 years.
Application of alternative assumptions could produce significantly different estimates of the fair value of share-based compensation and consequently, significantly affect the related amounts recognized in the consolidated statements of operations.
Equity Incentive PlanPredecessor
Prior to the consummation of the Transaction, the Companys 2004 Equity Incentive Plan (the 2004 Plan), provided for grants to employees of incentive stock options within the meaning of Section 422 of the Internal Revenue Code, for grants of non-statutory stock options to employees, consultants and non-employee directors of the Company, and for grants of other types of equity incentive compensation, such as restricted stock and restricted stock units. Options granted pursuant to the 2004 Plan were granted at exercise prices equal to the closing price of the Companys common stock on the date of grant.
The following table summarizes stock option activity during the period from January 30, 2010 to November 22, 2010:
Number of shares (in thousands) |
Weighted-average exercise price per share |
|||||||
Predecessor |
||||||||
Outstanding at January 30, 2010 |
339 | $ | 13.67 | |||||
Exercised |
(101 | ) | 13.75 | |||||
Expired |
(2 | ) | 11.33 | |||||
Options exercised and settled in connection with the Transaction |
(236 | ) | 13.65 | |||||
Outstanding at November 22, 2010 |
| $ | | |||||
F-25
The total intrinsic value of options exercised during the period from January 31, 2010 to November 22, 2010, fiscal 2009 and fiscal 2008 was $16.2 million, $13.0 million, and $16.2 million, respectively.
Restricted Stock Awards (Predecessor)
Restricted stock award activity during the period from January 30, 2010 to November 22, 2010 is summarized as follows:
Restricted Stock Awards | ||||||||
Number
of shares (in thousands) |
Weighted-average grant date fair value per share |
|||||||
Nonvested at January 30, 2010 |
993 | $ | 33.97 | |||||
Granted |
370 | 40.13 | ||||||
Vested |
(406 | ) | 32.83 | |||||
Awards vested and settled in connection with the Transaction |
(957 | ) | 36.84 | |||||
Nonvested at November 22, 2010 |
| $ | | |||||
The fair value of restricted stock awards that vested during the period from January 31, 2010 to November 22, 2010, fiscal 2009 and fiscal 2008 was $81.2 million, $9.8 million and $9.2 million, respectively. There were no restricted stock awards granted subsequent to November 22, 2010. As of January 29, 2011, there was no unrecognized compensation cost related to restricted stock awards.
Restricted Stock Units (Predecessor)
Restricted stock unit activity during the period from January 30, 2010 to November 22, 2010 is summarized as follows:
Restricted Stock Units | ||||||||
Number
of shares (in thousands) |
Weighted-average grant date fair value per share |
|||||||
Nonvested at January 30, 2010 |
407 | $ | 27.00 | |||||
Granted |
140 | 51.26 | ||||||
Vested |
(148 | ) | 29.64 | |||||
Forfeited |
(24 | ) | 33.27 | |||||
Units vested and settled in connection with the Transaction |
(375 | ) | 36.76 | |||||
Nonvested at November 22, 2010 |
| $ | | |||||
The fair value of restricted stock units that vested during the period from January 31, 2010 to November 22, 2010, fiscal 2009 and fiscal 2008 was $31.7 million, $2.5 million and $2.8 million, respectively.
There were no restricted stock units granted subsequent to November 22, 2010. As of January 29, 2011, there was no unrecognized compensation cost related to restricted stock units.
1993 Employee Stock Purchase Plan (Predecessor)
The 1993 Employee Stock Purchase Plan (the Purchase Plan) allowed employees to purchase shares of the Companys common stock at a price equal to 85% of the fair market value of the common stock on the first day of the applicable offering period or the last day of the applicable purchase period, whichever is lower. The
F-26
Purchase Plan was suspended effective January 1, 2009. Consequently, there have been no shares issued under the Purchase Plan since that date. There were 50,461 shares issued under the Purchase Plan in fiscal 2008. As of January 29, 2011, there was no unrecognized compensation cost related to the Purchase Plan.
Share-based compensation expense is included as a component of SG&A expenses and consists of the following (in thousands):
Successor | Predecessor | |||||||||||||||||||
November 23, 2010 to January 29, 2011 |
January 31, 2010 to November 22, 2010 |
Year Ended January 30, 2010 |
Year Ended January 31, 2009 |
|||||||||||||||||
Stock options |
$ | 482 | $ | | $ | 327 | $ | 1,557 | ||||||||||||
Restricted stock awards and units |
| 41,042 | 18,135 | 17,911 | ||||||||||||||||
Employee stock purchase plan |
| | | 382 | ||||||||||||||||
Total |
$ | 482 | $ | 41,042 | $ | 18,462 | $ | 19,850 | ||||||||||||
Share-based compensation expense for the period from January 31, 2010 to November 22, 2010, includes $27.7 million related to the accelerated vesting of options, restricted stock and restricted stock units awarded to management and employees that vested upon the closing of the Transaction. The Company includes an estimate forfeitures in determining share-based compensation expense. The Company recognized no income tax benefits related to share-based compensation expense for the period from November 23, 2010 to January 29, 2011. The Company recognized income tax benefits related to share-based compensation expense of approximately $24.9 million (of which $12.3 million affected stockholders equity and $12.6 million affected net income), $9.2 million (of which $2.9 million affected stockholders equity and $6.3 million affected net income) and $10.8 million (of which $6.4 million affected stockholders equity and $4.4 million affected net income) for the period from January 31, 2010 to November 22, 2010, fiscal 2009 and fiscal 2008, respectively.
For the period from November 23, 2010 to January 29, 2011, the Company reported no excess tax benefits as financing cash inflows. For the period from January 31, 2010 to November 22, 2010, fiscal 2009 and fiscal 2008, the Company reported $12.6 million, $3.8 million and $6.0 million, respectively, in excess tax benefits as financing cash inflows.
10. | 401(k) Plan |
The Company maintains a voluntary defined contribution 401(k) profit-sharing plan (the Plan) covering employees who have met certain service and eligibility requirements. Employees may elect to contribute up to 100% of their compensation to the Plan, not to exceed the dollar limit set by law. Prior to March 1, 2009, the Company contributed $1.00 to the plan for each $1.00 contributed by an employee, up to 4% of the employees salary. Matching contributions to the Plan totaled approximately $0.1 million and $2.3 million in fiscal 2009 and 2008, respectively. The matching contributions were suspended effective March 1, 2009.
11. | Related Party Transactions |
Arrangements with Investors
Simultaneously with and following the consummation of the Transaction, the Company and certain of its parent entities entered into the following equityholder agreements with those persons and entities that became equityholders of the Company or Holding after the completion of the Transaction. These equityholder agreements contain agreements among the parties with respect to election of directors, participation rights, right of first refusal upon disposition of shares, permitted transferees, registration rights and other actions requiring the approval of equityholders.
Management Agreement
On October 23, 2010, Acquisition Sub and Holding entered into a management agreement with Bain Capital, pursuant to which Bain Capital agreed to provide certain management services to Acquisition Sub and
F-27
Holding until December 31, 2020 (unless terminated earlier), with evergreen one-year extensions thereafter. The Company has assumed the obligations of Acquisition Sub under this agreement by operation of law as a result of the Transaction. Pursuant to such agreement, Bain Capital is entitled to receive an aggregate annual management fee equal to $3 million and reimbursement for out-of-pocket expenses incurred by it or its affiliates in connection with the provision of services pursuant to the agreement or otherwise related to its investment. The Company paid approximately $1.1 million in management fees during the period from November 23, 2010 to January 29, 2011. In addition, pursuant to such agreement, the Company paid Bain Capital aggregate transaction fees of approximately $17 million in connection with services it provided related to the Transaction.
The management agreement provides that Bain Capital is entitled to receive fees in connection with certain subsequent financing, acquisition, disposition and change of control transactions of 1% of the gross transaction value of any such transaction. The management agreement includes customary exculpation and indemnification provisions in favor of Bain Capital and its affiliates. The management agreement may be terminated by Bain Capital at any time and will terminate automatically upon an initial public offering or a change of control unless the Company and the counterparty to the management agreement determine otherwise. Upon termination, each provider of management services will be entitled to a termination fee calculated based on the present value of the annual fees due during the remaining period from the date of termination to December 31, 2020 or the then-applicable scheduled date for termination of the management agreement.
Stockholders Agreement
On November 23, 2010, Holding, the Company, certain investment funds sponsored by Bain Capital (collectively the Bain Funds), Giraffe Intermediate A, Inc., Giraffe Intermediate B, Inc. and certain co-investors entered into a stockholders agreement. The agreement, among other things, creates certain rights and restrictions on the shares of Holdings Common Stock held by the parties thereto, including transfer restrictions, tag-along and drag-along rights, and put and call rights.
Registration and Participation Rights Agreement
On November 23, 2010, Holding, the Company, the Bain Funds, Giraffe Intermediate A, Inc., Giraffe Intermediate B, Inc. and certain co-investors entered into a registration and participation rights agreement. Pursuant to the agreement, the Bain Funds have a right to participate in any future issuances or sales of the capital stock of Holding or any of its subsidiaries or any securities convertible into or exchangeable for any such securities, including options. The agreement also gives certain investors demand and piggyback registration rights with respect to their and certain other persons interests in Holding.
Management Subscription Agreement
On or about January 31, 2011, Holding entered into subscription agreements with certain members of the Companys management team. Under the subscription agreements, such members of the management team purchased an aggregate of 1,580,769 Class A Shares and 175,641 Class L Shares of Holding, representing 1.51% of Holdings outstanding Common Stock as of March 15, 2011. The aggregate cash consideration paid for the shares was $7.9 million.
Such members of the Companys management team also became parties to the stockholders agreement and the registration and participation rights agreement described above.
Indemnification of Directors and Officers; Directors and Officers Insurance
Under the Merger Agreement relating to the Transaction, the directors and officers of the Company and its subsidiaries who served as such prior to the consummation of the Transaction are entitled to continued indemnification and insurance coverage.
F-28
12. | Segments |
The Company has two reportable segments: retail stores and Gymboree Play & Music. These segments were identified based on differences in products and services. The retail stores segment includes four operating segments (brands) which sell high-quality apparel for children: Gymboree (including an online store), Gymboree Outlet, Janie and Jack (including an online store), and Crazy 8 (including an online store). These four operating segments have been aggregated into one reportable segment because, in the Companys judgment, these operating segments have similar historical economic characteristics and/or are expected to have similar economic characteristics and similar long-term financial performance in the future. Gross margin is the principal measure the Company considers in determining whether the economic characteristics are similar. In addition, each operating segment has similar products, production processes and type or class of customer. The Company believes that disaggregating its operating segments would not provide material additional information. Corporate overhead (costs related to the Companys distribution center and shared corporate services) is included in the retail stores segment. Other operating segments that do not meet the criteria of reportable segments are aggregated below. The Other segment primarily relates to the Companys international retail franchise business, which was launched in August 2010.
The following table provides the summary financial data of each reportable segment (in thousands):
Period from November 23, 2010 to January 29, 2011 (Successor) |
||||||||||||||||
Retail Stores |
Play & Music | Other | Total | |||||||||||||
Net sales |
$ | 244,287 | $ | 2,814 | $ | 447 | $ | 247,548 | ||||||||
Operating (loss) income |
(17,378 | ) | 1,416 | 184 | (15,778 | ) | ||||||||||
Total assets |
2,044,211 | 42,844 | 1,070 | 2,088,125 |
Period from January 31, 2010 to November 22, 2010 (Predecessor) |
||||||||||||||||
Retail Stores |
Play & Music | Other | Total | |||||||||||||
Net sales |
$ | 814,863 | $ | 10,847 | $ | 1,173 | $ | 826,883 | ||||||||
Operating income |
82,777 | 4,518 | 552 | 87,847 |
Year ended January 30, 2010 (Predecessor) | ||||||||||||
Retail Stores |
Play & Music | Total | ||||||||||
Net sales |
$ | 1,001,527 | $ | 13,384 | $ | 1,014,911 | ||||||
Operating income |
158,243 | 5,395 | 163,638 | |||||||||
Total assets |
630,979 | 5,151 | 636,130 |
Year ended January 31, 2009 (Predecessor) | ||||||||||||
Retail Stores |
Play & Music |
Total | ||||||||||
Net sales |
$ | 987,859 | $ | 12,819 | $ | 1,000,678 | ||||||
Operating income |
143,390 | 4,918 | 148,308 | |||||||||
Total assets |
516,077 | 4,504 | 520,581 |
Interest expense, depreciation and amortization expense and capital expenditures have not been separately disclosed above as the amounts primarily relate to the retail segment. There are no intersegment revenues.
F-29
The Company attributes retail store revenues to individual countries based on selling location. The following table provides the summary financial data of each geographical segment (in thousands):
Period from November 23, 2010 to January 29, 2011 (Successor) |
||||||||||||
Canada | Australia | Total International |
||||||||||
Net sales |
$ | 9,890 | $ | 364 | $ | 10,254 | ||||||
Long-lived assets |
6,061 | 665 | 6,726 |
Period from January 31, 2010 to November 22, 2010 (Predecessor) |
||||||||||||
Canada | Australia | Total International |
||||||||||
Net sales |
$ | 31,636 | $ | 737 | $ | 32,373 | ||||||
Long-lived assets |
5,771 | 734 | 6,505 |
Year ended January 30, 2010 (Predecessor) |
||||||||
Canada | Total International |
|||||||
Net sales |
$ | 39,921 | $ | 39,921 | ||||
Long-lived assets |
5,035 | 5,035 |
Year ended January 31, 2009 (Predecessor) |
||||||||
Canada | Total International |
|||||||
Net sales |
$ | 40,443 | $ | 40,443 | ||||
Long-lived assets |
2,618 | 2,618 |
13. | Co-Branded Credit Card |
The Company has co-branded credit card agreements (the Agreements) with a third-party bank (the Bank) and Visa U.S.A. Inc. for the issuance of a Visa credit card bearing the Gymboree brand and administration of an associated incentive program for cardholders. These Agreements expire in fiscal 2014. The Company recognizes revenues related to the Agreements as follows:
Successor
| New account fees are recognized as retail revenues as earned. |
| Credit card usage fees are recognized as retail revenues as actual credit card usage occurs. |
| Rewards earned are recorded as gift card liabilities and recognized as retail revenues when the gift cards are redeemed |
Predecessor
| New account fees are recognized as retail revenues on a straight-line basis over the estimated life of the credit card relationship. |
| Credit card usage fees are recognized as retail revenues as actual credit card usage occurs. |
| Minimum guaranteed annual payments received under the Companys original credit card agreement executed in fiscal 2003 that exceeded amounts earned based on the number of accounts opened and card usage are recognized as retail revenues on a straight-line basis over the estimated life of the credit card relationship. |
F-30
| Rewards earned are recorded as gift card liabilities and recognized as retail revenues when the gift cards are redeemed. |
During the period from November 23, 2010 to January 29, 2011, the period from January 31, 2010 to November 22, 2010, fiscal 2009 and fiscal 2008, the Company recognized approximately $0.3 million, $6.1 million, $7.6 million, and $9.1 million in revenue from these Agreements, respectively. These amounts are included in net retail sales in the accompanying consolidated statements of operations. As of January 30, 2010, $6.4 million in current deferred revenue was included in accrued liabilities in the accompanying consolidated balance sheets and $12.4 million in long-term deferred revenue was included in other deferred liabilities. Upon consummation of the Transaction, deferred revenue from the Agreements was adjusted to its estimated fair value of zero (see Note 2).
14. | Common Stock Repurchases |
Pursuant to authorization from the Board of Directors, the Company repurchased and retired 2,613,375 shares of Company stock at an aggregate cost of approximately $113.6 million, or approximately $43.49 per share, during the period from January 31, 2010 to November 22, 2010, 627,156 shares of Company stock at an aggregate cost of approximately $26.4 million, or approximately $42.02 per share, in fiscal 2009 and 18,000 shares of Company stock at an aggregate cost of approximately $0.7 million, or approximately $40.15 per share, in fiscal 2008.
15. | Lease Incentives and Other Deferred Liabilities |
Lease incentives and other deferred liabilities consist of the following (in thousands):
Successor | Predecessor | |||||||||||
January 29, 2011 |
January 30, 2010 |
|||||||||||
Above market leases (see Note 4) |
$ | 15,981 | $ | | ||||||||
Deferred rent |
937 | 18,991 | ||||||||||
Construction allowance |
976 | 39,074 | ||||||||||
Deferred revenue related to Gymboree Visa program (see Note 13) |
| 12,381 | ||||||||||
Other |
458 | 413 | ||||||||||
Total |
$ | 18,352 | $ | 70,859 | ||||||||
16. | Derivative Instruments |
The Company enters into forward foreign exchange contracts with respect to certain purchases in United States dollars of inventory to be sold in the Companys retail stores in Canada. The purpose of these contracts is to protect the Companys margins on the eventual sale of the inventory from fluctuations in the exchange rate for Canadian and United States dollars. The term of the forward exchange contracts is generally less than one year. These contracts are treated as cash flow hedges. Amounts reported in accumulated other comprehensive income related to the Companys forward foreign exchange contracts will be reclassified to cost of goods sold over a three-month period.
During the period from November 23, 2010 to January 29, 2011, the Company entered into four purchased interest rate caps to hedge against rising interest rates associated with the Companys Term Loan (see Note 6) above the strike of the cap through December 23, 2016, the maturity date of the caps. All four caps were designated on the date of execution as cash flow hedges. The Company paid approximately $12.1 million to enter into these caps. This premium, and any related amounts reported in accumulated other comprehensive income,
F-31
will be amortized to interest expense through December 23, 2016, the maturity of the interest rate caps, as interest payments are made on the underlying Term Loan. During fiscal 2011, the Company estimates that approximately $51,000 will be reclassified from other comprehensive income to interest expense.
For a derivative instrument designated as a cash-flow hedge, the effective portion of the derivatives gain or loss is initially reported as a component of other comprehensive income and is subsequently recognized in earnings when the hedged exposure is recognized in earnings. Gains or losses on the derivative representing either hedge components excluded from the assessment of effectiveness or hedge ineffectiveness are recognized in earnings.
The Company had the following outstanding derivatives designated as cash flow hedges (dollars in thousands):
Successor | Predecessor | |||||||||||||||||||
January 29, 2011 | January 30, 2010 | |||||||||||||||||||
Number of Instruments |
Notional (USD) |
Number of Instruments |
Notional (USD) |
|||||||||||||||||
Interest rate derivatives |
||||||||||||||||||||
Purchased Caps |
4 | $ | 700,000 | | $ | | ||||||||||||||
Foreign exchange derivatives |
||||||||||||||||||||
Forward foreign exchange contracts |
6 | 4,505 | 6 | 5,181 | ||||||||||||||||
Total |
10 | $ | 704,505 | 6 | $ | 5,181 | ||||||||||||||
The table below presents the fair value of the Companys derivative financial instruments as well as their classification on the balance sheet.
Successor | Predecessor | |||||||||||||||
January 29, 2011 | January 30, 2010 | |||||||||||||||
Derivatives Assets |
Derivative Liabilities | Derivatives Assets |
||||||||||||||
(in thousands) | ||||||||||||||||
Interest rate derivatives |
||||||||||||||||
Balance Sheet Location |
Other Assets | |||||||||||||||
Purchased Caps |
$ | 11,863 | ||||||||||||||
Foreign exchange derivatives |
||||||||||||||||
Balance Sheet Location |
Accrued liabilities | Other Assets | ||||||||||||||
Forward foreign exchange contracts |
$ | 33 | $ | 179 | ||||||||||||
Total |
$ | 11,863 | $ | 33 | $ | 179 | ||||||||||
The table below presents the effect of the Companys derivative financial instruments on the statements of operations. No amounts were reclassified from accumulated other comprehensive income into earnings as a result of forecasted transactions that failed to occur or as a result of hedge ineffectiveness.
Period from November 23, 2010 to January 29, 2011 (Successor) | ||||||||||||
Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) |
Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) |
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) |
||||||||||
(in thousands) | ||||||||||||
Interest rate derivatives |
||||||||||||
Purchased Caps |
$ | (216 | ) | Interest income/(expense) | $ | | ||||||
Foreign exchange derivatives |
||||||||||||
Forward foreign exchange contracts |
(7 | ) | Cost of goods sold | (52 | ) | |||||||
Total |
$ | (223 | ) | $ | (52 | ) | ||||||
F-32
The amount of gain or loss recognized in other comprehensive income (OCI) and reclassified from accumulated OCI into income was not significant for any periods prior to November 23, 2010.
17. | Fair Value Measurements |
The accounting guidance for fair value measurements prioritizes the inputs used in measuring fair value into the following hierarchy:
Level 1Quoted prices in active markets for identical assets or liabilities.
Level 2Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3Unobservable inputs for the asset or liability, which reflect the Companys own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety is classified is based on the lowest level input that is significant to the fair value measurement in its entirety. The Companys assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The tables below present the Companys assets and liabilities measured at fair value on a recurring basis as of January 29, 2011 and January 30, 2010, aggregated by the level in the fair value hierarchy within which those measurements fall.
As of January 29, 2011 (Successor) | ||||||||||||||||
Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
Total Fair Value |
|||||||||||||
(in thousands) | ||||||||||||||||
Assets |
||||||||||||||||
Interest rate caps |
$ | | $ | 11,863 | $ | | $ | 11,863 | ||||||||
Liabilities |
||||||||||||||||
Forward foreign exchange contracts |
$ | | $ | 33 | $ | | $ | 33 | ||||||||
As of January 30, 2010 (Predecessor) | ||||||||||||||||
Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
Total Fair Value |
|||||||||||||
(in thousands) | ||||||||||||||||
Assets |
||||||||||||||||
Forward foreign exchange contracts |
$ | | $ | 179 | $ | | $ | 179 | ||||||||
The fair value of the Companys interest rate caps was determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) were based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, were incorporated in the fair
F-33
values to account for potential nonperformance risk. In adjusting the fair value of these contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements such as collateral postings, thresholds, mutual puts, and guarantees.
Although the Company has determined that the majority of the inputs used to value its interest rate caps fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with these derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of January 29, 2011, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its interest rate cap positions and determined that the credit valuation adjustment was not significant to the overall valuation. As a result, the Company classified its interest rate caps derivative valuations in Level 2 of the fair value hierarchy.
The fair value of the Companys forward foreign exchange contracts was determined using the market approach and Level 2 inputs. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The Company had no other financial assets or liabilities measured at fair value as of January 29, 2011 and January 30, 2010.
The carrying value of cash and cash equivalents, receivables, and payables approximates their estimated fair values due to the short maturities of these instruments. The Company estimates the fair value of its long-term debt using interest rates currently available to the Company for issuance of notes payable and long-term debt (including current maturities). These interest rates are considered Level 2 inputs. The estimated fair value of long-term debt is as follows (in thousands):
As of January 29, 2011 | ||||||||
Carrying Amount |
Fair Value | |||||||
Term loan |
$ | 815,991 | $ | 831,275 | ||||
Notes |
400,000 | 420,500 | ||||||
$ | 1,215,991 | $ | 1,251,775 | |||||
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
The Company measures certain non-financial assets and liabilities, including long-lived assets, at fair value on a non-recurring basis. During the period from November 23, 2010 to January 29, 2011, the period from January 31, 2010 to November 22, 2010 and fiscal 2009, the Company recorded charges related to the impairment of assets at under-performing stores. The impairment charges reduced the carrying amount of the applicable long-lived assets from $1.1 million, $0.2 million and $0.5 million to their fair value of zero as of January 29, 2011, November 22, 2010 and January 30, 2010, respectively. The Company recorded no impairment charges in fiscal 2008. The fair market value of these assets was determined using the income approach and Level 3 inputs, which required management to make significant estimates about future cash flows. Management estimates the amount and timing of future cash flows based on its experience and knowledge of the retail market in which each store operates. These impairment charges are included in SG&A expenses in the accompanying consolidated statements of operations.
18. | Accumulated Other Comprehensive Income (Loss) |
Accumulated other comprehensive income (loss) consists of the following (in thousands):
Successor | Predecessor | |||||||||||||||
January 29, 2011 |
November 22, 2010 |
January 30, 2010 |
||||||||||||||
Foreign currency translation |
$ | 446 | $ | (624 | ) | $ | 273 | |||||||||
Unrealized net gain (loss) on cash flow hedges, net of tax |
(208 | ) | (227 | ) | 70 | |||||||||||
Total accumulated other comprehensive income (loss) |
$ | 238 | $ | (851 | ) | $ | 343 | |||||||||
F-34
19. | Condensed Consolidating Financial Information |
In connection with the Transaction, the Company issued $400 million aggregate principal amount of 9.125% Notes (see Note 6) under an indenture dated November 23, 2010 (the Indenture). The Company and its 100%-owned domestic subsidiaries have fully and unconditionally guaranteed the Notes. The following condensed consolidating financial information presents the financial position, results of operations and cash flows of The Gymboree Corporation and the guarantor and non-guarantor subsidiaries. Intercompany transactions are eliminated.
THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEETS
(In thousands)
As of January 29, 2011 (Successor) | ||||||||||||||||||||
The Gymboree Corporation |
Guarantor Subsidiaries |
Non-guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Current Assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 19,157 | $ | 6,530 | $ | 6,437 | $ | | $ | 32,124 | ||||||||||
Accounts receivable, net of allowance |
620 | 12,960 | 89 | | 13,669 | |||||||||||||||
Merchandise inventories |
| 181,544 | 2,955 | (231 | ) | 184,268 | ||||||||||||||
Prepaid income taxes |
15,404 | | 712 | | 16,116 | |||||||||||||||
Prepaid expenses |
3,149 | 1,658 | 49 | | 4,856 | |||||||||||||||
Intercompany receivable |
| 333,845 | | (333,845 | ) | | ||||||||||||||
Deferred income taxes |
| 7,805 | 28 | (1,136 | ) | 6,697 | ||||||||||||||
Total current assets |
38,330 | 544,342 | 10,270 | (335,212 | ) | 257,730 | ||||||||||||||
Property and Equipment, net |
21,411 | 184,203 | 6,877 | | 212,491 | |||||||||||||||
Deferred Income Taxes |
37,573 | | 828 | (38,401 | ) | | ||||||||||||||
Goodwill |
934,639 | | | | 934,639 | |||||||||||||||
Other Intangible Assets |
3,888 | 602,081 | 241 | | 606,210 | |||||||||||||||
Deferred Financing Costs |
61,983 | | | | 61,983 | |||||||||||||||
Other Assets |
11,867 | 802 | 2,403 | | 15,072 | |||||||||||||||
Investment in Subsidiaries |
962,297 | | | (962,297 | ) | | ||||||||||||||
Total Assets |
$ | 2,071,988 | $ | 1,331,428 | $ | 20,619 | $ | (1,335,910 | ) | $ | 2,088,125 | |||||||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||||||||||||||
Current Liabilities: |
||||||||||||||||||||
Accounts payable |
$ | 4,235 | $ | 50,040 | $ | 219 | $ | | $ | 54,494 | ||||||||||
Accrued liabilities |
36,197 | 43,538 | 1,365 | | 81,100 | |||||||||||||||
Deferred income taxes |
1,136 | | | (1,136 | ) | | ||||||||||||||
Intercompany payable |
323,911 | | 9,846 | (333,757 | ) | | ||||||||||||||
Current portion of long-term debt |
8,200 | | | | 8,200 | |||||||||||||||
Total current liabilities |
373,679 | 93,578 | 11,430 | (334,893 | ) | 143,794 | ||||||||||||||
Long-Term Liabilities: |
||||||||||||||||||||
Long-term debt |
1,207,791 | | | | 1,207,791 | |||||||||||||||
Lease incentives and other liabilities |
4,707 | 17,990 | 3,434 | | 26,131 | |||||||||||||||
Deferred income taxes |
| 262,999 | | (38,401 | ) | 224,598 | ||||||||||||||
Total Liabilities |
1,586,177 | 374,567 | 14,864 | (373,294 | ) | 1,602,314 | ||||||||||||||
Commitments and Contingencies |
| | | | | |||||||||||||||
Stockholders Equity |
485,811 | 956,861 | 5,755 | (962,616 | ) | 485,811 | ||||||||||||||
Total Liabilities and Stockholders Equity |
$ | 2,071,988 | $ | 1,331,428 | $ | 20,619 | $ | (1,335,910 | ) | $ | 2,088,125 | |||||||||
F-35
THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEETS
(In thousands)
As of January 30, 2010 (Predecessor) | ||||||||||||||||||||
The Gymboree Corporation |
Guarantor Subsidiaries |
Non-guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Current Assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 245,526 | $ | 3,922 | $ | 8,224 | $ | | $ | 257,672 | ||||||||||
Accounts receivable, net of allowance |
453 | 9,411 | 47 | | 9,911 | |||||||||||||||
Merchandise inventories |
| 119,176 | 2,229 | (272 | ) | 121,133 | ||||||||||||||
Prepaid expenses |
3,532 | 1,745 | 1,159 | (1,121 | ) | 5,315 | ||||||||||||||
Intercompany receivable |
| 261,095 | | (261,095 | ) | | ||||||||||||||
Deferred income taxes |
| 17,527 | 457 | (3,521 | ) | 14,463 | ||||||||||||||
Total current assets |
249,511 | 412,876 | 12,116 | (266,009 | ) | 408,494 | ||||||||||||||
Property and Equipment, net |
23,767 | 176,255 | 5,439 | | 205,461 | |||||||||||||||
Deferred Income Taxes |
18,599 | | | (1,182 | ) | 17,417 | ||||||||||||||
Other Assets |
5 | 1,941 | 2,812 | | 4,758 | |||||||||||||||
Investment in Subsidiaries |
467,247 | | | (467,247 | ) | | ||||||||||||||
Total Assets |
$ | 759,129 | $ | 591,072 | $ | 20,367 | $ | (734,438 | ) | $ | 636,130 | |||||||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||||||||||||||
Current Liabilities: |
||||||||||||||||||||
Accounts payable |
$ | 4,507 | $ | 41,930 | $ | 33 | $ | | $ | 46,470 | ||||||||||
Accrued liabilities |
29,818 | 38,384 | 1,093 | | 69,295 | |||||||||||||||
Income tax payable |
6,502 | | | (1,121 | ) | 5,381 | ||||||||||||||
Deferred income taxes |
3,521 | | | (3,521 | ) | | ||||||||||||||
Intercompany payable |
248,459 | | 12,548 | (261,007 | ) | | ||||||||||||||
Total current liabilities |
292,807 | 80,314 | 13,674 | (265,649 | ) | 121,146 | ||||||||||||||
Long-Term Liabilities: |
||||||||||||||||||||
Lease incentives and other liabilities |
27,569 | 46,219 | 3,625 | (1,182 | ) | 76,231 | ||||||||||||||
Total Liabilities |
320,376 | 126,533 | 17,299 | (266,831 | ) | 197,377 | ||||||||||||||
Commitments and Contingencies |
| | | | | |||||||||||||||
Stockholders Equity |
438,753 | 464,539 | 3,068 | (467,607 | ) | 438,753 | ||||||||||||||
Total Liabilities and Stockholders Equity |
$ | 759,129 | $ | 591,072 | $ | 20,367 | $ | (734,438 | ) | $ | 636,130 | |||||||||
F-36
THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM NOVEMBER 23, 2010 TO JANUARY 29, 2011 (SUCCESSOR)
(In thousands)
The Gymboree Corporation |
Guarantor Subsidiaries |
Non-guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Net sales: |
||||||||||||||||||||
Retail |
$ | 300 | $ | 236,588 | $ | 10,821 | $ | (3,422 | ) | $ | 244,287 | |||||||||
Play & Music |
| 2,814 | | | 2,814 | |||||||||||||||
Other |
| 447 | | | 447 | |||||||||||||||
Intercompany revenue |
19,564 | 1,147 | 132 | (20,843 | ) | | ||||||||||||||
Total net sales |
19,864 | 240,996 | 10,953 | (24,265 | ) | 247,548 | ||||||||||||||
Cost of goods sold, including buying and occupancy expenses |
(3,260 | ) | (186,398 | ) | (7,621 | ) | 12,796 | (184,483 | ) | |||||||||||
Gross profit |
16,604 | 54,598 | 3,332 | (11,469 | ) | 63,065 | ||||||||||||||
Selling, general and administrative expenses |
(21,061 | ) | (66,774 | ) | (2,578 | ) | 11,570 | (78,843 | ) | |||||||||||
Operating (loss) income |
(4,457 | ) | (12,176 | ) | 754 | 101 | (15,778 | ) | ||||||||||||
Interest income |
21 | | 15 | | 36 | |||||||||||||||
Interest expense |
(17,387 | ) | | | | (17,387 | ) | |||||||||||||
Other income (expense), net |
60 | | (7 | ) | | 53 | ||||||||||||||
(Loss) income before income taxes and equity in losses of affiliates |
(21,763 | ) | (12,176 | ) | 762 | 101 | (33,076 | ) | ||||||||||||
Income tax benefit (expense) |
6,551 | 4,049 | (568 | ) | | 10,032 | ||||||||||||||
Equity in losses of affiliates, net of tax |
(7,832 | ) | | | 7,832 | | ||||||||||||||
Net (loss) income |
$ | (23,044 | ) | $ | (8,127 | ) | $ | 194 | $ | 7,933 | $ | (23,044 | ) | |||||||
THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM JANUARY 31, 2010 TO NOVEMBER 22, 2010 (PREDECESSOR)
(In thousands)
The Gymboree Corporation |
Guarantor Subsidiaries |
Non-guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Net sales: |
||||||||||||||||||||
Retail |
$ | 6,148 | $ | 790,806 | $ | 34,256 | $ | (16,347 | ) | $ | 814,863 | |||||||||
Play & Music |
| 10,847 | | | 10,847 | |||||||||||||||
Other |
| 1,173 | | | 1,173 | |||||||||||||||
Intercompany revenue |
60,558 | 1,924 | 620 | (63,102 | ) | | ||||||||||||||
Total net sales |
66,706 | 804,750 | 34,876 | (79,449 | ) | 826,883 | ||||||||||||||
Cost of goods sold, including buying and occupancy expenses |
(898 | ) | (452,301 | ) | (22,714 | ) | 44,238 | (431,675 | ) | |||||||||||
Gross profit |
65,808 | 352,449 | 12,162 | (35,211 | ) | 395,208 | ||||||||||||||
Selling, general and administrative expenses |
(95,235 | ) | (237,435 | ) | (9,726 | ) | 35,035 | (307,361 | ) | |||||||||||
Operating (loss) income |
(29,427 | ) | 115,014 | 2,436 | (176 | ) | 87,847 | |||||||||||||
Interest income |
259 | | 36 | | 295 | |||||||||||||||
Interest expense |
(248 | ) | | | | (248 | ) | |||||||||||||
Other income (expense), net |
79 | (1 | ) | 41 | | 119 | ||||||||||||||
(Loss) income before income taxes and equity in earnings of affiliates |
(29,337 | ) | 115,013 | 2,513 | (176 | ) | 88,013 | |||||||||||||
Income tax benefit (expense) |
3,879 | (40,086 | ) | (242 | ) | | (36,449 | ) | ||||||||||||
Equity in earnings of affiliates, net of tax |
77,022 | | | (77,022 | ) | | ||||||||||||||
Net income |
$ | 51,564 | $ | 74,927 | $ | 2,271 | $ | (77,198 | ) | $ | 51,564 | |||||||||
F-37
THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED JANUARY 30, 2010 (PREDECESSOR)
(In thousands)
The Gymboree Corporation |
Guarantor Subsidiaries |
Non-guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Net sales: |
||||||||||||||||||||
Retail |
$ | 7,651 | $ | 970,789 | $ | 42,302 | $ | (19,215 | ) | $ | 1,001,527 | |||||||||
Play & Music |
| 13,384 | | | 13,384 | |||||||||||||||
Intercompany revenue |
82,158 | 3,162 | 569 | (85,889 | ) | | ||||||||||||||
Total net sales |
89,809 | 987,335 | 42,871 | (105,104 | ) | 1,014,911 | ||||||||||||||
Cost of goods sold, including buying and occupancy expenses |
(3,957 | ) | (555,790 | ) | (29,097 | ) | 53,839 | (535,005 | ) | |||||||||||
Gross profit |
85,852 | 431,545 | 13,774 | (51,265 | ) | 479,906 | ||||||||||||||
Selling, general and administrative expenses |
(66,230 | ) | (289,853 | ) | (11,279 | ) | 51,094 | (316,268 | ) | |||||||||||
Operating income |
19,622 | 141,692 | 2,495 | (171 | ) | 163,638 | ||||||||||||||
Interest income |
1,286 | | 15 | (573 | ) | 728 | ||||||||||||||
Interest expense |
(243 | ) | | (573 | ) | 573 | (243 | ) | ||||||||||||
Other income (expense), net |
595 | (1 | ) | 16 | | 610 | ||||||||||||||
Income before income taxes and equity in earnings of affiliates |
21,260 | 141,691 | 1,953 | (171 | ) | 164,733 | ||||||||||||||
Income tax expense |
(4,480 | ) | (56,696 | ) | (1,638 | ) | | (62,814 | ) | |||||||||||
Equity in earnings of affiliates, net of tax |
85,139 | | | (85,139 | ) | | ||||||||||||||
Net income |
$ | 101,919 | $ | 84,995 | $ | 315 | $ | (85,310 | ) | $ | 101,919 | |||||||||
THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED JANUARY 31, 2009 (PREDECESSOR)
(In thousands)
The Gymboree Corporation |
Guarantor Subsidiaries |
Non-guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Net sales: |
||||||||||||||||||||
Retail |
$ | 9,073 | $ | 938,020 | $ | 42,302 | $ | (1,536 | ) | $ | 987,859 | |||||||||
Play & Music |
| 12,819 | | | 12,819 | |||||||||||||||
Intercompany revenue |
84,838 | 5,720 | 743 | (91,301 | ) | | ||||||||||||||
Total net sales |
93,911 | 956,559 | 43,045 | (92,837 | ) | 1,000,678 | ||||||||||||||
Cost of goods sold, including buying and occupancy expenses |
(3,784 | ) | (528,368 | ) | (19,054 | ) | 26,729 | (524,477 | ) | |||||||||||
Gross profit |
90,127 | 428,191 | 23,991 | (66,108 | ) | 476,201 | ||||||||||||||
Selling, general and administrative expenses |
(75,544 | ) | (299,868 | ) | (18,658 | ) | 66,177 | (327,893 | ) | |||||||||||
Operating income |
14,583 | 128,323 | 5,333 | 69 | 148,308 | |||||||||||||||
Interest income |
2,068 | 2 | 171 | (551 | ) | 1,690 | ||||||||||||||
Interest expense |
(208 | ) | | (551 | ) | 551 | (208 | ) | ||||||||||||
Other (expense) income, net |
(311 | ) | 202 | (42 | ) | | (151 | ) | ||||||||||||
Income before income taxes and equity in earnings of affiliates |
16,132 | 128,527 | 4,911 | 69 | 149,639 | |||||||||||||||
Income tax (expense) benefit |
(6,165 | ) | (50,115 | ) | 121 | | (56,159 | ) | ||||||||||||
Equity in earnings of affiliates, net of tax |
83,514 | | | (83,514 | ) | | ||||||||||||||
Net income |
$ | 93,481 | $ | 78,412 | $ | 5,032 | $ | (83,445 | ) | $ | 93,480 | |||||||||
F-38
THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM NOVEMBER 23, 2010 TO JANUARY 29, 2011 (SUCCESSOR)
(In thousands)
The Gymboree Corporation |
Guarantor Subsidiaries |
Non-guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||||||||||
Net cash (used in) provided by operating activities |
$ | (11,140 | ) | $ | 30,604 | $ | 1,616 | $ | | $ | 21,080 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||||||||||
Acquisition of business, net of cash acquired |
(1,828,308 | ) | | | | (1,828,308 | ) | |||||||||||||
Capital expenditures |
(275 | ) | (4,402 | ) | (377 | ) | | (5,054 | ) | |||||||||||
Other |
(17 | ) | (27 | ) | (2 | ) | | (46 | ) | |||||||||||
Net cash used in investing activities |
(1,828,600 | ) | (4,429 | ) | (379 | ) | | (1,833,408 | ) | |||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||||||||||
Intercompany transfers |
30,758 | (26,451 | ) | (4,307 | ) | | | |||||||||||||
Proceeds from long-term debtterm loan |
815,900 | | | | 815,900 | |||||||||||||||
Proceeds from senior notes |
400,000 | | | | 400,000 | |||||||||||||||
Proceeds from ABL Facility |
30,000 | | | | 30,000 | |||||||||||||||
Principal payments on ABL facility |
(30,000 | ) | | | | (30,000 | ) | |||||||||||||
Deferred financing costs |
(63,266 | ) | | | | (63,266 | ) | |||||||||||||
Purchase of interest rate cap contracts |
(12,079 | ) | | | | (12,079 | ) | |||||||||||||
Proceeds from issuance of common stock |
508,135 | | | | 508,135 | |||||||||||||||
Net cash provided by (used in) financing activities |
1,679,448 | (26,451 | ) | (4,307 | ) | | 1,648,690 | |||||||||||||
Net decrease in cash and cash equivalents |
(160,292 | ) | (276 | ) | (3,070 | ) | | (163,638 | ) | |||||||||||
Effect of exchange rate fluctuations on cash |
| | 852 | | 852 | |||||||||||||||
CASH AND CASH EQUIVALENTS: |
||||||||||||||||||||
Beginning of Period |
179,449 | 6,806 | 8,655 | | 194,910 | |||||||||||||||
End of Period |
$ | 19,157 | $ | 6,530 | $ | 6,437 | $ | | $ | 32,124 | ||||||||||
F-39
THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 31, 2010 TO NOVEMBER 22, 2010 (PREDECESSOR)
(In thousands)
The Gymboree Corporation |
Guarantor Subsidiaries |
Non-guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | 19,541 | $ | 73,003 | $ | (1,593 | ) | $ | | $ | 90,951 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||||||||||
Capital expenditures |
(3,087 | ) | (37,253 | ) | (1,874 | ) | | (42,214 | ) | |||||||||||
Investment in subsidiaries |
(1,981 | ) | | | 1,981 | | ||||||||||||||
Other |
| (1,156 | ) | (82 | ) | | (1,238 | ) | ||||||||||||
Net cash used in investing activities |
(5,068 | ) | (38,409 | ) | (1,956 | ) | 1,981 | (43,452 | ) | |||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||||||||||
Investment by parent |
| | 1,981 | (1,981 | ) | | ||||||||||||||
Intercompany transfers |
35,464 | (37,069 | ) | 1,605 | | | ||||||||||||||
Proceeds from issuance of common stock |
1,371 | | | | 1,371 | |||||||||||||||
Excess tax benefits from exercise and vesting of share-based awards |
7,225 | 5,359 | | | 12,584 | |||||||||||||||
Repurchases of common stock |
(124,610 | ) | | | | (124,610 | ) | |||||||||||||
Net cash (used in) provided by financing activities |
(80,550 | ) | (31,710 | ) | 3,586 | (1,981 | ) | (110,655 | ) | |||||||||||
Net (decrease) increase in cash and cash equivalents |
(66,077 | ) | 2,884 | 37 | | (63,156 | ) | |||||||||||||
Effect of exchange rate fluctuations on cash |
| | 394 | | 394 | |||||||||||||||
CASH AND CASH EQUIVALENTS: |
||||||||||||||||||||
Beginning of Period |
245,526 | 3,922 | 8,224 | | 257,672 | |||||||||||||||
End of Period |
$ | 179,449 | $ | 6,806 | $ | 8,655 | $ | | $ | 194,910 | ||||||||||
F-40
THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JANUARY 30, 2010 (PREDECESSOR)
(In thousands)
The Gymboree Corporation |
Guarantor Subsidiaries |
Non-guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | 58,698 | $ | 123,317 | $ | (5,420 | ) | $ | | $ | 176,595 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||||||||||
Capital expenditures |
(3,162 | ) | (33,908 | ) | (2,509 | ) | | (39,579 | ) | |||||||||||
Net cash used in investing activities |
(3,162 | ) | (33,908 | ) | (2,509 | ) | | (39,579 | ) | |||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||||||||||
Intercompany transfers |
84,586 | (88,416 | ) | 3,830 | | | ||||||||||||||
Proceeds from issuance of common stock |
6,055 | | | | 6,055 | |||||||||||||||
Excess tax benefits from exercise and vesting of share-based awards |
2,633 | 1,117 | | | 3,750 | |||||||||||||||
Repurchases of common stock |
(31,340 | ) | | | | (31,340 | ) | |||||||||||||
Net cash provided by (used in) financing activities |
61,934 | (87,299 | ) | 3,830 | | (21,535 | ) | |||||||||||||
Net increase (decrease) in cash and cash equivalents |
117,470 | 2,110 | (4,099 | ) | | 115,481 | ||||||||||||||
Effect of exchange rate fluctuations on cash |
| | 1,719 | | 1,719 | |||||||||||||||
CASH AND CASH EQUIVALENTS: |
||||||||||||||||||||
Beginning of Period |
128,056 | 1,812 | 10,604 | | 140,472 | |||||||||||||||
End of Period |
$ | 245,526 | $ | 3,922 | $ | 8,224 | $ | | $ | 257,672 | ||||||||||
F-41
THE GYMBOREE CORPORATION
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JANUARY 31, 2009 (PREDECESSOR)
(In thousands)
The Gymboree Corporation |
Guarantor Subsidiaries |
Non-guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||||||||||
Net cash provided by operating activities |
$ | 25,008 | $ | 124,394 | $ | 5,622 | $ | | $ | 155,024 | ||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||||||||||
Proceeds from sale of marketable securities |
34,700 | | | | 34,700 | |||||||||||||||
Purchases of marketable securities |
(34,700 | ) | | | | (34,700 | ) | |||||||||||||
Capital expenditures |
(5,472 | ) | (49,412 | ) | (1,230 | ) | | (56,114 | ) | |||||||||||
Net cash used in investing activities |
(5,472 | ) | (49,412 | ) | (1,230 | ) | | (56,114 | ) | |||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||||||||||
Intercompany transfers |
73,433 | (74,826 | ) | 1,393 | | | ||||||||||||||
Proceeds from issuance of common stock |
9,296 | | | | 9,296 | |||||||||||||||
Excess tax benefits from exercise and vesting of share-based awards |
4,740 | 1,283 | | | 6,023 | |||||||||||||||
Repurchases of common stock |
(5,591 | ) | | | | (5,591 | ) | |||||||||||||
Net cash provided by (used in) financing activities |
81,878 | (73,543 | ) | 1,393 | | 9,728 | ||||||||||||||
Net increase in cash and cash equivalents |
101,414 | 1,439 | 5,785 | | 108,638 | |||||||||||||||
Effect of exchange rate fluctuations on cash |
| | (1,479 | ) | | (1,479 | ) | |||||||||||||
CASH AND CASH EQUIVALENTS: |
||||||||||||||||||||
Beginning of Period |
26,642 | 373 | 6,298 | | 33,313 | |||||||||||||||
End of Period |
$ | 128,056 | $ | 1,812 | $ | 10,604 | $ | | $ | 140,472 | ||||||||||
The Gymboree Corporation and its guarantor subsidiaries participate in a cash pooling program. As part of this program, cash balances are generally swept on a daily basis between the guarantor subsidiary bank accounts and those of The Gymboree Corporation. In addition, The Gymboree Corporation pays expenses on behalf of its guarantor and non-guarantor subsidiaries on a regular basis. These types of transactions have been accounted for as intercompany transfers within financing activities.
The Gymboree Corporations transactions include interest, tax payments and intercompany sales transactions related to administrative costs incurred by the Gymboree Corporation, which are billed to guarantor and non-guarantor subsidiaries on a cost plus basis. All intercompany transactions are presumed to be settled in cash and therefore are included in operating activities. Non-operating cash flow changes have been classified as financing activities.
F-42
The Gymboree Corporation
Exchange Offer
for
9.125% Senior Notes due 2018
PROSPECTUS
, 2011
Until the date that is 90 days from the date of this prospectus, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers obligation to deliver a prospectus when acting as underwriters with respect to unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. | Indemnification of Directors and Officers. |
The following summarizes the limitations of liability and/or certain indemnification rights provided for in the applicable statutes and constituent documents of the registrants. These summaries are qualified in their entirety by reference to the complete text of the statutes and the constituent documents referred to below.
Registrants Incorporated Under the Laws of Delaware
The Gymboree Corporation is a corporation organized under the laws of the State of Delaware.
Section 145(a) of the Delaware General Corporation Law (the DGCL) authorizes a Delaware corporation to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that the person is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding, if the person acted in good faith and in a manner the person reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe the persons conduct was unlawful.
Section 145(b) further authorizes a Delaware corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
Section 102(b)(7) of the DGCL enables a corporation in its certificate of incorporation or an amendment thereto to eliminate or limit the personal liability of a director to the corporation or its stockholders of monetary damages for violations of the directors fiduciary duty of care, except (i) for any breach of the directors duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL (providing for liability of directors for unlawful payment of dividends or unlawful stock purchases or redemptions) or (iv) for any transaction from which a director derived an improper personal benefit. These provisions will not limit the liability of directors or officers under the federal securities laws of the United States.
The second amended and restated certificate of incorporation of The Gymboree Corporation provides that the corporation shall, to the fullest extent permitted from time to time under the laws of the State of Delaware, indemnify and hold harmless, and upon request shall advance expenses, to any person (and the heirs, executors or administrators of such person) who is or was a party or is threatened to be made a party, witness, or otherwise a participant in, any threatened, pending or completed action, suit, proceeding or claim, whether civil, criminal,
II-1
administrative or investigative, by reason of the fact that such person is or was or has agreed to be a director, officer, employee or agent of the corporation or any predecessor to the corporation or while such a director, officer, employee or agent is or was serving at the request of the corporation or any predecessor to the corporation as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys fees and experts fees), judgments, damages (including punitive damages), fines, penalties and amounts paid in settlement incurred (and not otherwise recovered) in connection with the investigation, preparation to defend or otherwise participate in, or defense of such action, suit, proceeding or claim. The corporation shall also advance, on an as-incurred basis, all expenses to any such person to the extent incurred by him or her in defense of, or otherwise in participation in, any action, suit or proceeding in advance of the final disposition of such action, suit or proceeding, including all appeals. Such advances shall be (i) unsecured and interest free, (ii) made without regard to such persons ability to repay amounts advanced, and (iii) conditioned only upon such person submitting, to the extent required by the DGCL, an unsecured written undertaking to repay amounts advanced and appropriate documentation reflecting the expenses for which advancement is sought. The corporation shall not be required to indemnify or advance expenses for any action, suit, proceeding, claim or counterclaim initiated by or on behalf of such person described above except in certain limited circumstances, including when such action, suit, proceeding, claim or counterclaim is authorized by the board of directors of the corporation. Any person seeking indemnification under the second amended and restated certificate of incorporation shall be deemed to have met the standard of conduct required for such indemnification unless the contrary shall be established.
The second amended and restated certificate of incorporation also provides that The Gymboree Corporation may purchase and maintain, at its expense, insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or other loss asserted or obtained against such person and incurred by such person in any such capacity, or arising out of such persons status as such, whether or not the corporation would have the power to indemnify such person against such liability under the terms of the second amended and restated certificate of incorporation or the DGCL. In addition, the second amended and restated certificate of incorporation provides that directors shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that exculpation from liability is not permitted under the DGCL as in effect at the time such liability is determined. The Gymboree Corporation has obtained directors and officers insurance to insure its directors and officers against certain liabilities, including certain liabilities under United States securities laws.
Registrants Incorporated Under the Laws of California
The following registrants are corporations organized under the laws of the State of California: Gymboree Retail Stores, Inc., Gymboree Manufacturing, Inc., Gymboree Operations, Inc., Gymboree Play Programs, Inc., Gym-Mark, Inc. and S.C.C. Wholesale, Inc.
Section 317 of the California Corporations Code authorizes a corporation to indemnify any person who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right of the corporation to procure a judgment in its favor to procure a judgment in its favor) by reason of the fact that the person is or was an agent of the corporation, against expenses, judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with the proceeding, if that person acted in good faith and in a manner reasonably believed by such person to be in the best interests of the corporation, and in the case of a criminal proceeding, had no reasonable cause to believe the conduct of the person was unlawful. The corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action by or in the right of the corporation to procure a judgment in its favor to procure a judgment in its favor by reason of the fact that the person is or was an agent of the corporation, against expenses actually and reasonably incurred by that person in connection with the defense or settlement of the
II-2
action if the person acted in good faith, in a manner the person believed to be in the best interests of the corporation and its shareholders. Section 317 of the California Corporations Code also provides that a corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action by or in the right of the corporation to procure a judgment in its favor to procure a judgment in its favor by reason of the fact that the person is or was an agent of the corporation, against expenses actually and reasonably incurred by that person in connection with the defense or settlement of the action if the person acted in good faith, in a manner the person believed to be in the best interests of the corporation and its shareholders. Indemnification for expenses, including amounts paid on settling or otherwise disposing of a threatened or pending action or defending against the same, can be made in certain circumstances by action of the company through a majority vote of a quorum of the corporations board of directors consisting of directors who are not party to the proceedings; approval of shareholders, with the shares owned by the person to be indemnified not being entitled to vote thereon; or such court in which the proceeding is or was pending upon application by designated parties.
Gymboree Retail Stores, Inc., Gymboree Manufacturing, Inc., Gymboree Operations, Inc., Gymboree Play Programs, Inc. and Gym-Mark, Inc.
The articles of incorporation and the amended and restated bylaws of each of Gymboree Retail Stores, Inc., Gymboree Manufacturing, Inc., Gymboree Operations, Inc., Gymboree Play Programs, Inc. and Gym-Mark, Inc. provide that the corporation shall, to the fullest extent permitted under the California Corporations Code, indemnify each of its directors and officers or any person who may have served at the corporations request as a director or officer of a predecessor corporation or another corporation, partnership, joint venture, trust or other enterprise against all expenses, fines, judgments and settlements actually and reasonably incurred in connection with any proceeding arising by reason of fact that such person is or was an agent of the corporation. Each corporation shall have the power, to the fullest extent permitted under the California Corporations Code, to indemnify each of its employees and agents or any person who may have served at its request as an employee or agent of a predecessor corporation or another corporation, partnership, joint venture, trust or other enterprise against all expenses, fines, judgments and settlements actually and reasonably incurred in connection with any proceeding arising by reason of fact that such person is or was an agent of the corporation. Expenses incurred in defending any proceeding for which indemnification is required or permitted as described above shall paid in advance of the final disposition of such proceeding upon authorization be the board of directors and the receipt of an undertaking by the indemnified party to repay such amount in the event that indemnification is not permitted or authorized.
The articles of incorporation and the amended and restated bylaws of each of Gymboree Retail Stores, Inc., Gymboree Manufacturing, Inc., Gymboree Operations, Inc., Gymboree Play Programs, Inc. and Gym-Mark, Inc. provide that the corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation against any liability asserted against or incurred by such person in such capacity, whether or not the corporation would have the power to indemnify him or her as described above. In addition, pursuant to the articles of incorporation of each such corporation, the liability of directors for monetary damages shall be eliminated to the fullest extent permissible under California law.
S.C.C. Wholesale, Inc.
The articles of incorporation and the amended and restated bylaws of S.C.C. Wholesale, Inc. provide that the corporation shall, to the fullest extent permitted under the California Corporations Code, indemnify any person a party to or threatened to be made a party to any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative by reason that such person is or was a director and officer or who may have served at the corporations request as an agent of the corporation, a predecessor corporation or another corporation, partnership, joint venture, trust or other enterprise against all expenses (including attorneys fees), fines, judgments and settlements actually and reasonably incurred in connection with such action or proceeding; provided that the person acted in good faith and in a manner reasonably believed to be in the best
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interests of the corporation; and provided further that any indemnification shall only be made if authorized by the board of directors. The corporation shall pay all expenses incurred in defending any action or proceeding as they are incurred; provided, that such advances shall be made only upon receipt of an agreement made by the indemnified party to repay such advances in the event that they are ultimately not permitted or authorized; provided, further that no advances shall be required for any action brought by the corporation against the indemnified party alleging certain acts or omissions, including those not undertaken in good faith or in a knowing violation of law. Nothing in the bylaws shall limit the ability of the corporation to, in its discretion, indemnify or advance expenses to persons other than as described above. In addition, pursuant to the articles of incorporation, the liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law.
Registrants Organized Under the Laws of Virginia
Gym-Card, LLC is a limited liability company organized under the laws of the Commonwealth of Virginia.
Section 13.1-1009 of the Virginia Limited Liability Company Act permits a limited liability company to indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever, and to pay for or reimburse any member or manager or other person for reasonable expenses incurred by such a person who is a party to a proceeding in advance of final disposition of the proceeding.
The operating agreement of Gym-Card, LLC provides, to the fullest extent permitted by applicable law, that managers shall not have any liability to the company by reason of being or having been a manager, except to the extent an adverse judgment or other final adjudication establishes that their acts or omissions were in bad faith or involved intentional misconduct, or they gained financial or other advantages to which they were not entitled.
Item 21. | Exhibits and Financial Statement Schedules. |
(a) | Exhibits. |
Reference is made to the Index to Exhibits filed as a part of this registration statement beginning on page E-1. Each of such exhibits is incorporated by reference herein.
(b) | Financial Statement Schedules. |
Schedules are omitted because they are not applicable, or not required, or because the information is included in our consolidated financial statements or notes thereto.
Item 22. | Undertakings. |
(a) Each of the undersigned registrants hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933, as amended (the Securities Act);
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement; and
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(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities:
Each of the undersigned registrants undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the 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:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(b) 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 registrants have been advised that in the opinion of the SEC, 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 registrants 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 registrants 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.
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(c) Each of the undersigned registrants hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
(d) Each of the undersigned registrants hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
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SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, State of California, on May 16, 2011.
THE GYMBOREE CORPORATION | ||
By: | /s/ MATTHEW K. MCCAULEY | |
Name: | Matthew K. McCauley | |
Title: | Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Further, we, the undersigned officers and directors of The Gymboree Corporation hereby severally constitute and appoint Matthew K. McCauley, Jeffrey P. Harris, Lynda G. Gustafson and Kimberly Holtz MacMillan, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities as indicated, any and all amendments or supplements to this registration statement on Form S-4, including post-effective amendments to the registration statement and generally to do all such things in connection therewith in our name and on our behalf in our capacities as indicated to enable the registrant to comply with the provisions of the Securities Act of 1933, as amended, and all requirements of the SEC, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to any and all amendments.
Signature | Title | Date | ||
/S/ MATTHEW K. MCCAULEY Matthew K. McCauley |
Chief Executive Officer and Director (Principal Executive Officer) |
May 16, 2011 | ||
/S/ JEFFREY P. HARRIS Jeffrey P. Harris |
Chief Financial Officer (Principal Financial Officer) |
May 16, 2011 | ||
/S/ LYNDA G. GUSTAFSON Lynda G. Gustafson |
Vice President, Corporate Controller (Principal Accounting Officer) |
May 16, 2011 | ||
/S/ JOSHUA BEKENSTEIN Joshua Bekenstein |
Director |
May 16, 2011 | ||
/S/ JORDAN HITCH Jordan Hitch |
Director |
May 16, 2011 | ||
/S/ MARKO KIVISTO Marko Kivisto |
Director |
May 16, 2011 | ||
/S/ STEVEN YOUNG Steven Young |
Director |
May 16, 2011 | ||
/S/ ROBERT GAY Robert Gay |
Director |
May 16, 2011 |
II-7
SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, State of California, on May 16, 2011.
GYMBOREE RETAIL STORES, INC. | ||
By: | /s/ MATTHEW K. MCCAULEY | |
Name: | Matthew K. McCauley | |
Title: | Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Further, we, the undersigned officers and directors of Gymboree Retail Stores, Inc. hereby severally constitute and appoint Matthew K. McCauley, Jeffrey P. Harris, Lynda G. Gustafson and Kimberly Holtz MacMillan, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities as indicated, any and all amendments or supplements to this registration statement on Form S-4, including post-effective amendments to the registration statement and generally to do all such things in connection therewith in our name and on our behalf in our capacities as indicated to enable the registrant to comply with the provisions of the Securities Act of 1933, as amended, and all requirements of the SEC, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to any and all amendments.
Signature | Title | Date | ||
/S/ MATTHEW K. MCCAULEY Matthew K. McCauley |
Chief Executive Officer and Director (Principal Executive Officer) |
May 16, 2011 | ||
/S/ JEFFREY P. HARRIS Jeffrey P. Harris |
Chief Financial Officer (Principal Financial Officer) |
May 16, 2011 | ||
/S/ LYNDA G. GUSTAFSON Lynda G. Gustafson |
Vice President, Corporate Controller (Principal Accounting Officer) |
May 16, 2011 |
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SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, State of California, on May 16, 2011.
GYMBOREE MANUFACTURING, INC. | ||
By: | /s/ MATTHEW K. MCCAULEY | |
Name: | Matthew K. McCauley | |
Title: | Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Further, we, the undersigned officers and directors of Gymboree Manufacturing, Inc. hereby severally constitute and appoint Matthew K. McCauley, Jeffrey P. Harris, Lynda G. Gustafson and Kimberly Holtz MacMillan, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities as indicated, any and all amendments or supplements to this registration statement on Form S-4, including post-effective amendments to the registration statement and generally to do all such things in connection therewith in our name and on our behalf in our capacities as indicated to enable the registrant to comply with the provisions of the Securities Act of 1933, as amended, and all requirements of the SEC, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to any and all amendments.
Signature | Title | Date | ||
/S/ MATTHEW K. MCCAULEY Matthew K. McCauley |
Chief Executive Officer and Director (Principal Executive Officer) | May 16, 2011 | ||
/S/ JEFFREY P. HARRIS Jeffrey P. Harris |
Chief Financial Officer (Principal Financial Officer) |
May 16, 2011 | ||
/S/ LYNDA G. GUSTAFSON Lynda G. Gustafson |
Vice President, Corporate Controller (Principal Accounting Officer) |
May 16, 2011 |
II-9
SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, State of California, on May 16, 2011.
GYMBOREE OPERATIONS, INC. | ||
By: | /s/ MATTHEW K. MCCAULEY | |
Name: | Matthew K. McCauley | |
Title: | Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Further, we, the undersigned officers and directors of Gymboree Operations, Inc. hereby severally constitute and appoint Matthew K. McCauley, Jeffrey P. Harris, Lynda G. Gustafson and Kimberly Holtz MacMillan, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities as indicated, any and all amendments or supplements to this registration statement on Form S-4, including post-effective amendments to the registration statement and generally to do all such things in connection therewith in our name and on our behalf in our capacities as indicated to enable the registrant to comply with the provisions of the Securities Act of 1933, as amended, and all requirements of the SEC, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to any and all amendments.
Signature | Title | Date | ||
/S/ MATTHEW K. MCCAULEY Matthew K. McCauley |
Chief Executive Officer and Director (Principal Executive Officer) | May 16, 2011 | ||
/S/ JEFFREY P. HARRIS Jeffrey P. Harris |
Chief Financial Officer (Principal Financial Officer) |
May 16, 2011 | ||
/S/ LYNDA G. GUSTAFSON Lynda G. Gustafson |
Vice President, Corporate Controller (Principal Accounting Officer) |
May 16, 2011 |
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SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, State of California, on May 16, 2011.
GYM-MARK, INC. | ||
By: | /s/ MATTHEW K. MCCAULEY | |
Name: | Matthew K. McCauley | |
Title: | Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Further, we, the undersigned officers and directors of Gym-Mark, Inc. hereby severally constitute and appoint Matthew K. McCauley, Jeffrey P. Harris, Lynda G. Gustafson and Kimberly Holtz MacMillan, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities as indicated, any and all amendments or supplements to this registration statement on Form S-4, including post-effective amendments to the registration statement and generally to do all such things in connection therewith in our name and on our behalf in our capacities as indicated to enable the registrant to comply with the provisions of the Securities Act of 1933, as amended, and all requirements of the SEC, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to any and all amendments.
Signature | Title | Date | ||
/S/ MATTHEW K. MCCAULEY Matthew K. McCauley |
Chief Executive Officer and Director (Principal Executive Officer) | May 16, 2011 | ||
/S/ JEFFREY P. HARRIS Jeffrey P. Harris |
Chief Financial Officer (Principal Financial Officer) |
May 16, 2011 | ||
/S/ LYNDA G. GUSTAFSON Lynda G. Gustafson |
Vice President, Corporate Controller (Principal Accounting Officer) |
May 16, 2011 |
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SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, State of California, on May 16, 2011.
S.C.C. WHOLESALE, INC. | ||
By: | /s/ MATTHEW K. MCCAULEY | |
Name: | Matthew K. McCauley | |
Title: | Chief Executive Officer and President |
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Further, we, the undersigned officers and directors of S.C.C. Wholesale, Inc. hereby severally constitute and appoint Matthew K. McCauley, Jeffrey P. Harris, Lynda G. Gustafson and Kimberly Holtz MacMillan, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities as indicated, any and all amendments or supplements to this registration statement on Form S-4, including post-effective amendments to the registration statement and generally to do all such things in connection therewith in our name and on our behalf in our capacities as indicated to enable the registrant to comply with the provisions of the Securities Act of 1933, as amended, and all requirements of the SEC, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to any and all amendments.
Signature | Title | Date | ||
/S/ MATTHEW K. MCCAULEY Matthew K. McCauley |
Chief Executive Officer, President and Director (Principal Executive Officer) |
May 16, 2011 | ||
/S/ JEFFREY P. HARRIS Jeffrey P. Harris |
Chief Financial Officer (Principal Financial Officer) |
May 16, 2011 | ||
/S/ LYNDA G. GUSTAFSON Lynda G. Gustafson |
Vice President, Corporate Controller and Treasurer (Principal Accounting Officer) |
May 16, 2011 |
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SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, State of California, on May 16, 2011.
GYMBOREE PLAY PROGRAMS, INC. | ||
By: | /s/ MATTHEW K. MCCAULEY | |
Name: | Matthew K. McCauley | |
Title: | Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Further, we, the undersigned officers and directors of Gymboree Play Programs, Inc. hereby severally constitute and appoint Matthew K. McCauley, Jeffrey P. Harris, Lynda G. Gustafson and Kimberly Holtz MacMillan, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities as indicated, any and all amendments or supplements to this registration statement on Form S-4, including post-effective amendments to the registration statement and generally to do all such things in connection therewith in our name and on our behalf in our capacities as indicated to enable the registrant to comply with the provisions of the Securities Act of 1933, as amended, and all requirements of the SEC, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to any and all amendments.
Signature | Title | Date | ||
/S/ MATTHEW K. MCCAULEY Matthew K. McCauley |
Chief Executive Officer and Director (Principal Executive Officer) |
May 16, 2011 | ||
/S/ JEFFREY P. HARRIS Jeffrey P. Harris |
Chief Financial Officer (Principal Financial Officer) |
May 16, 2011 | ||
/S/ LYNDA G. GUSTAFSON Lynda G. Gustafson |
Vice President, Corporate Controller (Principal Accounting Officer) |
May 16, 2011 |
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SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, State of California, on May 16, 2011.
GYM-CARD, LLC | ||
By: | /s/ MATTHEW K. MCCAULEY | |
Name: | Matthew K. McCauley | |
Title: | Chief Executive Officer and President |
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Further, we, the undersigned officers and managers of Gym-Card, LLC hereby severally constitute and appoint Matthew K. McCauley, Jeffrey P. Harris, Lynda G. Gustafson and Kimberly Holtz MacMillan, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities as indicated, any and all amendments or supplements to this registration statement on Form S-4, including post-effective amendments to the registration statement and generally to do all such things in connection therewith in our name and on our behalf in our capacities as indicated to enable the registrant to comply with the provisions of the Securities Act of 1933, as amended, and all requirements of the SEC, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to any and all amendments.
Signature | Title | Date | ||
/S/ MATTHEW K. MCCAULEY Matthew K. McCauley |
Chief Executive Officer and President (Principal Executive Officer) |
May 16, 2011 | ||
/S/ JEFFREY P. HARRIS Jeffrey P. Harris |
Chief Financial Officer (Principal Financial Officer) |
May 16, 2011 | ||
/S/ LYNDA G. GUSTAFSON Lynda G. Gustafson |
Vice President, Corporate Controller, Treasurer and Manager (Principal Accounting Officer) |
May 16, 2011 | ||
/S/ MANDY KWOK Mandy Kwok |
Manager | May 16, 2011 | ||
/S/ STEVEN MARCH Steven March |
Manager | May 16, 2011 | ||
/S/ TERESA MILLER Teresa Miller |
Manager | May 16, 2011 |
II-14
INDEX TO EXHIBITS
Exhibit Number |
Description | |
2.1 | Agreement and Plan of Merger dated as of October 11, 2010 by and among Giraffe Holding, Inc., Giraffe Acquisition Corporation and The Gymboree Corporation. (1) | |
3.1 | Second Amended and Restated Certificate of Incorporation of The Gymboree Corporation. (2) | |
3.2 | Second Amended and Restated Bylaws of The Gymboree Corporation. (2) | |
3.3 | Articles of Organization of Gym-Card, LLC dated November 25, 2008. | |
3.4 | Operating Agreement of Gym-Card, LLC dated December 8, 2008. | |
3.5 | Articles of Incorporation of Gym-Mark, Inc. dated July 5, 1994. | |
3.6 | Amended and Restated Bylaws of Gym-Mark, Inc. | |
3.7 | Articles of Incorporation of Gymboree Manufacturing, Inc. dated July 5, 1994. | |
3.8 | Amended and Restated Bylaws of Gymboree Manufacturing, Inc. | |
3.9 | Articles of Incorporation of Gymboree Operations, Inc. dated July 5, 1994. | |
3.10 | Amended and Restated Bylaws of Gymboree Operations, Inc. | |
3.11 | Articles of Incorporation of Gymboree Play Programs, Inc. dated July 5, 1994. | |
3.12 | Amended and Restated Bylaws of Gymboree Play Programs, Inc. | |
3.13 | Articles of Incorporation of Gymboree Retail Stores, Inc. dated July 5, 1994. | |
3.14 | Amended and Restated Bylaws of Gymboree Retail Stores, Inc. | |
3.15 | Articles of Incorporation of S.C.C. Wholesale, Inc. dated August 20, 2010. | |
3.16 | Amended and Restated Bylaws of S.C.C. Wholesale, Inc. | |
4.1 | Indenture, dated as of November 23, 2010, among Giraffe Acquisition Corporation as Issuer, the Guarantors from time to time party thereto and Deutsche Bank Trust Company Americas, as trustee. | |
4.1.1 | Supplemental Indenture, dated as of November 23, 2010, among The Gymboree Corporation, the Guarantors named therein and Deutsche Bank Trust Company Americas, as trustee. | |
4.2 | Form of Global Exchange Note (included in Exhibit 4.1). | |
4.3 | Registration Rights Agreement, dated as of November 23, 2010, by and among Giraffe Acquisition Corporation and Morgan Stanley & Co. Incorporated and Credit Suisse Securities (USA) LLC. | |
4.3.1 | Joinder Agreement to the Registration Rights Agreement, dated November 23, 2010, by and among the parties to the Registration Rights Agreement dated as of November 23, 2010, The Gymboree Corporation and the Guarantors. | |
5.1 | Opinion of Ropes & Gray LLP. | |
5.2 | Opinion of Holland & Knight LLP. | |
10.1* | Amended and Restated Management Change of Control Plan. (3) | |
10.2* | Amended and Restated Management Severance Plan. (4) | |
10.3* | Annual Bonus Plan, as amended. (5) | |
10.4* | Key Terms of Compensation Arrangements for Named Executive Officers. (6) | |
10.5* | The Gymboree Corporation Executive Bonus Plan. | |
10.6 | Form of Indemnification Agreement. (7) | |
10.7 | Sublease Agreement for 500 Howard Street, San Francisco, CA. (8) |
1
10.8 | Refinancing Amendment, Agreement and Joinder with Credit Suisse AG, Cayman Islands Branch dated as of February 11, 2011 in respect of the Credit Agreement with Credit Suisse AG, Cayman Islands Branch dated as of November 23, 2010. | |
10.9 | Amended and Restated Credit Agreement with Credit Suisse AG, Cayman Islands Branch dated as of February 11, 2011. | |
10.10 | Credit Agreement, dated as of November 23, 2010, among Giraffe Acquisition Corporation, The Gymboree Corporation (as successor to Giraffe Acquisition Corporation), the other Borrowers party thereto from time to time, Giraffe Intermediate B, Inc., and the other Facility Guarantors party thereto from time to time, the Lenders, and Bank of America, N.A., as Administrative Agent and as Collateral Agent. | |
10.11 | Management Agreement, dated as of October 23, 2010, by and among Giraffe Holding, Inc., Giraffe Acquisition Corporation, and Bain Capital Partners, LLC. | |
10.12 | Form of Stockholders Agreement dated as of November 23, 2010 by and among Giraffe Holding, Inc., Giraffe Intermediate A, Inc., Giraffe Intermediate B, Inc., The Gymboree Corporation and the Investors, Other Investors and Managers named therein. | |
10.13 | Form of Registration and Participation Rights Agreement dated as of November 23, 2010 by and among Giraffe Holding, Inc., Giraffe Intermediate A, Inc., Giraffe Intermediate B, Inc., The Gymboree Corporation and certain stockholders of Giraffe Holding, Inc. party thereto. | |
12.1 | Computation of Ratio of Earnings to Fixed Charges. | |
21.1 | Subsidiaries of The Gymboree Corporation. | |
23.1 | Consent of Independent Registered Public Accounting Firm. | |
23.2 | Consent of Ropes & Gray LLP (see Exhibit 5.1). | |
23.3 | Consent of Holland & Knight LLP (see Exhibit 5.2). | |
25.1 | Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended of Deutsche Bank Trust Company Americas, as Trustee, with respect to the Indenture governing the 9.125% Senior Notes due 2018. | |
99.1 | Form of Letter of Transmittal. | |
99.2 | Form of Notice of Guaranteed Delivery. | |
99.3 | Form of Letter to Registered Holders and DTC Participants. |
* Indicates management contracts or compensatory plans or arrangements in which our executive officers or directors participate.
(1) | Incorporated by reference to the corresponding exhibit to The Gymboree Corporations Current Report on Form 8-K filed with the SEC on October 12, 2010. |
(2) | Incorporated by reference to the corresponding exhibits to The Gymboree Corporations Current Report on Form 8-K filed with the SEC on November 23, 2010. |
(3) | Incorporated by reference to Exhibit 10.52 to The Gymboree Corporations Current Report on Form 8-K filed with the SEC on April 7, 2008. |
(4) | Incorporated by reference to Exhibit 10.53 to The Gymboree Corporations Current Report on Form 8-K filed with the SEC on April 7, 2008. |
(5) | Incorporated by reference to Exhibit 10.56 to The Gymboree Corporations Quarterly Report on Form 10-Q for the quarterly period ended May 1, 2010 filed with the SEC on June 8, 2010. |
(6) | Incorporated by reference to Exhibit 10.54 to The Gymboree Corporations Quarterly Report on Form 10-Q for the quarterly period ended May 1, 2010 filed with the SEC on June 8, 2010. |
(7) | Incorporated by reference to Exhibit 10.73 to The Gymboree Corporations Annual Report on Form 10-K for the fiscal year ended January 30, 2010 filed with the SEC on March 30, 2010. |
(8) | Incorporated by reference to Exhibit 10.57 to The Gymboree Corporations Quarterly Report on Form 10-Q for the quarterly period ended May 1, 2004 filed with the SEC on June 9, 2004. |
2
Exhibit 3.3
|
COMMONWEALTH OF VIRGINIA STATE CORPORATION COMMISSION |
|||
LLC-1011 (07/06) |
ARTICLES OF ORGANIZATION OF A DOMESTIC LIMITED LIABILITY COMPANY |
Pursuant to Chapter 12 of Title 13.1 of the Code of Virginia the undersigned states as follows:
1. | The name of the limited liability company is |
Gym-Card, LLC
(The name must contain the words limited company or limited liability company or the abbreviation L.C., LC, L.L.C, or LLC)
2. | A. The name of the limited liability companys initial registered agent is |
Corporation Service Company
B. | The registered agent is (mark appropriate box): |
(1) | an INDIVIDUAL who is a resident of Virginia and |
¨ | a member or manager of the limited liability company. |
¨ | a member or manager of a limited liability company that is a member or manager of the limited liability company. |
¨ | an officer or director of a corporation that is a member or manager of the limited liability company. |
¨ | a general partner of a general or limited partnership that is a member or manager of the limited liability company. |
¨ | a trustee of a trust that is a member or manager of the limited liability company. |
¨ | a member of the Virginia State Bar. |
OR
(2) x | a domestic or foreign stock or nonstock corporation, limited liability company or registered limited liability partnership authorized to transact business in Virginia. |
3. | The limited liability companys initial registered office address, including the street and number, if any, which is identical to the business office of the initial registered agent, is |
11 South 12th Street, P.O. Box 1463 | Richmond VA | 23218 | ||
(number/street) | (city or town) | (zip) |
which is physically located in the ¨ county or x city of Richmond.
4. | The limited liability companys principal office address, including the street and number, is |
500 Howard St. | San Francisco CA | 94105 | ||
(number/street) | (city or town) (state) | (zip) |
Organizer(s): | ||||
/s/ Lynda Gustafson |
VP, CONTROLLER |
11/25/08 | ||
(signature) | (date) |
Lynda Gustafson |
|
| ||
(printed name) | (telephone number (optional)) |
SEE INSTRUCTIONS ON THE REVERSE
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
AT RICHMOND, DECEMBER 8, 2008
The State Corporation Commission has found the accompanying articles submitted on behalf of
Gym-Card, LLC
to comply with the requirements of law, and confirms payment of all required fees. Therefore, it is ORDERED that this
CERTIFICATE OF ORGANIZATION
be issued and admitted to record with the articles of organization in the Office of the Clerk of the Commission, effective December 8, 2008.
STATE CORPORATION COMMISSION | ||
By |
![]() | |
Commissioner |
DLLCACPT
CIS0339
08-12-05-4028
I Certify the Following from the Records of the Commission:
The foregoing is a true copy of all business entity documents on file in the Clerks Office of the Commission relating to Gym-Card, LLC, a Virginia limited liability company.
Nothing more is hereby certified.
|
Signed and Sealed at Richmond on this Date: October 29, 2010 | |||
/s/ Joel H. Peck | ||||
Joel H. Peck, Clerk of the Commission |
CIS0505
Exhibit 3.4
OPERATING AGREEMENT
OF
GYM-CARD, LLC
This OPERATING AGREEMENT OF Gym-Card, LLC, dated as of the 8th day of December 2008, by the Person named on Schedule A hereto as the sole Member of Gym-Card, LLC, a Virginia limited liability company (the Company).
STATEMENT OF AGREEMENT
The undersigned, desiring to form a limited liability company in accordance with the provisions of the Virginia Limited Liability Company Act, Va. Code Ann. § 13.1-1000 (the Act), and to provide for the terms and conditions under which the Company shall operate, intending to be legally bound hereby agrees as follows:
ARTICLE I
FORMATION AND BUSINESS OF THE COMPANY; OFFICES; TERM
1.1. Formation. The Company was organized on December 8, 2008, in accordance with and pursuant to the Act.
1.2. Name. The name of the Company is Gym-Card, LLC. The Company may do business under that name and, as permitted by applicable law, under any other name determined from time to time by the Member.
1.3. Purpose of the Company. The Company is formed for the object and purpose of, and the nature of the business to be conducted and promoted by the Company is, engaging in any lawful act or activity for which limited liability companies may be formed under the Act, including the business of holding, issuing and selling gift certificates, gift cards and merchandise credits and managing and tracking the obligations resulting from sales and redemptions of such gift certificates, gift cards and merchandise credits.
1.4. Principal Office. The Companys principal place of business shall be located at 500 Howard Street, San Francisco, CA 94105. The Company may have such other business offices within or without the Commonwealth of Virginia as the Member may deem advisable.
1.5. Registered Office; Registered Agent. The registered office of the Company in the Commonwealth of Virginia as required by the Act shall be the office of the initial registered agent named in the Certificate or such other office (which need not be a place of business of the Company) as a Manager may designate from time to time in the manner provided by the Act. The registered agent of the Company in the Commonwealth of Virginia shall be the initial registered agent named in the Certificate or such other Person or Persons as a Manager may designate from time to time in the manner provided by the Act.
1.6. Term. The term of the Company shall commence on the date hereof and continue in perpetuity unless or until the Company is dissolved in accordance with Article IX herewith or pursuant to the Act.
1.7. Seal. The Manager may adopt a seal of the Company in such form as the Manager may deem advisable.
ARTICLE II
DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, the following terms shall have the following meanings:
2.1. Act shall mean the Virginia Limited Liability Company Act as embodied in Va. Code Ann. Section 13.1-1000 et seq., as the same may be amended from time to time, or any successor statute.
2.2. Agreement means this Operating Agreement as it may be amended or restated from time to time, which is intended to be a limited liability company agreement within the meaning of the Act.
2.3. Capital Contribution shall mean any contribution to the capital of the Company in cash or property by the Member whenever made.
2.4. Certificate shall mean the Articles of Organization of the Company as filed with the Secretary of the Commonwealth of Virginia on December 8, 2008, as amended or restated from time to time.
2.5. Code shall mean the Internal Revenue Code of 1986 or corresponding provisions of subsequent superseding federal revenue laws.
2.6. Company shall mean the limited liability company created pursuant to the Certificate and governed by this Agreement and applicable law. as from time to time in effect.
2.7. Distributable Cash shall mean all cash, revenues and funds received by the Company from Company operations, less the sum of the following to the extent paid or set aside by the Company: (a) all principal and interest payments on indebtedness of the Company and all other sums paid to lenders; (b) all cash expenditures incurred in the normal operation of the Companys business; and (c) such reserves as the Member deems necessary for the proper operation of the Companys business.
2.8. Fiscal Year shall mean the Companys accounting, tax and fiscal year, which shall end December 31 of each calendar year.
2.9. Manager shall mean the Person or Persons, if any, who are from time to time selected by the Member as the Managers of the Company as provided herein.
2.10. Member shall mean the Person designated as the Member in Schedule A hereto, or any Person who hereafter becomes a Member as provided herein, in such Persons capacity as a member of the Company.
2.11. Member Interest shall mean all of a Members limited liability company interest in the Company, including the rights, if any, to receive allocations and distributions, to vote and, to consent or approve.
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2.12. Net Losses shall mean, for each Fiscal Year, the losses and deductions of the Company determined in accordance with accounting principles consistently applied from year to year, plus any expenditures described in Section 705(a)(2)(B) of the Code.
2.13. Net Profits shall mean, for each Fiscal Year, the income and gains of the Company determined in accordance with accounting principles consistently applied from year to year, plus any income described in Section 705(a)(l)(B) of the Code.
2.14. Percentage Interest shall mean for the Member, one hundred (100) percent.
2.15. Person shall mean any individual, partnership, limited liability company, corporation, joint venture, trust, association, or any other entity, domestic or foreign, and their respective heirs, executors, administrators, legal representatives, successors and assigns where the context of this Agreement so permits.
2.16. Regulations shall mean any applicable regulations under the Code, including, without limitation, Reg. § 1-704, as from time to time in effect, and any successor provisions.
2.17. State shall mean the Commonwealth of Virginia.
2.18. Substituted Member shall mean any Person who becomes a Member of the Company under the provisions of Article VIII.
ARTICLE III
MANAGEMENT
3.1. Management Vested in a Manager or Managers. The business and affairs of the Company may be managed by a Manager or Managers, who shall each have full and complete authority, power and discretion to manage and control the business, affairs and properties of the Company, to make all decisions regarding those matters and to perform any and all other acts or activities customary or incident to the management of the Companys business and objectives, except for such matters as are exclusively vested in the Member under the Act or by this Agreement. The Member shall act as the Manager unless a Manager is so named by the Member. Unless authorized to do so by this Agreement or by a Manager, no employee, officer, attorney-in-fact or other agent of the Company shall have any power or authority to bind the Company. The initial Managers of the Company shall be Lynda Gustafson, Mandy Kwok, Steven March and Teresa Miller. The member shall have the authority to designate additional managers from time to time.
3.2. Limitation of Liability. Notwithstanding anything contained herein to the contrary, to the fullest extent permitted by applicable law, a Manager shall not have any liability to the Company by reason of being or having been a Manager, provided that this Section 3.2 shall not affect a Managers liability if an adverse judgment or other final adjudication establishes that his acts or omissions were in bad faith or involved intentional misconduct, or he gained financial or other advantages to which he was not entitled. In performing his duties, a Manager shall be entitled to rely on information, opinions, reports or statements, including financial statements, in each case prepared or presented by the agents or employees of the Company, or counsel, public accountants, or other Persons, as to matters that a Manager believes to be within their respective professional or expert competence.
3.3. Manager Has No Exclusive Duty to Company. A Manager shall not be required to manage the Company as his sole and exclusive function and he may have other business interests and may engage in other activities in addition to those relating to the Company. The Company shall not have
3
any right, by virtue of this Agreement, to share or participate in other investments or activities of a Manager or in the income or proceeds derived therefrom.
3.4. Compensation and Expenses. As long as a Manager is also a full-time officer or employee of the Member, a Manager shall not be separately entitled to compensation for his service to the Company, but a Manager shall in all events be reimbursed by the Company for reasonable documented expenses incurred in connection with such service.
3.5. Bank Accounts. A Manager may from time to time authorize the opening of bank accounts in the name and on behalf of the Company, and a Manager shall determine who shall have the signatory power over such accounts.
3.6. Books and Records. At the expense of the Company, a Manager shall maintain, or cause to be maintained by the Treasurer, adequate records and accounts of all operations and expenditures of the Company.
3.7. Resignation and Removal. Upon notice to the Member, a Manager may voluntarily resign as the Manager of the Company. A Manager may be removed from office with or without cause upon notice from the Member.
ARTICLE IV
OFFICERS
4.1. Designation of Officers. From time to time, the Manager may, but shall not be required to, designate one or more individuals to be officers of the Company. No officer need be a resident of the Commonwealth of Virginia, a citizen of the United States, or a Member. The officers of the Company shall be a President, a Secretary, a Treasurer and, if designated by the Manager, one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers. Officers so designated shall have such authority and perform such duties as the Manager may, from time to time, prescribe or as may be provided in this Agreement. The Manager may assign titles to particular officers. Each officer shall hold office until his or her successor shall be duly designated and shall qualify or until his or her death or until he or she shall resign or shall have been removed either with or without cause. Any number of offices may be held by the same individual. The salaries or other compensation, if any, of the officers and agents of the Company shall be fixed from time to time by the Manager.
4.2. President; Vice Presidents. The President shall be the chief executive officer of the Company and shall, subject to the powers of and limitations imposed by the Manager and this Agreement, have general charge of the business, affairs and property of the Company, and control over its officers, agents and employees and shall see that all directions of the Manager are carried into effect. The President shall have such other powers and perform such other duties as may be prescribed by the Manager or as may be provided in this Agreement. The initial President of the Company shall be the Person named in Schedule B hereto. The Vice Presidents, if any are so designated by the Manager, shall have the powers and perform the duties incident to such position and perform such other duties and have such other powers and perform such other duties as may be prescribed by the Manager or as may be provided in this Agreement. The initial Vice Presidents of the Company shall be the Persons named in Schedule B hereto.
4.3. Secretary; Assistant Secretaries. The Secretary shall have the power and perform the duties incident to such position and shall perform such other duties and have such other powers as the Manager or this Agreement may, from time to time, prescribe. The initial Secretary of the Company shall be the Person named in Schedule B hereto. The Assistant Secretaries, if any are so designated by
4
the Manager, shall assist the Secretary in the performance of his or her duties and shall perform such other duties and have such other powers as the Manager or this Agreement may, from time to time, prescribe.
4.4. Treasurer: Assistant Treasurers. The Treasurer shall keep or cause to be kept at the principal executive office of the Company a record of the Members name, address, Capital Contribution, and Member Interest from time to time. The Treasurer shall (a) receive and deposit all moneys and other valuables belonging to the Company in the name and to the credit of the Company and shall disburse the same only in such manner as the Manager may from time to time determine; (b) render, or cause to be rendered, to the President or to the Manager, whenever requested, an account of all his or her transactions as Treasurer and of the financial condition of the Company; and (c) perform such other duties and have such other powers as the Manager or this Agreement may, from time to time, prescribe. The initial Treasurer of the Company shall be the Person named in Schedule B hereto. The Assistant Treasurers, if any are so designated by the Manager, shall assist the Treasurer in the performance of his or her duties and shall perform such other duties and have such other powers as the Manager or this Agreement may, from time to time, prescribe.
4.5. Chief Financial Officer. The Chief Financial Officer of the Company shall keep and maintain, or cause to be kept and maintained, adequate records and accounts of the operations and expenditures of the Company.
4.6. Resignation; Removal. Any officer may resign as such at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time be specified, at the time of its receipt by the Manager. Any officer may be removed as such, either with or without cause, by the Manager; provided that such removal shall be without prejudice to the contract rights, if any, of the individual so removed. Designation of an officer shall not of itself create contract rights. Any vacancy occurring in any office of the Company may (but need not) be filled by the Manager.
4.7. Duties of Officers Generally. Each officer shall owe to the Company and the Member the same duties of care and loyalty that such individuals would owe to a corporation and its stockholders as an officer thereof under the laws of the Commonwealth of Virginia.
ARTICLE V
RIGHTS AND OBLIGATIONS OF THE MEMBER; MEETINGS
5.1. Liability for Company Debt. Except as expressly set forth in this Agreement or required by law, a Member shall not be personally liable for any debt, obligation or liability of the Company, whether arising in contract, tort or otherwise, solely by reason of being a Member of the Company.
5.2. Liability for Wrongful Distributions. If a Member receives a distribution from the Company which the Member knows to be in violation of this Agreement or the Act, the Member shall be liable to the Company for the amount of such distribution for a period of three (3) years after it was made.
5.3. Actions Requiring the Consent of the Member. Anything herein or in the Act to the contrary notwithstanding, in no event shall the Manager take or cause to be taken any of the following actions without in each case the affirmative consent or vote of the Member (or, if more than one Member, those Members owning a majority of the then-outstanding Member Interests):
(a) the sale or grant of any encumbrance, mortgage, easement or other interest, including a lease of, on or in respect of any real property of the Company;
5
(b) issuance after the date hereof of any Member Interest in the Company, or any option or other right to acquire the same, including without limitation the issuance of any security or other right convertible into or exchangeable for any such interest;
(c) any merger or other reorganization involving the Company and any other corporation, limited liability company, limited partnership or other entity, foreign or domestic;
(d) the incidence of any indebtedness or other obligation of any amount and any nature;
(e) the liquidation or dissolution of the Company; or
(f) an amendment of the Certificate or this Agreement.
ARTICLE VI
CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS
6.1. Initial Capital Contribution. The Member shall contribute such amount as it determines in its sole discretion to contribute.
6.2. Additional Capital Contributions. The Company may accept additional Capital Contributions from the Member, at such times, in such amounts, and on such terms as the Member shall determine. However, the Member shall not be required to make any additional Capital Contributions.
6.3. Capital Account. The Company shall establish a Capital Account for the Member and maintain such account in accordance with applicable tax and accounting rules, including the Regulations. Except as otherwise required in the Act (and subject to Sections 6.1 and 6.2 hereof), the Member shall not have any liability to restore all or any portion of a deficit balance in the Members Capital Account.
6.4. Withdrawal of Capital. The Member shall not, except as otherwise provided herein, have the right to withdraw from the Company all or any part of its Capital Contribution prior to the Companys final dissolution and liquidation.
ARTICLE VII
ALLOCATIONS AND DISTRIBUTIONS
7.1. Allocations of Net Profits and Net Losses and Distribution. The net profit and net loss of the Company shall be allocated and Distributable Cash shall be distributed in accordance with the percentages set forth in Schedule A hereto. Distributable Cash shall be distributed by the Company to the Member at such times and in such amounts as the Manager shall determine.
7.2. Interest. The Member may, in its sole discretion, cause the Company to pay interest on the Members Capital Contribution.
7.3. Loans to Company. Nothing in this Agreement shall prevent a Member from making secured or unsecured loans to the Company by agreement with the Company.
7.4. Returns and Other Elections. The Manager shall cause the preparation and timely filing of all tax returns required to be filed by the Company pursuant to the Code and other tax returns deemed necessary in each jurisdiction in which the Company does business. All elections permitted to be made by the Company under federal or state laws shall be made by the Manager, under the direction of the Member.
6
ARTICLE VIII
TRANSFERABILITY OF MEMBER INTERESTS
8.1. Restrictions on Transfer. If at any time there is more than one Member, no Member may sell, alienate, pledge, grant a security interest in, make a gift of, assign or otherwise dispose of, whether voluntarily or involuntarily (including by operation of law, on account of any bankruptcy, insolvency or other proceeding, or judicial sale or otherwise) (each, a Transfer), all or part of any Member Interest in the Company without the consent of the Members owning a majority of the then outstanding Member Interests. Any Member who shall assign its entire Member Interest in the Company in accordance with Section 8.1 hereof shall cease to be a Member of the Company, and shall no longer have any rights or privileges of a Member.
8.2. Non-Recognition of Certain Transfers.
Any sale, exchange, transfer or other disposition in contravention of any of the provisions of this Agreement shall be null and void and have no effect. Each Member hereby indemnifies the Company against any and all loss, liabilities, damages, and expenses, including, without limitation, tax liabilities or loss of tax benefits, arising directly or indirectly out of any Transfer or purported Transfer in violation of this Agreement.
ARTICLE IX
DISSOLUTION AND TERMINATION
9.1. Dissolution. The Company shall be dissolved and wound up upon the occurrence of any of the following events:
(a) by written notice of the Member;
(b) upon the bankruptcy or dissolution of the Member or occurrence of any other event which terminates the continued membership of the Member in the Company other than by transfer of all of the Members Interest to another Person; or
(c) the entry of a decree of judicial dissolution under Section 13.1-1047 of the Act.
9.2. Winding Up of the Company. (a) If the Company is dissolved in accordance with Section 9.1, the Manager shall wind up the affairs of the Company, including by selling or otherwise liquidating the Companys assets. If the Manager determines that an immediate sale would be financially inadvisable, he may defer sale of the Companys assets for a reasonable time, or distribute the assets in kind.
(a) The proceeds of any liquidation of the Company shall be distributed:
(i) first, to the creditors of the Company, as and to the extent provided in Section 13.1-1049 of the Act;
(ii) second, to the Member or former Members in satisfaction of any liabilities for distributions previously declared but not paid; and
(iii) third, as provided in Article VII.
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9.3. Certificate of Cancellation. Upon the dissolution and completion of the winding up of the Company, the Member shall cause a certificate of cancellation to be prepared, executed and filed in accordance with the Act.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1. Amendments. This Agreement may be amended from time to time by the Member. Any such amendment shall be in writing signed by the Member and shall be filed with the books and records of the Company. The Certificate may be amended from time to time by the Member. Any such amendment shall be in writing signed by the Member, and shall be executed and filed in accordance with Section 13.1-1014 of the Act.
10.2. Notices. Any notice or other communication required or permitted to be given by any provision of this Agreement shall be in writing and shall be deemed to have been given when actually received. Any such notice may be given by first class mail, express delivery, telegraph or facsimile and shall be addressed to the Member at the address shown in Schedule A and/or to the Company at its principal office or to such other address as a party may from time to time designate by notice to the other parties.
10.3. Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with, and governed by, the laws of the Commonwealth of Virginia without giving any effect to any choice of law or conflict of law provision or rule (whether of Virginia or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the Commonwealth of Virginia.
10.4. Construction. Whenever the singular number is used in this Agreement and when required by context, the same shall include the plural and vice versa, and the neuter gender shall include the feminine and masculine genders and vice versa.
10.5. Headings. The headings in this Agreement are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement.
10.6. Waivers. The failure of any party to redress any violation of or to insist upon the strict performance of any covenant or condition of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation.
10.7. Rights and Remedies Cumulative. The rights and remedies provided in this Agreement are cumulative and the use of any one right or remedy by any party shall not waive the right to use any or all other remedies. Such rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise.
10.8. Severability. If any provision of this Agreement is invalid, illegal, or unenforceable, the balance of this Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.
10.9. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors, assigns, heirs, and personal representatives.
8
10.10. No Third-Party Beneficiaries. The provisions of this Agreement shall not be for the benefit of or enforceable by any creditor of the Company or of the Member, or any other third Person, except as provided in Section 10.9.
*******
WITNESS the execution of this Agreement hereof as of the 8th day of December 2008.
as sole Member
GYMBOREE RETAIL STORES, INC. | ||
By: | /s/ Blair Lambert | |
Name: | Blair W. Lambert | |
Title: | C.O.O.-C.F.O. |
9
SCHEDULE A
NAME AND BUSINESS ADDRESS OF MEMBER |
INITIAL
CAPITAL CONTRIBUTION |
INTEREST IN CAPITAL PROFIT AND LOSS |
||||||
Gymboree Retail Stores, Inc. |
$ | 1,000 | 100 | % |
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SCHEDULE B
Title |
Name | |
Chief Executive Officer & President | Matthew K. McCauley | |
Chief Operating Officer & Chief Financial Officer |
Blair W. Lambert | |
Vice President, Controller & Treasurer |
Lynda G. Gustafson | |
Vice President, Finance |
Jeffrey P. Harris | |
Secretary |
Marina Armstrong | |
Assistant Secretary |
Kimberly Holtz MacMillan | |
Senior Director, Accounting and Financial Reporting |
Teresa Reinhold Miller | |
Director, Tax and Treasury |
Mandy Kwok | |
Director, Corporate Tax |
Steve March |
11
Exhibit 3.5
ARTICLES OF INCORPORATION
OF
GYM-MARK, INC.
I
The name of this corporation is Gym-Mark, Inc.
II
The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the General Corporation Law.
III
The name and address in the State of California of this corporations initial agent for service of process is:
James P. Curley The Gymboree Corporation 700 Airport Boulevard, Suite 200 Burlingame, California 94010-1912 |
IV
This corporation is authorized to issue one class of stock, designated Common Stock. The total number of shares of Common Stock which this corporation is authorized to issue is 1,000 shares.
V
Section 1. Limitation of Directors Liability.
The liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law.
Section 2. Indemnification of Corporate Agents.
The corporation is authorized to provide indemnification of agents (as defined in Section 317 of the General Corporation Law) of the corporation to the fullest extent permissible under California law.
Section 3. Repeal or Modification.
Any repeal or modification of the foregoing provisions of this Article V by the shareholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification.
Date: July 5, 1994
/s/ Patrick J. Schultheis |
Patrick J. Schultheis, Incorporator |
- 2 -
June 30, 1994
Secretary of State of California
1230 J Street
Sacramento, California 95814
Re: | The Gymboree Corporation |
Ladies and Gentlemen:
The Gymboree Corporation hereby gives consent to the use of the corporate name Gym-Mark, Inc.
If you have any questions with regard to this matter, please do not hesitate to call me at any time.
Very truly yours, |
/s/ James P. Curley |
James P. Curley Senior Vice President Chief Financial Officer |
Gymboree Corporation, 700 Airport Blvd, Suite 200 Burlingame, CA 94010-1912 Telephone: 415-579-0600
Main Fax: 415-579-1733 Franchise Fax: 415-696-7452 Merchandise Fax: 415-696-7426 Finance Fax: 415-696-7502
Exhibit 3.6
AMENDED AND RESTATED BYLAWS
OF
GYM-MARK, INC.
AMENDED AND RESTATED BYLAWS OF
GYM-MARK, INC.
Page | ||||
ARTICLE I CORPORATE OFFICES |
1 | |||
1.1. PRINCIPAL OFFICE |
1 | |||
1.2. OTHER OFFICES |
1 | |||
ARTICLE II MEETINGS OF SHAREHOLDERS |
1 | |||
2.1. PLACE OF MEETINGS |
1 | |||
2.2. ANNUAL MEETING |
1 | |||
2.3. SPECIAL MEETING |
1 | |||
2.4. NOTICE OF SHAREHOLDERS MEETINGS |
2 | |||
2.5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE |
2 | |||
2.6. QUORUM |
3 | |||
2.7. ADJOURNED MEETING; NOTICE |
3 | |||
2.8. VOTING |
4 | |||
2.9. VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT |
4 | |||
2.10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
5 | |||
2.11. RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS |
6 | |||
2.12. PROXIES |
6 | |||
2.13. INSPECTORS OF ELECTION |
7 | |||
ARTICLE III DIRECTORS |
7 | |||
3.1. POWERS |
7 | |||
3.2. NUMBER OF DIRECTORS |
8 | |||
3.3. ELECTION AND TERM OF OFFICE OF DIRECTORS |
8 | |||
3.4. RESIGNATION AND VACANCIES |
8 | |||
3.5. PLACE OF MEETINGS: MEETINGS BY TELEPHONE |
9 | |||
3.6. REGULAR MEETINGS |
9 | |||
3.7. SPECIAL MEETINGS; NOTICE |
9 | |||
3.8. QUORUM |
9 | |||
3.9. WAIVER OF NOTICE |
10 | |||
3.10. ADJOURNMENT |
10 | |||
3.11. NOTICE OF ADJOURNMENT |
10 | |||
3.12. BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
10 | |||
3.13. FEES AND COMPENSATION OF DIRECTORS |
10 |
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3.14. APPROVAL OF LOANS TO OFFICERS |
11 | |||
ARTICLE IV COMMITTEES | 11 | |||
4.1. COMMITTEES OF DIRECTORS |
11 | |||
4.2. MEETINGS AND ACTION OF COMMITTEES |
12 | |||
ARTICLE V OFFICERS | 12 | |||
5.1. OFFICERS |
12 | |||
5.2. ELECTION OF OFFICERS |
12 | |||
5.3. SUBORDINATE OFFICERS |
12 | |||
5.4. REMOVAL AND RESIGNATION OF OFFICERS |
12 | |||
5.5. VACANCIES IN OFFICES |
13 | |||
5.6. CHAIRMAN OF THE BOARD |
13 | |||
5.7. CHIEF EXECUTIVE OFFICER |
13 | |||
5.8. PRESIDENT |
13 | |||
5.9. VICE PRESIDENTS |
13 | |||
5.10. SECRETARY |
14 | |||
5.11. CHIEF FINANCIAL OFFICER |
14 | |||
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS | 14 | |||
6.1. INDEMNIFICATION OF DIRECTORS AND OFFICERS |
14 | |||
6.2. INDEMNIFICATION OF OTHERS |
15 | |||
6.3. PAYMENT OF EXPENSES IN ADVANCE |
15 | |||
6.4. INDEMNITY NOT EXCLUSIVE |
15 | |||
6.5. INSURANCE INDEMNIFICATION |
15 | |||
6.6. CONFLICTS |
16 | |||
ARTICLE VII RECORDS AND REPORTS | 16 | |||
7.1. MAINTENANCE AND INSPECTION OF SHARE REGISTER |
16 | |||
7.2. MAINTENANCE AND INSPECTION OF BYLAWS |
17 | |||
7.3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS |
17 | |||
7.4. INSPECTION BY DIRECTORS |
17 | |||
7.5. ANNUAL REPORT TO SHAREHOLDERS; WAIVER |
17 | |||
7.6. FINANCIAL STATEMENTS |
18 | |||
7.7. REPRESENTATION OF SHARES OF OTHER CORPORATIONS |
18 | |||
ARTICLE VIII GENERAL MATTERS | 18 | |||
8.1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING |
18 | |||
8.2. CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS |
19 | |||
8.3. CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED |
19 | |||
8.4. CERTIFICATES FOR SHARES |
19 | |||
8.5. LOST CERTIFICATES |
20 |
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8.6. CONSTRUCTION: DEFINITIONS |
20 | |||
ARTICLE IX AMENDMENTS |
20 | |||
9.1. AMENDMENT BY SHAREHOLDERS |
20 | |||
9.2. AMENDMENT BY DIRECTORS |
20 |
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AMENDED AND RESTATED BYLAWS
OF
GYM-MARK, INC.
ARTICLE I
CORPORATE OFFICES
1.1. | PRINCIPAL OFFICE |
The board of directors shall fix the location of the principal executive office of the corporation at any place within or outside the State of California. If the principal executive office is located outside such state and the corporation has one or more business offices in such state, then the board of directors shall fix and designate a principal business office in the State of California.
1.2. | OTHER OFFICES |
The board of directors may at any time establish branch or subordinate offices at any place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1. | PLACE OF MEETINGS |
Meetings of shareholders shall be held at any place within or outside the State of California designated by the board of directors. In the absence of any such designation, shareholders meetings shall be held at the principal executive office of the corporation.
2.2. | ANNUAL MEETING |
The annual meeting of shareholders shall be held each year on a date and at a time designated by the board of directors. In the absence of such designation, the annual meeting of shareholders shall be held on the third Tuesday of May of each year at 10:00 a.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding full business day. At the meeting, directors shall be elected, and any other proper business may be transacted.
2.3. | SPECIAL MEETING |
A special meeting of the shareholders may be called at any time by the board of directors, or by the chairman of the board, or by the president, or by the chief executive officer, or by one
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or more shareholders holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the board of directors or the president or the chairman of the board or the chief executive officer, then the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile trans-mission to the chairman of the board, the president, any vice president, the chief executive officer or the secretary of the corporation. The officer receiving the request shall cause notice to be promptly given to the shareholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will be held at the time requested by the person or persons calling the meeting, so long as that time is not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, then the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing or affecting the time when a meeting of shareholders called by action of the board of directors may be held.
2.4. | NOTICE OF SHAREHOLDERS MEETINGS |
All notices of meetings of shareholders shall be sent or otherwise given in accordance with Section 2.5 of these bylaws not less than ten (10) (or, if sent by third-class mail pursuant to Section 2.5 of these bylaws, thirty (30)) nor more than sixty (60) days before the date of the meeting. The notice shall specify the place, date, and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted (no business other than that specified in the notice may be transacted) or (ii) in the case of the annual meeting, those matters which the board of directors, at the time of giving the notice, intends to present for action by the shareholders (but subject to the provisions of the next paragraph of this Section 2.4 any proper matter may be presented at the meeting for such action). The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees who, at the time of the notice, the board intends to present for election.
If action is proposed to be taken at any meeting for approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code of California (the Code), (ii) an amendment of the articles of incorporation, pursuant to Section 902 of the Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to Section 1900 of the Code, or (v) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of the Code, then the notice shall also state the general nature of that proposal.
2.5. | MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE |
Written notice of any meeting of shareholders shall be given either (i) personally or (ii) by first-class mail or (iii) by third-class mail but only if the corporation has outstanding shares held of record by five hundred (500) or more persons (determined as provided in Section
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605 of the Code) on the record date for the shareholders meeting, or (iv) by telegraphic or other written communication. Notices not personally delivered shall be sent charges prepaid and shall be addressed to the shareholder at the address of that shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice. If no such address appears on the corporations books or is given, notice shall be deemed to have been given if sent to that shareholder by mail or telegraphic or other written communication to the corporations principal executive office, or if published at least once in a newspaper of general circulation in the county where that office is located. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at that address, then all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available to the shareholder on written demand of the shareholder at the principal executive office of the corporation for a period of one (1) year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any shareholders meeting, executed by the secretary, assistant secretary or any transfer agent of the corporation giving the notice, shall be prima facie evidence of the giving of such notice.
2.6. | QUORUM |
The presence in person or by proxy of the holders of a majority of the shares entitled to vote thereat constitutes a quorum for the transaction of business at all meetings of shareholders. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.
2.7. | ADJOURNED MEETING; NOTICE |
Any shareholders meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy. In the absence of a quorum, no other business may be transacted at that meeting except as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place are announced at the meeting at which the adjournment is taken. However, if a new record date for the adjourned meeting is fixed or if the adjournment is for more than forty-five (45) days from the date set for the original meeting, then notice of the adjourned meeting shall be given. Notice of any such adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws. At
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any adjourned meeting the corporation may transact any business which might have been transacted at the original meeting.
2.8. | VOTING |
The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to the provisions of Sections 702 through 704 of the Code (relating to voting shares held by a fiduciary, in the name of a corporation or in joint ownership).
The shareholders vote may be by voice vote or by ballot; provided, however, that any election for directors must be by ballot if demanded by any shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as may be otherwise provided in the articles of incorporation, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote of the shareholders. Any shareholder entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or, except when the matter is the election of directors, may vote them against the proposal; but, if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the share-holders approving vote is with respect to all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the shares represented and voting at a duly held meeting (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the shareholders, unless the vote of a greater number or a vote by classes is required by the Code or by the articles of incorporation.
At a shareholders meeting at which directors are to be elected, a shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of votes which such shareholder normally is entitled to cast) if the candidates names have been placed in nomination prior to commencement of the voting and the shareholder has given notice prior to commencement of the voting of the shareholders intention to cumulate votes. If any shareholder has given such a notice, then every shareholder entitled to vote may cumulate votes for candidates in nomination either (i) by giving one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which that shareholders shares are normally entitled or (ii) by distributing the shareholders votes on the same principle among any or all of the candidates, as the shareholder thinks fit. The candidates receiving the highest number of affirmative votes, up to the number of directors to be elected, shall be elected; votes against any candidate and votes withheld shall have no legal effect.
2.9. | VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT |
The transactions of any meeting of shareholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though they had been taken at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an
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approval of the minutes thereof. The waiver of notice or consent or approval need not specify either the business to be transacted or the purpose of any annual or special meeting of shareholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 2.4 of these bylaws, the waiver of notice or consent or approval shall state the general nature of the proposal. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of notice of and presence at that meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Attendance at a meeting is not a waiver of any right to object to the consideration of matters required by the Code to be included in the notice of the meeting but not so included, if that objection is expressly made at the meeting.
2.10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be effective only if signed by the holders of all outstanding shares entitled to vote for the election of directors. However, a director may be elected at any time to fill any vacancy on the board of directors, provided that it was not created by removal of a director and that it has not been filled by the directors, by the written consent of the holders of a majority of the outstanding shares entitled to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any shareholder giving a written consent, or the shareholders proxy holders, or a transferee of the shares, or a personal representative of the shareholder, or their respective proxy holders, may revoke the consent by a writing received by the secretary of the corporation before written consents of the number of shares required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been solicited in writing and if the unanimous written consent of all such shareholders has not been received, then the secretary shall give prompt notice of the corporate action approved by the shareholders without a meeting. Such notice shall be given to those shareholders entitled to vote who have not consented in writing and shall be given in the manner specified in Section 2.5 of these bylaws. In the case of approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Code, (ii) indemnification of a corporate agent, pursuant to Section 317 of the Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of the Code, and (iv) a distribution in dissolution other than in accordance with the
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rights of outstanding preferred shares, pursuant to Section 2007 of the Code, the notice shall be given at least ten (10) days before the consummation of any action authorized by that approval.
2.11. RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS
For purposes of determining the shareholders entitled to notice of any meeting or to vote thereat or entitled to give consent to corporate action without a meeting, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting nor more than sixty (60) days before any such action without a meeting, and in such event only shareholders of record on the date so fixed are entitled to notice and to vote or to give consents, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the Code.
If the board of directors does not so fix a record date:
(a) the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held; and
(b) the record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, (i) when no prior action by the board has been taken, shall be the day on which the first written consent is given, or (ii) when prior action by the board has been taken, shall be at the close of business on the day on which the board adopts the resolution relating to that action, or the sixtieth (60th) day before the date of such other action, whichever is later.
The record date for any other purpose shall be as provided in Article VIII of these bylaws.
2.12. PROXIES
Every person entitled to vote for directors, or on any other matter, shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation. A proxy shall be deemed signed if the shareholders name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the shareholder or the shareholders attorney-in-fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) the person who executed the proxy revokes it prior to the time of voting by delivering a writing to the corporation stating that the proxy is revoked or by executing a subsequent proxy and presenting it to the meeting or by voting in person at the meeting, or (ii) written notice of the death or incapacity of the maker of that proxy is received by the corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, unless otherwise provided in the proxy. The dates contained on the forms of proxy presumptively determine the order of execution, regardless of the postmark dates on the envelopes in which
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they are mailed. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of the Code.
2.13. INSPECTORS OF ELECTION
Before any meeting of shareholders, the board of directors may appoint an inspector or inspectors of election to act at the meeting or its adjournment. If no inspector of election is so appointed, then the chairman of the meeting may, and on the request of any shareholder or a shareholders proxy shall, appoint an inspector or inspectors of election to act at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting pursuant to the request of one (1) or more shareholders or proxies, then the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, then the chairman of the meeting may, and upon the request of any share-holder or a shareholders proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
3.1. | POWERS |
Subject to the provisions of the Code and any limitations in the articles of incorporation and these bylaws relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.
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3.2. | NUMBER OF DIRECTORS |
The number of directors of the corporation shall be one (1). The number of directors may be changed, by a duly adopted amendment to the articles of incorporation or by an amendment to this bylaw duly adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote.
No reduction of the authorized number of directors shall have the effect of removing any director before that directors term of office expires.
3.3. | ELECTION AND TERM OF OFFICE OF DIRECTORS |
Directors shall be elected at each annual meeting of shareholders to hold office until the next annual meeting. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified.
3.4. | RESIGNATION AND VACANCIES |
Any director may resign effective on giving written notice to the chief executive officer, the president, or the secretary, unless the notice specifies a later time for that resignation to become effective. If the resignation of a director is effective at a future time, the board of directors may elect a successor to take office when the resignation becomes effective.
Vacancies in the board of directors may be filled by a majority of the remaining directors, even if less than a quorum, or by a sole remaining director; however, a vacancy created by the removal of a director by the vote or written consent of the shareholders or by court order may be filled only by the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute a majority of the required quorum), or by the unanimous written consent of all shares entitled to vote thereon. Each director so elected shall hold office until the next annual meeting of the shareholders and until a successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to exist (i) in the event of the death, resignation or removal of any director, (ii) if the board of directors by resolution declares vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony, (iii) if the authorized number of directors is increased, or (iv) if the shareholders fail, at any meeting of shareholders at which any director or directors are elected, to elect the number of directors to be elected at that meeting.
The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election other than to fill a vacancy created by removal, if by written consent, shall require the consent of the holders of a majority of the outstanding shares entitled to vote thereon.
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3.5. | PLACE OF MEETINGS: MEETINGS BY TELEPHONE |
Regular meetings of the board of directors may be held at any place within or outside the State of California that has been designated from time to time by resolution of the board. In the absence of such a designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board may be held at any place within or outside the State of California that has been designated in the notice of the meeting or, if not stated in the notice or if there is no notice, at the principal executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in the meeting can hear one another; and all such directors shall be deemed to be present in person at the meeting.
3.6. | REGULAR MEETINGS |
Regular meetings of the board of directors may be held without notice if the times of such meetings are fixed by the board of directors.
3.7. | SPECIAL MEETINGS; NOTICE |
Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the president, any vice president, the chief executive officer, the secretary or any one director.
Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that directors address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation.
3.8. | QUORUM |
A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 3.10 of these bylaws. Every act or decision done or made by a majority of the directors present at a duly held meeting at which a quorum is present shall be regarded as the act of the board of directors, subject to the provisions of Section 310 of the Code (as to approval of contracts or transactions in which a director has a direct or indirect material financial interest), Section 311 of the Code (as to appointment of committees), Section 317(e) of the Code (as to indemnification of directors), the articles of incorporation, and other applicable law.
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A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
3.9. | WAIVER OF NOTICE |
Notice of a meeting need not be given to any director (i) who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or (ii) who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such directors. All such waivers, consents, and approvals shall be filed with the corporate records or made part of the minutes of the meeting. A waiver of notice need not specify the purpose of any regular or special meeting of the board of directors.
3.10. | ADJOURNMENT |
A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place.
3.11. | NOTICE OF ADJOURNMENT |
Notice of the time and place of holding an adjourned meeting need not be given unless the meeting is adjourned for more than twenty-four (24) hours. If the meeting is adjourned for more than twenty-four (24) hours, then notice of the time and place of the adjourned meeting shall be given before the adjourned meeting takes place, in the manner specified in Section 3.7 of these bylaws, to the directors who were not present at the time of the adjournment.
3.12. | BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
Any action required or permitted to be taken by the board of directors may be taken without a meeting, provided that all members of the board individually or collectively consent in writing to that action. Such action by written consent shall have the same force and effect as a unanimous vote of the board of directors. Such written consent and any counterparts thereof shall be filed with the minutes of the proceedings of the board.
3.13. | FEES AND COMPENSATION OF DIRECTORS |
Directors and members of committees may receive such compensation, if any, for their services and such reimbursement of expenses as may be fixed or determined by resolution of the board of directors. This Section 3.13 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee or otherwise and receiving compensation for those services.
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3.14. APPROVAL OF LOANS TO OFFICERS1
The corporation may, upon the approval of the board of directors alone, make loans of money or property to, or guarantee the obligations of, any officer of the corporation or its parent or subsidiary, whether or not a director, or adopt an employee benefit plan or plans authorizing such loans or guaranties provided that (i) the board of directors determines that such a loan or guaranty or plan may reasonably be expected to benefit the corporation, (ii) the corporation has outstanding shares held of record by 100 or more persons (determined as provided in Section 605 of the Code) on the date of approval by the board of directors, and (iii) the approval of the board of directors is by a vote sufficient without counting the vote of any interested director or directors.
ARTICLE IV
COMMITTEES
4.1. | COMMITTEES OF DIRECTORS |
The board of directors may, by resolution adopted by a majority of the authorized number of directors, designate one (1) or more committees, each consisting of one (1) or more directors, to serve at the pleasure of the board. The board may designate one (1) or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. The appointment of members or alternate members of a committee requires the vote of a majority of the authorized number of directors. Any committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with respect to:
(a) the approval of any action which, under the Code, also requires shareholders approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any committee;
(c) the fixing of compensation of the directors for serving on the board or any committee;
(d) the amendment or repeal of these bylaws or the adoption of new bylaws;
(e) the amendment or repeal of any resolution of the board of directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the board of directors; or
(g) the appointment of any other committees of the board of directors or the members of such committees.
1 | This section is effective only if it has been approved by the shareholders in accordance with Sections 315(b) and 152 of the Code. |
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4.2. | MEETINGS AND ACTION OF COMMITTEES |
Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section 3.12 (action without meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the board of directors, and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
5.1. | OFFICERS |
The officers of the corporation shall be a chief executive officer, a president, a chief financial officer, one or more vice presidents, a secretary, and one or more assistant secretaries. The corporation may also have, at the discretion of the board of directors, a chairman of the board, a treasurer, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person.
5.2. | ELECTION OF OFFICERS |
The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws, shall be chosen by the board, subject to the rights, if any, of an officer under any contract of employment.
5.3. | SUBORDINATE OFFICERS |
The board of directors may appoint, or may empower any officer to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.
5.4. | REMOVAL AND RESIGNATION OF OFFICERS |
Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors at any regular or special meeting of the board or, except in case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors.
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Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.
5.5. | VACANCIES IN OFFICES |
A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to that office.
5.6. | CHAIRMAN OF THE BOARD |
The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the board of directors or as may be prescribed by these bylaws.
5.7. | CHIEF EXECUTIVE OFFICER |
Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the chief executive officer of the corporation shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation. He shall preside at all meetings of the shareholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the board of directors. He shall have the general powers and duties of management usually vested in the office of chief executive officer of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws.
5.8. | PRESIDENT |
In the absence or disability of the chief executive officer, the president shall perform all the duties of the chief executive officer and when so acting shall have all the powers of, and be subject to all the restrictions upon, the chief executive officer. The president shall have such other powers and perform such other duties as from time to time may be prescribed for him by the board of directors, these bylaws, and chief executive officer, or the chairman of the board.
5.9. | VICE PRESIDENTS |
In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the chief executive officer, the president or the chairman of the board.
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5.10. | SECRETARY |
The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors and shareholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors meetings or committee meetings, the number of shares present or represented at shareholders meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporations transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the board of directors required to be given by law or by these bylaws. He shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws.
5.11. | CHIEF FINANCIAL OFFICER |
The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the chief executive officer, the president and directors, whenever they request it, an account of all of his transactions as chief financial officer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1. | INDEMNIFICATION OF DIRECTORS AND OFFICERS |
The corporation shall, to the maximum extent and in the manner permitted by the Code, indemnify each of its directors and officers against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in
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connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Article VI, a director or officer of the corporation includes any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
6.2. | INDEMNIFICATION OF OTHERS |
The corporation shall have the power, to the extent and in the manner permitted by the Code, to indemnify each of its employees and agents (other than directors and officers) against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Article VI, an employee or agent of the corporation (other than a director or officer) includes any person (i) who is or was an employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
6.3. | PAYMENT OF EXPENSES IN ADVANCE |
Expenses incurred in defending any civil or criminal action or proceeding for which indemnification is required pursuant to Section 6.1 or for which indemnification is permitted pursuant to Section 6.2 following authorization thereof by the Board of Directors shall be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of the indemnified party to repay such amount if it shall ultimately be determined that the indemnified party is not entitled to be indemnified as authorized in this Article VI.
6.4. | INDEMNITY NOT EXCLUSIVE |
The indemnification provided by this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the extent that such additional rights to indemnification are authorized in the Articles of Incorporation.
6.5. | INSURANCE INDEMNIFICATION |
The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation against any liability asserted against or incurred by such person in such capacity or arising out of such persons status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article VI.
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6.6. | CONFLICTS |
No indemnification or advance shall be made under this Article VI, except where such indemnification or advance is mandated by law or the order, judgment or decree of any court of competent jurisdiction, in any circumstance where it appears:
(1) That it would be inconsistent with a provision of the Articles of Incorporation, these bylaws, a resolution of the shareholders or an agreement in effect at the time of the accrual of the alleged cause of the action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1. | MAINTENANCE AND INSPECTION OF SHARE REGISTER |
The corporation shall keep either at its principal executive office or at the office of its transfer agent or registrar (if either be appointed), as determined by resolution of the board of directors, a record of its shareholders listing the names and addresses of all shareholders and the number and class of shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least five percent (5%) in the aggregate of the outstanding voting shares of the corporation or who holds at least one percent (1%) of such voting shares and has filed a Schedule 14B with the Securities and Exchange Commission relating to the election of directors, may (i) inspect and copy the records of shareholders names, addresses, and shareholdings during usual business hours on five (5) days prior written demand on the corporation, (ii) obtain from the transfer agent of the corporation, on written demand and on the tender of such transfer agents usual charges for such list, a list of the names and addresses of the shareholders who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which that list has been compiled or as of a date specified by the shareholder after the date of demand. Such list shall be made available to any such shareholder by the transfer agent on or before the later of five (5) days after the demand is received or five (5) days after the date specified in the demand as the date as of which the list is to be compiled.
The record of shareholders shall also be open to inspection on the written demand of any shareholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to the holders interests as a shareholder or as the holder of a voting trust certificate.
Any inspection and copying under this Section 7.1 may be made in person or by an agent or attorney of the shareholder or holder of a voting trust certificate making the demand.
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7.2. | MAINTENANCE AND INSPECTION OF BYLAWS |
The corporation shall keep at its principal executive office or, if its principal executive office is not in the State of California, at its principal business office in California the original or a copy of these bylaws as amended to date, which bylaws shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside the State of California and the corporation has no principal business office in such state, then the secretary shall, upon the written request of any shareholder, furnish to that shareholder a copy of these bylaws as amended to date.
7.3. | MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS |
The accounting books and records and the minutes of proceedings of the shareholders, of the board of directors, and of any committee or committees of the board of directors shall be kept at such place or places as are designated by the board of directors or, in absence of such designation, at the principal executive office of the corporation. The minutes shall be kept in written form, and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to the holders interests as a shareholder or as the holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney and shall include the right to copy and make extracts. Such rights of inspection shall extend to the records of each subsidiary corporation of the corporation.
7.4. | INSPECTION BY DIRECTORS |
Every director shall have the absolute right at any reasonable time to inspect all books, records, and documents of every kind as well as the physical properties of the corporation and each of its subsidiary corporations. Such inspection by a director may be made in person or by an agent or attorney. The right of inspection includes the right to copy and make extracts of documents.
7.5. | ANNUAL REPORT TO SHAREHOLDERS; WAIVER |
The board of directors shall cause an annual report to be sent to the shareholders not later than one hundred twenty (120) days after the close of the fiscal year adopted by the corporation. Such report shall be sent at least fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days) before the annual meeting of shareholders to be held during the next fiscal year and in the manner specified in Section 2.5 of these bylaws for giving notice to shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of the fiscal year, (ii) an income statement, (iii) a statement of changes in financial position for the fiscal year, and (iv) any report of independent accountants or, if there is no such report, the certificate of an authorized officer of the corporation that the statements were prepared without audit from the books and records of the corporation.
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The foregoing requirement of an annual report shall be waived so long as the shares of the corporation are held by fewer than one hundred (100) holders of record.
7.6. | FINANCIAL STATEMENTS |
If no annual report for the fiscal year has been sent to shareholders, then the corporation shall, upon the written request of any shareholder made more than one hundred twenty (120) days after the close of such fiscal year, deliver or mail to the person making the request, within thirty (30) days thereafter, a copy of a balance sheet as of the end of such fiscal year and an income statement and statement of changes in financial position for such fiscal year.
If a shareholder or shareholders holding at least five percent (5%) of the outstanding shares of any class of stock of the corporation makes a written request to the corporation for an income statement of the corporation for the three-month, six-month or nine-month period of the then current fiscal year ended more than thirty (30) days before the date of the request, and for a balance sheet of the corporation as of the end of that period, then the chief financial officer shall cause that statement to be prepared, if not already prepared, and shall deliver personally or mail that statement or statements to the person making the request within thirty (30) days after the receipt of the request. If the corporation has not sent to the shareholders its annual report for the last fiscal year, the statements referred to in the first paragraph of this Section 7.6 shall likewise be delivered or mailed to the shareholder or shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report, if any, of any independent accountants engaged by the corporation or by the certificate of an authorized officer of the corporation that the financial statements were prepared without audit from the books and records of the corporation.
7.7. | REPRESENTATION OF SHARES OF OTHER CORPORATIONS |
The chairman of the board, the chief executive officer, the president, any vice president, the chief financial officer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the chief executive officer or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority herein granted may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1. | RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING |
For purposes of determining the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the shareholders entitled to exercise any rights in respect of any other lawful action (other than action by shareholders by written consent without a meeting), the board of directors may fix, in advance, a record date, which shall not be
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more than sixty (60) days before any such action. In that case, only shareholders of record at the close of business on the date so fixed are entitled to receive the dividend, distribution or allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided in the Code.
If the board of directors does not so fix a record date, then the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the board adopts the applicable resolution or the sixtieth (60th) day before the date of that action, whichever is later.
8.2. | CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS |
From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.
8.3. | CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED |
The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
8.4. | CERTIFICATES FOR SHARES |
A certificate or certificates for shares of the corporation shall be issued to each shareholder when any of such shares are fully paid. The board of directors may authorize the issuance of certificates for shares partly paid provided that these certificates shall state the total amount of the consideration to be paid for them and the amount actually paid. All certificates shall be signed in the name of the corporation by the chairman of the board or the vice chairman of the board or the president or a vice president or the chief executive officer and by the chief financial officer or an assistant treasurer or the secretary or an assistant secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on a certificate ceases to be that officer, transfer agent or registrar before that certificate is issued, it may be issued by the corporation with the same effect as if that person were an officer, transfer agent or registrar at the date of issue.
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8.5. | LOST CERTIFICATES |
Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and can-celled at the same time. The board of directors may, in case any share certificate or certificate for any other security is lost, stolen or destroyed, authorize the issuance of replacement certificates on such terms and conditions as the board may require; the board may require indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of the certificate or the issuance of the replacement certificate.
8.6. | CONSTRUCTION: DEFINITIONS |
Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Code shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes, the singular, and the term person includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
9.1. | AMENDMENT BY SHAREHOLDERS |
New bylaws may be adopted or these bylaws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote.
9.2. | AMENDMENT BY DIRECTORS |
Subject to the rights of the shareholders as provided in Section 9.1 of these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing the authorized number of directors (except to fix the authorized number of directors pursuant to a bylaw providing for a variable number of directors), may be adopted, amended or repealed by the board of directors.
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Exhibit 3.7
ARTICLES OF INCORPORATION
OF
GYMBOREE MANUFACTURING, INC.
I
The name of this corporation is Gymboree Manufacturing, Inc.
II
The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the General Corporation Law.
III
The name and address in the State of California of this corporations initial agent for service of process is:
James P. Curley The Gymboree Corporation 700 Airport Boulevard, Suite 200 Burlingame, California 94010-1912 |
IV
This corporation is authorized to issue one class of stock, designated Common Stock. The total number of shares of Common Stock which this corporation is authorized to issue is 1,000 shares.
V
Section 1. Limitation of Directors Liability.
The liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law.
Section 2. Indemnification of Corporate Agents.
The corporation is authorized to provide indemnification of agents (as defined in Section 317 of the General Corporation Law) of the corporation to the fullest extent permissible under California law.
Section 3. Repeal or Modification.
Any repeal or modification of the foregoing provisions of this Article V by the shareholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification.
Date: July 5, 1994
/s/ Patrick J. Schultheis | ||
Patrick J. Schultheis, | ||
Incorporator |
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June 30, 1994
Secretary of State of California
1230 J Street
Sacramento, California 95814
Re: | The Gymboree Corporation |
Ladies and Gentlemen:
The Gymboree Corporation hereby gives consent to the use of the corporate name Gymboree Manufacturing, Inc.
If you have any questions with regard to this matter, please do not hesitate to call me at any time.
Very truly yours, | ||
/s/ James P. Curley | ||
James P. Curley | ||
Senior Vice President | ||
Chief Financial Officer |
Gymboree Corporation, 700 Airport Blvd, Suite 200 Burlingame, CA 94010-1912 Telephone: 415-579-0600
Main Fax: 415-579-1733 Franchise Fax: 415-696-7452 Merchandise Fax: 415-696-7426 Finance Fax: 415-696-7502
Exhibit 3.8
AMENDED AND RESTATED BYLAWS
OF
GYMBOREE MANUFACTURING, INC.
AMENDED AND RESTATED BYLAWS OF
GYMBOREE MANUFACTURING, INC.
TABLE OF CONTENTS
Page | ||||
ARTICLE I CORPORATE OFFICES |
1 | |||
1.1. PRINCIPAL OFFICE |
1 | |||
1.2. OTHER OFFICES |
1 | |||
ARTICLE II MEETINGS OF SHAREHOLDERS |
1 | |||
2.1. PLACE OF MEETINGS |
1 | |||
2.2. ANNUAL MEETING |
1 | |||
2.3. SPECIAL MEETING |
1 | |||
2.4. NOTICE OF SHAREHOLDERS MEETINGS |
2 | |||
2.5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE |
2 | |||
2.6. QUORUM |
3 | |||
2.7. ADJOURNED MEETING; NOTICE |
3 | |||
2.8. VOTING |
4 | |||
2.9. VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT |
4 | |||
2.10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
5 | |||
2.11. RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS |
6 | |||
2.12. PROXIES |
6 | |||
2.13. INSPECTORS OF ELECTION |
7 | |||
ARTICLE III DIRECTORS |
7 | |||
3.1. POWERS |
7 | |||
3.2. NUMBER OF DIRECTORS |
8 | |||
3.3. ELECTION AND TERM OF OFFICE OF DIRECTORS |
8 | |||
3.4. RESIGNATION AND VACANCIES |
8 | |||
3.5. PLACE OF MEETINGS: MEETINGS BY TELEPHONE |
9 | |||
3.6. REGULAR MEETINGS |
9 | |||
3.7. SPECIAL MEETINGS; NOTICE |
9 | |||
3.8. QUORUM |
9 | |||
3.9. WAIVER OF NOTICE |
10 | |||
3.10. ADJOURNMENT |
10 | |||
3.11. NOTICE OF ADJOURNMENT |
10 | |||
3.12. BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
10 | |||
3.13. FEES AND COMPENSATION OF DIRECTORS |
10 |
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3.14. APPROVAL OF LOANS TO OFFICERS |
11 | |||
ARTICLE IV COMMITTEES |
11 | |||
4.1. COMMITTEES OF DIRECTORS |
11 | |||
4.2. MEETINGS AND ACTION OF COMMITTEES |
12 | |||
ARTICLE V OFFICERS |
12 | |||
5.1. OFFICERS |
12 | |||
5.2. ELECTION OF OFFICERS |
12 | |||
5.3. SUBORDINATE OFFICERS |
12 | |||
5.4. REMOVAL AND RESIGNATION OF OFFICERS |
12 | |||
5.5. VACANCIES IN OFFICES |
13 | |||
5.6. CHAIRMAN OF THE BOARD |
13 | |||
5.7. CHIEF EXECUTIVE OFFICER |
13 | |||
5.8. PRESIDENT |
13 | |||
5.9. VICE PRESIDENTS |
13 | |||
5.10. SECRETARY |
14 | |||
5.11. CHIEF FINANCIAL OFFICER |
14 | |||
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS |
14 | |||
6.1. INDEMNIFICATION OF DIRECTORS AND OFFICERS |
14 | |||
6.2. INDEMNIFICATION OF OTHERS |
15 | |||
6.3. PAYMENT OF EXPENSES IN ADVANCE |
15 | |||
6.4. INDEMNITY NOT EXCLUSIVE |
15 | |||
6.5. INSURANCE INDEMNIFICATION |
15 | |||
6.6. CONFLICTS |
16 | |||
ARTICLE VII RECORDS AND REPORTS |
16 | |||
7.1. MAINTENANCE AND INSPECTION OF SHARE REGISTER |
16 | |||
7.2. MAINTENANCE AND INSPECTION OF BYLAWS |
17 | |||
7.3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS |
17 | |||
7.4. INSPECTION BY DIRECTORS |
17 | |||
7.5. ANNUAL REPORT TO SHAREHOLDERS; WAIVER |
17 | |||
7.6. FINANCIAL STATEMENTS |
18 | |||
7.7. REPRESENTATION OF SHARES OF OTHER CORPORATIONS |
18 | |||
ARTICLE VIII GENERAL MATTERS |
18 | |||
8.1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING |
18 | |||
8.2. CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS |
19 | |||
8.3. CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED |
19 | |||
8.4. CERTIFICATES FOR SHARES |
19 | |||
8.5. LOST CERTIFICATES |
20 |
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8.6. CONSTRUCTION: DEFINITIONS |
20 | |||
ARTICLE IX AMENDMENTS |
20 | |||
9.1. AMENDMENT BY SHAREHOLDERS |
20 | |||
9.2. AMENDMENT BY DIRECTORS |
20 |
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AMENDED AND RESTATED BYLAWS
OF
GYMBOREE MANUFACTURING, INC.
ARTICLE I
CORPORATE OFFICES
1.1. | PRINCIPAL OFFICE |
The board of directors shall fix the location of the principal executive office of the corporation at any place within or outside the State of California. If the principal executive office is located outside such state and the corporation has one or more business offices in such state, then the board of directors shall fix and designate a principal business office in the State of California.
1.2. | OTHER OFFICES |
The board of directors may at any time establish branch or subordinate offices at any place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1. | PLACE OF MEETINGS |
Meetings of shareholders shall be held at any place within or outside the State of California designated by the board of directors. In the absence of any such designation, shareholders meetings shall be held at the principal executive office of the corporation.
2.2. | ANNUAL MEETING |
The annual meeting of shareholders shall be held each year on a date and at a time designated by the board of directors. In the absence of such designation, the annual meeting of shareholders shall be held on the third Tuesday of May of each year at 10:00 a.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding full business day. At the meeting, directors shall be elected, and any other proper business may be transacted.
2.3. | SPECIAL MEETING |
A special meeting of the shareholders may be called at any time by the board of directors, or by the chairman of the board, or by the president, or by the chief executive officer, or by one
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or more shareholders holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the board of directors or the president or the chairman of the board or the chief executive officer, then the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile trans-mission to the chairman of the board, the president, any vice president, the chief executive officer or the secretary of the corporation. The officer receiving the request shall cause notice to be promptly given to the shareholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will be held at the time requested by the person or persons calling the meeting, so long as that time is not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, then the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing or affecting the time when a meeting of shareholders called by action of the board of directors may be held.
2.4. | NOTICE OF SHAREHOLDERS MEETINGS |
All notices of meetings of shareholders shall be sent or otherwise given in accordance with Section 2.5 of these bylaws not less than ten (10) (or, if sent by third-class mail pursuant to Section 2.5 of these bylaws, thirty (30)) nor more than sixty (60) days before the date of the meeting. The notice shall specify the place, date, and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted (no business other than that specified in the notice may be transacted) or (ii) in the case of the annual meeting, those matters which the board of directors, at the time of giving the notice, intends to present for action by the shareholders (but subject to the provisions of the next paragraph of this Section 2.4 any proper matter may be presented at the meeting for such action). The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees who, at the time of the notice, the board intends to present for election.
If action is proposed to be taken at any meeting for approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code of California (the Code), (ii) an amendment of the articles of incorporation, pursuant to Section 902 of the Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to Section 1900 of the Code, or (v) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of the Code, then the notice shall also state the general nature of that proposal.
2.5. | MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE |
Written notice of any meeting of shareholders shall be given either (i) personally or (ii) by first-class mail or (iii) by third-class mail but only if the corporation has outstanding shares held of record by five hundred (500) or more persons (determined as provided in Section
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605 of the Code) on the record date for the shareholders meeting, or (iv) by telegraphic or other written communication. Notices not personally delivered shall be sent charges prepaid and shall be addressed to the shareholder at the address of that shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice. If no such address appears on the corporations books or is given, notice shall be deemed to have been given if sent to that shareholder by mail or telegraphic or other written communication to the corporations principal executive office, or if published at least once in a newspaper of general circulation in the county where that office is located. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at that address, then all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available to the shareholder on written demand of the shareholder at the principal executive office of the corporation for a period of one (1) year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any shareholders meeting, executed by the secretary, assistant secretary or any transfer agent of the corporation giving the notice, shall be prima facie evidence of the giving of such notice.
2.6. | QUORUM |
The presence in person or by proxy of the holders of a majority of the shares entitled to vote thereat constitutes a quorum for the transaction of business at all meetings of shareholders. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.
2.7. | ADJOURNED MEETING; NOTICE |
Any shareholders meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy. In the absence of a quorum, no other business may be transacted at that meeting except as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place are announced at the meeting at which the adjournment is taken. However, if a new record date for the adjourned meeting is fixed or if the adjournment is for more than forty-five (45) days from the date set for the original meeting, then notice of the adjourned meeting shall be given. Notice of any such adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws. At
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any adjourned meeting the corporation may transact any business which might have been transacted at the original meeting.
2.8. | VOTING |
The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to the provisions of Sections 702 through 704 of the Code (relating to voting shares held by a fiduciary, in the name of a corporation or in joint ownership).
The shareholders vote may be by voice vote or by ballot; provided, however, that any election for directors must be by ballot if demanded by any shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as may be otherwise provided in the articles of incorporation, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote of the shareholders. Any shareholder entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or, except when the matter is the election of directors, may vote them against the proposal; but, if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the share-holders approving vote is with respect to all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the shares represented and voting at a duly held meeting (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the shareholders, unless the vote of a greater number or a vote by classes is required by the Code or by the articles of incorporation.
At a shareholders meeting at which directors are to be elected, a shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of votes which such shareholder normally is entitled to cast) if the candidates names have been placed in nomination prior to commencement of the voting and the shareholder has given notice prior to commencement of the voting of the shareholders intention to cumulate votes. If any shareholder has given such a notice, then every shareholder entitled to vote may cumulate votes for candidates in nomination either (i) by giving one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which that shareholders shares are normally entitled or (ii) by distributing the shareholders votes on the same principle among any or all of the candidates, as the shareholder thinks fit. The candidates receiving the highest number of affirmative votes, up to the number of directors to be elected, shall be elected; votes against any candidate and votes withheld shall have no legal effect.
2.9. | VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT |
The transactions of any meeting of shareholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though they had been taken at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an
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approval of the minutes thereof. The waiver of notice or consent or approval need not specify either the business to be transacted or the purpose of any annual or special meeting of shareholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 2.4 of these bylaws, the waiver of notice or consent or approval shall state the general nature of the proposal. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of notice of and presence at that meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Attendance at a meeting is not a waiver of any right to object to the consideration of matters required by the Code to be included in the notice of the meeting but not so included, if that objection is expressly made at the meeting.
2.10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be effective only if signed by the holders of all outstanding shares entitled to vote for the election of directors. However, a director may be elected at any time to fill any vacancy on the board of directors, provided that it was not created by removal of a director and that it has not been filled by the directors, by the written consent of the holders of a majority of the outstanding shares entitled to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any shareholder giving a written consent, or the shareholders proxy holders, or a transferee of the shares, or a personal representative of the shareholder, or their respective proxy holders, may revoke the consent by a writing received by the secretary of the corporation before written consents of the number of shares required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been solicited in writing and if the unanimous written consent of all such shareholders has not been received, then the secretary shall give prompt notice of the corporate action approved by the shareholders without a meeting. Such notice shall be given to those shareholders entitled to vote who have not consented in writing and shall be given in the manner specified in Section 2.5 of these bylaws. In the case of approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Code, (ii) indemnification of a corporate agent, pursuant to Section 317 of the Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of the Code, and (iv) a distribution in dissolution other than in accordance with the
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rights of outstanding preferred shares, pursuant to Section 2007 of the Code, the notice shall be given at least ten (10) days before the consummation of any action authorized by that approval.
2.11. RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS
For purposes of determining the shareholders entitled to notice of any meeting or to vote thereat or entitled to give consent to corporate action without a meeting, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting nor more than sixty (60) days before any such action without a meeting, and in such event only shareholders of record on the date so fixed are entitled to notice and to vote or to give consents, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the Code.
If the board of directors does not so fix a record date:
(a) the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held; and
(b) the record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, (i) when no prior action by the board has been taken, shall be the day on which the first written consent is given, or (ii) when prior action by the board has been taken, shall be at the close of business on the day on which the board adopts the resolution relating to that action, or the sixtieth (60th) day before the date of such other action, whichever is later.
The record date for any other purpose shall be as provided in Article VIII of these bylaws.
2.12. PROXIES
Every person entitled to vote for directors, or on any other matter, shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation. A proxy shall be deemed signed if the shareholders name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the shareholder or the shareholders attorney-in-fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) the person who executed the proxy revokes it prior to the time of voting by delivering a writing to the corporation stating that the proxy is revoked or by executing a subsequent proxy and presenting it to the meeting or by voting in person at the meeting, or (ii) written notice of the death or incapacity of the maker of that proxy is received by the corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, unless otherwise provided in the proxy. The dates contained on the forms of proxy presumptively determine the order of execution, regardless of the postmark dates on the envelopes in which
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they are mailed. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of the Code.
2.13. INSPECTORS OF ELECTION
Before any meeting of shareholders, the board of directors may appoint an inspector or inspectors of election to act at the meeting or its adjournment. If no inspector of election is so appointed, then the chairman of the meeting may, and on the request of any shareholder or a shareholders proxy shall, appoint an inspector or inspectors of election to act at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting pursuant to the request of one (1) or more shareholders or proxies, then the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, then the chairman of the meeting may, and upon the request of any share-holder or a shareholders proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
3.1. | POWERS |
Subject to the provisions of the Code and any limitations in the articles of incorporation and these bylaws relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.
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3.2. | NUMBER OF DIRECTORS |
The number of directors of the corporation shall be one (1). The number of directors may be changed, by a duly adopted amendment to the articles of incorporation or by an amendment to this bylaw duly adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote.
No reduction of the authorized number of directors shall have the effect of removing any director before that directors term of office expires.
3.3. | ELECTION AND TERM OF OFFICE OF DIRECTORS |
Directors shall be elected at each annual meeting of shareholders to hold office until the next annual meeting. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified.
3.4. | RESIGNATION AND VACANCIES |
Any director may resign effective on giving written notice to the chief executive officer, the president, or the secretary, unless the notice specifies a later time for that resignation to become effective. If the resignation of a director is effective at a future time, the board of directors may elect a successor to take office when the resignation becomes effective.
Vacancies in the board of directors may be filled by a majority of the remaining directors, even if less than a quorum, or by a sole remaining director; however, a vacancy created by the removal of a director by the vote or written consent of the shareholders or by court order may be filled only by the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute a majority of the required quorum), or by the unanimous written consent of all shares entitled to vote thereon. Each director so elected shall hold office until the next annual meeting of the shareholders and until a successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to exist (i) in the event of the death, resignation or removal of any director, (ii) if the board of directors by resolution declares vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony, (iii) if the authorized number of directors is increased, or (iv) if the shareholders fail, at any meeting of shareholders at which any director or directors are elected, to elect the number of directors to be elected at that meeting.
The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election other than to fill a vacancy created by removal, if by written consent, shall require the consent of the holders of a majority of the outstanding shares entitled to vote thereon.
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3.5. | PLACE OF MEETINGS: MEETINGS BY TELEPHONE |
Regular meetings of the board of directors may be held at any place within or outside the State of California that has been designated from time to time by resolution of the board. In the absence of such a designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board may be held at any place within or outside the State of California that has been designated in the notice of the meeting or, if not stated in the notice or if there is no notice, at the principal executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in the meeting can hear one another; and all such directors shall be deemed to be present in person at the meeting.
3.6. | REGULAR MEETINGS |
Regular meetings of the board of directors may be held without notice if the times of such meetings are fixed by the board of directors.
3.7. | SPECIAL MEETINGS; NOTICE |
Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the president, any vice president, the chief executive officer, the secretary or any one director.
Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that directors address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation.
3.8. | QUORUM |
A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 3.10 of these bylaws. Every act or decision done or made by a majority of the directors present at a duly held meeting at which a quorum is present shall be regarded as the act of the board of directors, subject to the provisions of Section 310 of the Code (as to approval of contracts or transactions in which a director has a direct or indirect material financial interest), Section 311 of the Code (as to appointment of committees), Section 317(e) of the Code (as to indemnification of directors), the articles of incorporation, and other applicable law.
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A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
3.9. | WAIVER OF NOTICE |
Notice of a meeting need not be given to any director (i) who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or (ii) who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such directors. All such waivers, consents, and approvals shall be filed with the corporate records or made part of the minutes of the meeting. A waiver of notice need not specify the purpose of any regular or special meeting of the board of directors.
3.10. ADJOURNMENT
A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place.
3.11. NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not be given unless the meeting is adjourned for more than twenty-four (24) hours. If the meeting is adjourned for more than twenty-four (24) hours, then notice of the time and place of the adjourned meeting shall be given before the adjourned meeting takes place, in the manner specified in Section 3.7 of these bylaws, to the directors who were not present at the time of the adjournment.
3.12. BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors may be taken without a meeting, provided that all members of the board individually or collectively consent in writing to that action. Such action by written consent shall have the same force and effect as a unanimous vote of the board of directors. Such written consent and any counterparts thereof shall be filed with the minutes of the proceedings of the board.
3.13. FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if any, for their services and such reimbursement of expenses as may be fixed or determined by resolution of the board of directors. This Section 3.13 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee or otherwise and receiving compensation for those services.
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3.14. APPROVAL OF LOANS TO OFFICERS1
The corporation may, upon the approval of the board of directors alone, make loans of money or property to, or guarantee the obligations of, any officer of the corporation or its parent or subsidiary, whether or not a director, or adopt an employee benefit plan or plans authorizing such loans or guaranties provided that (i) the board of directors determines that such a loan or guaranty or plan may reasonably be expected to benefit the corporation, (ii) the corporation has outstanding shares held of record by 100 or more persons (determined as provided in Section 605 of the Code) on the date of approval by the board of directors, and (iii) the approval of the board of directors is by a vote sufficient without counting the vote of any interested director or directors.
ARTICLE IV
COMMITTEES
4.1. | COMMITTEES OF DIRECTORS |
The board of directors may, by resolution adopted by a majority of the authorized number of directors, designate one (1) or more committees, each consisting of one (1) or more directors, to serve at the pleasure of the board. The board may designate one (1) or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. The appointment of members or alternate members of a committee requires the vote of a majority of the authorized number of directors. Any committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with respect to:
(a) the approval of any action which, under the Code, also requires shareholders approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any committee;
(c) the fixing of compensation of the directors for serving on the board or any committee;
(d) the amendment or repeal of these bylaws or the adoption of new bylaws;
(e) the amendment or repeal of any resolution of the board of directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the board of directors; or
(g) the appointment of any other committees of the board of directors or the members of such committees.
1 | This section is effective only if it has been approved by the shareholders in accordance with Sections 315(b) and 152 of the Code. |
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4.2. | MEETINGS AND ACTION OF COMMITTEES |
Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section 3.12 (action without meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the board of directors, and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
5.1. | OFFICERS |
The officers of the corporation shall be a chief executive officer, a president, a chief financial officer, one or more vice presidents, a secretary, and one or more assistant secretaries. The corporation may also have, at the discretion of the board of directors, a chairman of the board, a treasurer, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person.
5.2. | ELECTION OF OFFICERS |
The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws, shall be chosen by the board, subject to the rights, if any, of an officer under any contract of employment.
5.3. | SUBORDINATE OFFICERS |
The board of directors may appoint, or may empower any officer to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.
5.4. | REMOVAL AND RESIGNATION OF OFFICERS |
Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors at any regular or special meeting of the board or, except in case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors.
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Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.
5.5. | VACANCIES IN OFFICES |
A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to that office.
5.6. | CHAIRMAN OF THE BOARD |
The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the board of directors or as may be prescribed by these bylaws.
5.7. | CHIEF EXECUTIVE OFFICER |
Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the chief executive officer of the corporation shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation. He shall preside at all meetings of the shareholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the board of directors. He shall have the general powers and duties of management usually vested in the office of chief executive officer of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws.
5.8. | PRESIDENT |
In the absence or disability of the chief executive officer, the president shall perform all the duties of the chief executive officer and when so acting shall have all the powers of, and be subject to all the restrictions upon, the chief executive officer. The president shall have such other powers and perform such other duties as from time to time may be prescribed for him by the board of directors, these bylaws, and chief executive officer, or the chairman of the board.
5.9. | VICE PRESIDENTS |
In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the chief executive officer, the president or the chairman of the board.
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5.10. SECRETARY
The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors and shareholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors meetings or committee meetings, the number of shares present or represented at shareholders meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporations transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the board of directors required to be given by law or by these bylaws. He shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws.
5.11. CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the chief executive officer, the president and directors, whenever they request it, an account of all of his transactions as chief financial officer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1. | INDEMNIFICATION OF DIRECTORS AND OFFICERS |
The corporation shall, to the maximum extent and in the manner permitted by the Code, indemnify each of its directors and officers against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in
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connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Article VI, a director or officer of the corporation includes any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
6.2. | INDEMNIFICATION OF OTHERS |
The corporation shall have the power, to the extent and in the manner permitted by the Code, to indemnify each of its employees and agents (other than directors and officers) against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Article VI, an employee or agent of the corporation (other than a director or officer) includes any person (i) who is or was an employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
6.3. | PAYMENT OF EXPENSES IN ADVANCE |
Expenses incurred in defending any civil or criminal action or proceeding for which indemnification is required pursuant to Section 6.1 or for which indemnification is permitted pursuant to Section 6.2 following authorization thereof by the Board of Directors shall be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of the indemnified party to repay such amount if it shall ultimately be determined that the indemnified party is not entitled to be indemnified as authorized in this Article VI.
6.4. | INDEMNITY NOT EXCLUSIVE |
The indemnification provided by this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the extent that such additional rights to indemnification are authorized in the Articles of Incorporation.
6.5. | INSURANCE INDEMNIFICATION |
The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation against any liability asserted against or incurred by such person in such capacity or arising out of such persons status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article VI.
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6.6. | CONFLICTS |
No indemnification or advance shall be made under this Article VI, except where such indemnification or advance is mandated by law or the order, judgment or decree of any court of competent jurisdiction, in any circumstance where it appears:
(1) That it would be inconsistent with a provision of the Articles of Incorporation, these bylaws, a resolution of the shareholders or an agreement in effect at the time of the accrual of the alleged cause of the action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1. | MAINTENANCE AND INSPECTION OF SHARE REGISTER |
The corporation shall keep either at its principal executive office or at the office of its transfer agent or registrar (if either be appointed), as determined by resolution of the board of directors, a record of its shareholders listing the names and addresses of all shareholders and the number and class of shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least five percent (5%) in the aggregate of the outstanding voting shares of the corporation or who holds at least one percent (1%) of such voting shares and has filed a Schedule 14B with the Securities and Exchange Commission relating to the election of directors, may (i) inspect and copy the records of shareholders names, addresses, and shareholdings during usual business hours on five (5) days prior written demand on the corporation, (ii) obtain from the transfer agent of the corporation, on written demand and on the tender of such transfer agents usual charges for such list, a list of the names and addresses of the shareholders who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which that list has been compiled or as of a date specified by the shareholder after the date of demand. Such list shall be made available to any such shareholder by the transfer agent on or before the later of five (5) days after the demand is received or five (5) days after the date specified in the demand as the date as of which the list is to be compiled.
The record of shareholders shall also be open to inspection on the written demand of any shareholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to the holders interests as a shareholder or as the holder of a voting trust certificate.
Any inspection and copying under this Section 7.1 may be made in person or by an agent or attorney of the shareholder or holder of a voting trust certificate making the demand.
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7.2. | MAINTENANCE AND INSPECTION OF BYLAWS |
The corporation shall keep at its principal executive office or, if its principal executive office is not in the State of California, at its principal business office in California the original or a copy of these bylaws as amended to date, which bylaws shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside the State of California and the corporation has no principal business office in such state, then the secretary shall, upon the written request of any shareholder, furnish to that shareholder a copy of these bylaws as amended to date.
7.3. | MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS |
The accounting books and records and the minutes of proceedings of the shareholders, of the board of directors, and of any committee or committees of the board of directors shall be kept at such place or places as are designated by the board of directors or, in absence of such designation, at the principal executive office of the corporation. The minutes shall be kept in written form, and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to the holders interests as a shareholder or as the holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney and shall include the right to copy and make extracts. Such rights of inspection shall extend to the records of each subsidiary corporation of the corporation.
7.4. | INSPECTION BY DIRECTORS |
Every director shall have the absolute right at any reasonable time to inspect all books, records, and documents of every kind as well as the physical properties of the corporation and each of its subsidiary corporations. Such inspection by a director may be made in person or by an agent or attorney. The right of inspection includes the right to copy and make extracts of documents.
7.5. | ANNUAL REPORT TO SHAREHOLDERS; WAIVER |
The board of directors shall cause an annual report to be sent to the shareholders not later than one hundred twenty (120) days after the close of the fiscal year adopted by the corporation. Such report shall be sent at least fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days) before the annual meeting of shareholders to be held during the next fiscal year and in the manner specified in Section 2.5 of these bylaws for giving notice to shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of the fiscal year, (ii) an income statement, (iii) a statement of changes in financial position for the fiscal year, and (iv) any report of independent accountants or, if there is no such report, the certificate of an authorized officer of the corporation that the statements were prepared without audit from the books and records of the corporation.
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The foregoing requirement of an annual report shall be waived so long as the shares of the corporation are held by fewer than one hundred (100) holders of record.
7.6. | FINANCIAL STATEMENTS |
If no annual report for the fiscal year has been sent to shareholders, then the corporation shall, upon the written request of any shareholder made more than one hundred twenty (120) days after the close of such fiscal year, deliver or mail to the person making the request, within thirty (30) days thereafter, a copy of a balance sheet as of the end of such fiscal year and an income statement and statement of changes in financial position for such fiscal year.
If a shareholder or shareholders holding at least five percent (5%) of the outstanding shares of any class of stock of the corporation makes a written request to the corporation for an income statement of the corporation for the three-month, six-month or nine-month period of the then current fiscal year ended more than thirty (30) days before the date of the request, and for a balance sheet of the corporation as of the end of that period, then the chief financial officer shall cause that statement to be prepared, if not already prepared, and shall deliver personally or mail that statement or statements to the person making the request within thirty (30) days after the receipt of the request. If the corporation has not sent to the shareholders its annual report for the last fiscal year, the statements referred to in the first paragraph of this Section 7.6 shall likewise be delivered or mailed to the shareholder or shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report, if any, of any independent accountants engaged by the corporation or by the certificate of an authorized officer of the corporation that the financial statements were prepared without audit from the books and records of the corporation.
7.7. | REPRESENTATION OF SHARES OF OTHER CORPORATIONS |
The chairman of the board, the chief executive officer, the president, any vice president, the chief financial officer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the chief executive officer or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority herein granted may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1. | RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING |
For purposes of determining the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the shareholders entitled to exercise any rights in respect of any other lawful action (other than action by shareholders by written consent without a meeting), the board of directors may fix, in advance, a record date, which shall not be
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more than sixty (60) days before any such action. In that case, only shareholders of record at the close of business on the date so fixed are entitled to receive the dividend, distribution or allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided in the Code.
If the board of directors does not so fix a record date, then the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the board adopts the applicable resolution or the sixtieth (60th) day before the date of that action, whichever is later.
8.2. | CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS |
From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.
8.3. | CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED |
The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
8.4. | CERTIFICATES FOR SHARES |
A certificate or certificates for shares of the corporation shall be issued to each shareholder when any of such shares are fully paid. The board of directors may authorize the issuance of certificates for shares partly paid provided that these certificates shall state the total amount of the consideration to be paid for them and the amount actually paid. All certificates shall be signed in the name of the corporation by the chairman of the board or the vice chairman of the board or the president or a vice president or the chief executive officer and by the chief financial officer or an assistant treasurer or the secretary or an assistant secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on a certificate ceases to be that officer, transfer agent or registrar before that certificate is issued, it may be issued by the corporation with the same effect as if that person were an officer, transfer agent or registrar at the date of issue.
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8.5. | LOST CERTIFICATES |
Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and can-celled at the same time. The board of directors may, in case any share certificate or certificate for any other security is lost, stolen or destroyed, authorize the issuance of replacement certificates on such terms and conditions as the board may require; the board may require indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of the certificate or the issuance of the replacement certificate.
8.6. | CONSTRUCTION: DEFINITIONS |
Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Code shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes, the singular, and the term person includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
9.1. | AMENDMENT BY SHAREHOLDERS |
New bylaws may be adopted or these bylaws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote.
9.2. | AMENDMENT BY DIRECTORS |
Subject to the rights of the shareholders as provided in Section 9.1 of these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing the authorized number of directors (except to fix the authorized number of directors pursuant to a bylaw providing for a variable number of directors), may be adopted, amended or repealed by the board of directors.
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Exhibit 3.9
ARTICLES OF INCORPORATION
OF
GYMBOREE OPERATIONS, INC.
I
The name of this corporation is Gymboree Operations, Inc.
II
The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the General Corporation Law.
III
The name and address in the State of California of this corporations initial agent for service of process is:
James P. Curley | ||||
The Gymboree Corporation | ||||
700 Airport Boulevard, Suite 200 | ||||
Burlingame, California 94010 -1912 |
IV
This corporation is authorized to issue one class of stock, designated Common Stock. The total number of shares of Common Stock which this corporation is authorized to issue is 1,000 shares.
V
Section 1. Limitation of Directors Liability.
The liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law.
Section 2. Indemnification of Corporate Agents.
The corporation is authorized to provide indemnification of agents (as defined in Section 317 of the General Corporation Law) of the corporation to the fullest extent permissible under California law.
Section 3. Repeal or Modification.
Any repeal or modification of the foregoing provisions of this Article V by the shareholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification.
Date: July 5, 1994
/s/ Patrick J. Schultheis, |
Patrick J. Schultheis, Incorporator |
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June 30, 1994
Secretary of State of California
1230 J Street
Sacramento, California 95814
Re: | The Gymboree Corporation |
Ladies and Gentlemen:
The Gymboree Corporation hereby gives consent to the use of the corporate name Gymboree Operations, Inc.
If you have any questions with regard to this matter, please do not hesitate to call me at any time.
Very truly yours, |
/s/ James P. Curley |
James P. Curley |
Senior Vice President |
Chief Financial Officer |
Gymboree Corporation, 700 Airport Blvd, Suite 200 Burlingame, CA 94010-1912 Telephone 415-579-0600
Main Fax: 415-579-1733 Franchise Fax 415-696-7452 Merchandise Fax 415-696-7426 Finance Fax 415-696-7502
Exhibit 3.10
AMENDED AND RESTATED BYLAWS
OF
GYMBOREE OPERATIONS, INC.
AMENDED AND RESTATED BYLAWS OF
GYMBOREE OPERATIONS, INC.
TABLE OF CONTENTS
Page | ||||||
ARTICLE I CORPORATE OFFICES |
1 | |||||
1.1 |
PRINCIPAL OFFICE |
1 | ||||
1.2 |
OTHER OFFICES |
1 | ||||
ARTICLE II MEETINGS OF SHAREHOLDERS |
1 | |||||
2.1 |
PLACE OF MEETINGS |
1 | ||||
2.2 |
ANNUAL MEETING |
1 | ||||
2.3 |
SPECIAL MEETING |
1 | ||||
2.4 |
NOTICE OF SHAREHOLDERS MEETINGS |
2 | ||||
2.5 |
MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE |
2 | ||||
2.6 |
QUORUM |
3 | ||||
2.7 |
ADJOURNED MEETING: NOTICE |
3 | ||||
2.8 |
VOTING |
4 | ||||
2.9 |
VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT |
4 | ||||
2.10 |
SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
5 | ||||
2.11 |
RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS |
6 | ||||
2.12 |
PROXIES |
6 | ||||
2.13 |
INSPECTORS OF ELECTION |
7 | ||||
ARTICLE III DIRECTORS |
7 | |||||
3.1 |
POWERS |
7 | ||||
3.2 |
NUMBER OF DIRECTORS |
7 | ||||
3.3 |
ELECTION AND TERM OF OFFICE OF DIRECTORS |
8 | ||||
3.4 |
RESIGNATION AND VACANCIES |
8 | ||||
3.5 |
PLACE OF MEETINGS; MEETINGS BY TELEPHONE |
8 | ||||
3.6 |
REGULAR MEETINGS |
9 | ||||
3.7 |
SPECIAL MEETINGS., NOTICE |
9 | ||||
3.8 |
QUORUM |
9 | ||||
3.9 |
WAIVER OF NOTICE |
10 | ||||
3.10 |
ADJOURNMENT |
10 | ||||
3.11 |
NOTICE OF ADJOURNMENT |
10 | ||||
3.12 |
BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
10 | ||||
3.13 |
FEES AND COMPENSATION OF DIRECTORS |
10 | ||||
3.14 |
APPROVAL OF LOANS TO OFFICERS |
10 |
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ARTICLE IV COMMITTEES |
11 | |||||
4.1 |
COMMITTEES OF DIRECTORS |
11 | ||||
4.2 |
MEETINGS AND ACTION OF COMMITTEES |
11 | ||||
ARTICLE V OFFICERS | 12 | |||||
5.1 |
OFFICERS |
12 | ||||
5.2 |
ELECTION OF OFFICERS |
12 | ||||
5.3 |
SUBORDINATE OFFICERS |
12 | ||||
5.4 |
REMOVAL AND RESIGNATION OF OFFICERS |
12 | ||||
5.5 |
VACANCIES IN OFFICES |
13 | ||||
5.6 |
CHAIRMAN OF THE BOARD |
13 | ||||
5.7 |
CHIEF EXECUTIVE OFFICER |
13 | ||||
5.8 |
PRESIDENT |
13 | ||||
5.9 |
VICE PRESIDENTS |
13 | ||||
5.10 |
SECRETARY |
13 | ||||
5.11 |
CHIEF FINANCIAL OFFICER |
14 | ||||
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS | 14 | |||||
6.1 |
INDEMNIFICATION OF DIRECTORS AND OFFICERS |
14 | ||||
6.2 |
INDEMNIFICATION OF OTHERS |
15 | ||||
6.3 |
PAYMENT OF EXPENSES IN ADVANCE |
15 | ||||
6.4 |
INDEMNITY NOT EXCLUSIVE |
15 | ||||
6.5 |
INSURANCE INDEMNIFICATION |
15 | ||||
6.6 |
CONFLICTS |
15 | ||||
ARTICLE VII RECORDS AND REPORTS | 16 | |||||
7.1 |
MAINTENANCE AND INSPECTION OF SHARE REGISTER |
16 | ||||
7.2 |
MAINTENANCE AND INSPECTION OF BYLAWS |
16 | ||||
7.3 |
MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS |
17 | ||||
7.4 |
INSPECTION BY DIRECTORS |
17 | ||||
7.5 |
ANNUAL REPORT TO SHAREHOLDERS; WAIVER |
17 | ||||
7.6 |
FINANCIAL STATEMENTS |
18 | ||||
7.7 |
REPRESENTATION OF SHARES OF OTHER CORPORATIONS |
18 | ||||
ARTICLE VIII GENERAL MATTERS | 18 | |||||
8.1 |
RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING |
18 | ||||
8.2 |
CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS |
19 | ||||
8.3 |
CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED |
19 | ||||
8.4 |
CERTIFICATES FOR SHARES |
19 | ||||
8.5 |
LOST CERTIFICATES |
19 | ||||
8.6 |
CONSTRUCTION; DEFINITIONS |
20 |
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ARTICLE IX AMENDMENTS |
20 | |||||
9.1 |
AMENDMENT BY SHAREHOLDERS |
20 | ||||
9.2 |
AMENDMENT BY DIRECTORS |
20 |
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AMENDED AND RESTATED BYLAWS
OF
GYMBOREE OPERATIONS, INC.
ARTICLE I
CORPORATE OFFICES
1.1 | PRINCIPAL OFFICE |
The board of directors shall fix the location of the principal executive office of the corporation at any place within or outside the State of California. If the principal executive office is located outside such state and the corporation has one or more business offices in such state, then the board of directors shall fix and designate a principal business office in the State of California.
1.2 | OTHER OFFICES |
The board of directors may at any time establish branch or subordinate offices at any place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 | PLACE OF MEETINGS |
Meetings of shareholders shall be held at any place within or outside the State of California designated by the board of directors. In the absence of any such designation, shareholders meetings shall be held at the principal executive office of the corporation.
2.2 | ANNUAL MEETING |
The annual meeting of shareholders shall be held each year on a date and at a time designated by the board of directors. In the absence of such designation, the annual meeting of shareholders shall be held on the third Tuesday of May of each year at 10:00 a.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding full business day. At the meeting, directors shall be elected, and any other proper business may be transacted.
2.3 | SPECIAL MEETING |
A special meeting of the shareholders may be called at any time by the board of directors, the chairman of the board, the chief executive officer, the president, or one or more shareholders
holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the board of directors, the chief executive officer, the president, or the chairman of the board, then the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the chief executive officer, the president, any vice president or the secretary of the corporation. The officer receiving the request shall cause notice to be promptly given to the shareholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will be held at the time requested by the person or persons calling the meeting, so long as that time is not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, then the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing or affecting the time when a meeting of shareholders called by action of the board of directors may be held.
2.4 | NOTICE OF SHAREHOLDERS MEETINGS |
All notices of meetings of shareholders shall be sent or otherwise given in accordance with Section 2.5 of these bylaws not less than ten (10) (or, if sent by third-class mail pursuant to Section 2.5 of these bylaws, thirty (30)) nor more than sixty (60) days before the date of the meeting. The notice shall specify the place, date, and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted (no business other than that specified in the notice may be transacted) or (ii) in the case of the annual meeting, those matters which the board of directors, at the time of giving the notice, intends to present for action by the shareholders (but subject to the provisions of the next paragraph of this Section 2.4 any proper matter may be presented at the meeting for such action). The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees who, at the time of the notice, the board intends to present for election.
If action is proposed to be taken at any meeting for approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code of California (the Code), (ii) an amendment of the articles of incorporation, pursuant to Section 902 of the Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to Section 1900 of the Code, or (v) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of the Code, then the notice shall also state the general nature of that proposal.
2.5 | MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE |
Written notice of any meeting of shareholders shall be given either (i) personally or (ii) by first-class mail or (iii) by third-class mail but only if the corporation has outstanding shares held of record by five hundred (500) or more persons (determined as provided in Section 605 of the Code) on the record date for the shareholders meeting, or (iv) by telegraphic or other written
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communication. Notices not personally delivered shall be sent charges prepaid and shall be addressed to the shareholder at the address of that shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice. If no such address appears on the corporations books or is given, notice shall be deemed to have been given if sent to that shareholder by mail or telegraphic or other written communication to the corporations principal executive office, or if published at least once in a newspaper of general circulation in the county where that office is located. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at that address, then all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available to the shareholder on written demand of the shareholder at the principal executive office of the corporation for a period of one (1) year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any shareholders meeting, executed by the secretary, assistant secretary or any transfer agent of the corporation giving the notice, shall be prima facie evidence of the giving of such notice.
2.6 | QUORUM |
The presence in person or by proxy of the holders of a majority of the shares entitled to vote thereat constitutes a quorum for the transaction of business at all meetings of shareholders. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.
2.7 | ADJOURNED MEETING: NOTICE |
Any shareholders meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy. In the absence of a quorum, no other business may be transacted at that meeting except as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place are announced at the meeting at which the adjournment is taken. However, if a new record date for the adjourned meeting is fixed or if the adjournment is for more than forty-five (45) days from the date set for the original meeting, then notice of the adjourned meeting shall be given. Notice of any such adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws. At any adjourned meeting the corporation may transact any business which might have been transacted at the original meeting.
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2.8 | VOTING |
The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to the provisions of Sections 702 through 704 of the Code (relating to voting shares held by a fiduciary, in the name of a corporation or in joint ownership).
The shareholders vote may be by voice vote or by ballot; provided, however, that any election for directors must be by ballot if demanded by any shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as may be otherwise provided in the articles of incorporation, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote of the shareholders. Any shareholder entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or, except when the matter is the election of directors, may vote them against the proposal; but, if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the shareholders approving vote is with respect to all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the shares represented and voting at a duly held meeting (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the shareholders, unless the vote of a greater number or a vote by classes is required by the Code or by the articles of incorporation.
At a shareholders meeting at which directors are to be elected, a shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of votes which such shareholder normally is entitled to cast) if the candidates names have been placed in nomination prior to commencement of the voting and the shareholder has given notice prior to commencement of the voting of the shareholders intention to cumulate votes. If any shareholder has given such a notice, then every shareholder entitled to vote may cumulate votes for candidates in nomination either (i) by giving one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which that shareholders shares are normally entitled or (ii) by distributing the shareholders votes on the same principle among any or all of the candidates, as the shareholder thinks fit. The candidates receiving the highest number of affirmative votes, up to the number of directors to be elected, shall be elected; votes against any candidate and votes withheld shall have no legal effect.
2.9 | VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT |
The transactions of any meeting of shareholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though they had been taken at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof. The waiver of notice or consent or approval need not specify either the business to be transacted or the purpose of any annual or special meeting of
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shareholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 2.4 of these bylaws, the waiver of notice or consent or approval shall state the general nature of the proposal. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of notice of and presence at that meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Attendance at a meeting is not a waiver of any right to object to the consideration of matters required by the Code to be included in the notice of the meeting but not so included, if that objection is expressly made at the meeting.
2.10 | SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
Any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be effective only if signed by the holders of all outstanding shares entitled to vote for the election of directors. However, a director may be elected at any time to fill any vacancy on the board of directors, provided that it was not created by removal of a director and that it has not been filled by the directors, by the written consent of the holders of a majority of the outstanding shares entitled to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any shareholder giving a written consent, or the shareholders proxy holders, or a transferee of the shares, or a personal representative of the shareholder, or their respective proxy holders, may revoke the consent by a writing received by the secretary of the corporation before written consents of the number of shares required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been solicited in writing and if the unanimous written consent of all such shareholders has not been received, then the secretary shall give prompt notice of the corporate action approved by the shareholders without a meeting. Such notice shall be given to those shareholders entitled to vote who have not consented in writing and shall be given in the manner specified in Section 2.5 of these bylaws. In the case of approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Code, (ii) indemnification of a corporate agent, pursuant to Section 317 of the Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of the Code, and (iv) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of the Code, the notice shall be given at least ten (10) days before the consummation of any action authorized by that approval.
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2.11 | RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS |
For purposes of determining the shareholders entitled to notice of any meeting or to vote thereat or entitled to give consent to corporate action without a meeting, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting nor more than sixty (60) days before any such action without a meeting, and in such event only shareholders of record on the date so fixed are entitled to notice and to vote or to give consents, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the Code.
If the board of directors does not so fix a record date:
(a) the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held; and
(b) the record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, (i) when no prior action by the board has been taken, shall be the day on which the first written consent is given, or (ii) when prior action by the board has been taken, shall be at the close of business on the day on which the board adopts the resolution relating to that action, or the sixtieth (60th) day before the date of such other action, whichever is later.
The record date for any other purpose shall be as provided in Article VIII of these bylaws.
2.12 | PROXIES |
Every person entitled to vote for directors, or on any other matter, shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation. A proxy shall be deemed signed if the shareholders name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the shareholder or the shareholders attorney-in-fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) the person who executed the proxy revokes it prior to the time of voting by delivering a writing to the corporation stating that the proxy is revoked or by executing a subsequent proxy and presenting it to the meeting or by voting in person at the meeting, or (ii) written notice of the death or incapacity of the maker of that proxy is received by the corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, unless otherwise provided in the proxy. The dates contained on the forms of proxy presumptively determine the order of execution, regardless of the postmark dates on the envelopes in which they are mailed. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of the Code.
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2.13 | INSPECTORS OF ELECTION |
Before any meeting of shareholders, the board of directors may appoint an inspector or inspectors of election to act at the meeting or its adjournment. If no inspector of election is so appointed, then the chairman of the meeting may, and on the request of any shareholder or a shareholders proxy shall, appoint an inspector or inspectors of election to act at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting pursuant to the request of one (1) or more shareholders or proxies, then the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, then the chairman of the meeting may, and upon the request of any share-holder or a shareholders proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
3.1 | POWERS |
Subject to the provisions of the Code and any limitations in the articles of incorporation and these bylaws relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.
3.2 | NUMBER OF DIRECTORS |
The number of directors of the corporation shall be one (1). The number of directors may be changed, by a duly adopted amendment to the articles of incorporation or by an amendment to
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this bylaw duly adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote.
No reduction of the authorized number of directors shall have the effect of removing any director before that directors term of office expires.
3.3 | ELECTION AND TERM OF OFFICE OF DIRECTORS |
Directors shall be elected at each annual meeting of shareholders to hold office until the next annual meeting. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified.
3.4 | RESIGNATION AND VACANCIES |
Any director may resign effective on giving written notice to the chief executive officer, the president, or the secretary, unless the notice specifies a later time for that resignation to become effective. If the resignation of a director is effective at a future time, the board of directors may elect a successor to take office when the resignation becomes effective.
Vacancies in the board of directors may be filled by a majority of the remaining directors, even if less than a quorum, or by a sole remaining director; however, a vacancy created by the removal of a director by the vote or written consent of the shareholders or by court order may be filled only by the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute a majority of the required quorum), or by the unanimous written consent of all shares entitled to vote thereon. Each director so elected shall hold office until the next annual meeting of the shareholders and until a successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to exist (i) in the event of the death, resignation or removal of any director, (ii) if the board of directors by resolution declares vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony, (iii) if the authorized number of directors is increased, or (iv) if the shareholders fail, at any meeting of shareholders at which any director or directors are elected, to elect the number of directors to be elected at that meeting.
The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election other than to fill a vacancy created by removal, if by written consent, shall require the consent of the holders of a majority of the outstanding shares entitled to vote thereon.
3.5 | PLACE OF MEETINGS; MEETINGS BY TELEPHONE |
Regular meetings of the board of directors may be held at any place within or outside the State of California that has been designated from time to time by resolution of the board. In the absence of such a designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board may be held at any place within or outside the
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State of California that has been designated in the notice of the meeting or, if not stated in the notice or if there is no notice, at the principal executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in the meeting can hear one another; and all such directors shall be deemed to be present in person at the meeting.
3.6 | REGULAR MEETINGS |
Regular meetings of the board of directors may be held without notice if the times of such meetings are fixed by the board of directors.
3.7 | SPECIAL MEETINGS; NOTICE |
Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the chief executive officer, the president, any vice president, the secretary or any one director.
Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that directors address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation.
3.8 | QUORUM |
A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 3.10 of these bylaws. Every act or decision done or made by a majority of the directors present at a duly held meeting at which a quorum is present shall be regarded as the act of the board of directors, subject to the provisions of Section 310 of the Code (as to approval of contracts or transactions in which a director has a direct or indirect material financial interest), Section 311 of the Code (as to appointment of committees), Section 317(e) of the Code (as to indemnification of directors), the articles of incorporation, and other applicable law.
A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
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3.9 | WAIVER OF NOTICE |
Notice of a meeting need not be given to any director (i) who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or (ii) who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such directors. All such waivers, consents, and approvals shall be filed with the corporate records or made part of the minutes of the meeting. A waiver of notice need not specify the purpose of any regular or special meeting of the board of directors.
3.10 | ADJOURNMENT |
A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place.
3.11 | NOTICE OF ADJOURNMENT |
Notice of the time and place of holding an adjourned meeting need not be given unless the meeting is adjourned for more than twenty-four (24) hours. If the meeting is adjourned for more than twenty-four (24) hours, then notice of the time and place of the adjourned meeting shall be given before the adjourned meeting takes place, in the manner specified in Section 3.7 of these bylaws, to the directors who were not present at the time of the adjournment.
3.12 | BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
Any action required or permitted to be taken by the board of directors may be taken without a meeting, provided that all members of the board individually or collectively consent in writing to that action. Such action by written consent shall have the same force and effect as a unanimous vote of the board of directors. Such written consent and any counterparts thereof shall be filed with the minutes of the proceedings of the board.
3.13 | FEES AND COMPENSATION OF DIRECTORS |
Directors and members of committees may receive such compensation, if any, for their services and such reimbursement of expenses as may be fixed or determined by resolution of the board of directors. This Section 3.13 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee or otherwise and receiving compensation for those services.
3.14 | APPROVAL OF LOANS TO OFFICERS 1 |
The corporation may, upon the approval of the board of directors alone, make loans of money or property to, or guarantee the obligations of, any officer of the corporation or its parent or subsidiary, whether or not a director, or adopt an employee benefit plan or plans authorizing such loans or guaranties provided that (i) the board of directors determines that such a loan or guaranty or plan may reasonably be expected to benefit the corporation, (ii) the corporation has
1 | This section is effective only if it has been approved by the shareholders in accordance with Sections 315(b) and 152 of the Code. |
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outstanding shares held of record by 100 or more persons (determined as provided in Section 605 of the Code) on the date of approval by the board of directors, and (iii) the approval of the board of directors is by a vote sufficient without counting the vote of any interested director or directors.
ARTICLE IV
COMMITTEES
4.1 | COMMITTEES OF DIRECTORS |
The board of directors may, by resolution adopted by a majority of the authorized number of directors, designate one (1) or more committees, each consisting of one (1) or more directors, to serve at the pleasure of the board. The board may designate one (1) or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. The appointment of members or alternate members of a committee requires the vote of a majority of the authorized number of directors. Any committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with respect to:
(a) the approval of any action which, under the Code, also requires shareholders approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any committee;
(c) the fixing of compensation of the directors for serving on the board or any committee;
(d) the amendment or repeal of these bylaws or the adoption of new bylaws;
(e) the amendment or repeal of any resolution of the board of directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the board of directors; or
(g) the appointment of any other committees of the board of directors or the members of such committees.
4.2 | MEETINGS AND ACTION OF COMMITTEES |
Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section 3.12 (action without meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that
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special meetings of committees may also be called by resolution of the board of directors, and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
5.1 | OFFICERS |
The officers of the corporation shall be a chief executive officer, a president, one or more vice presidents, a chief financial officer, a secretary, and one or more assistant secretaries. The corporation may also have, at the discretion of the board of directors, a chairman of the board, a treasurer, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person.
5.2 | ELECTION OF OFFICERS |
The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws, shall be chosen by the board, subject to the rights, if any, of an officer under any contract of employment.
5.3 | SUBORDINATE OFFICERS |
The board of directors may appoint, or may empower any officer to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.
5.4 | REMOVAL AND RESIGNATION OF OFFICERS |
Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors at any regular or special meeting of the board or, except in case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.
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5.5 | VACANCIES IN OFFICES |
A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to that office.
5.6 | CHAIRMAN OF THE BOARD |
The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the board of directors or as may be prescribed by these bylaws.
5.7 | CHIEF EXECUTIVE OFFICER |
Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the chief executive officer of the corporation shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation. He shall preside at all meetings of the shareholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the board of directors. He shall have the general powers and duties of management usually vested in the office of chief executive officer of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws.
5.8 | PRESIDENT |
In the absence or disability of the chief executive officer, the president shall perform all the duties of the chief executive officer and when so acting shall have all the powers of, and be subject to all the restrictions upon, the chief executive officer. The president shall have such other powers and perform such other duties as from time to time may be prescribed for him by the board of directors, these bylaws, and chief executive officer, or the chairman of the board.
5.9 | VICE PRESIDENTS |
In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the chief executive officer, the president or the chairman of the board.
5.10 | SECRETARY |
The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors and shareholders. The minutes shall
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show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors meetings or committee meetings, the number of shares present or represented at shareholders meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporations transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the board of directors required to be given by law or by these bylaws. He shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws.
5.11 | CHIEF FINANCIAL OFFICER |
The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the chief executive officer, the president and directors, whenever they request it, an account of all of his transactions as chief financial officer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1 | INDEMNIFICATION OF DIRECTORS AND OFFICERS |
The corporation shall, to the maximum extent and in the manner permitted by the Code, indemnify each of its directors and officers against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Article VI, a director or officer of the corporation includes any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who
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was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
6.2 | INDEMNIFICATION OF OTHERS |
The corporation shall have the power, to the extent and in the manner permitted by the Code, to indemnify each of its employees and agents (other than directors and officers) against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Article VI, an employee or agent of the corporation (other than a director or officer) includes any person (i) who is or was an employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
6.3 | PAYMENT OF EXPENSES IN ADVANCE |
Expenses incurred in defending any civil or criminal action or proceeding for which indemnification is required pursuant to Section 6.1 or for which indemnification is permitted pursuant to Section 6.2 following authorization thereof by the Board of Directors shall be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of the indemnified party to repay such amount if it shall ultimately be determined that the indemnified party is not entitled to be indemnified as authorized in this Article VI.
6.4 | INDEMNITY NOT EXCLUSIVE |
The indemnification provided by this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the extent that such additional rights to indemnification are authorized in the Articles of Incorporation.
6.5 | INSURANCE INDEMNIFICATION |
The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation against any liability asserted against or incurred by such person in such capacity or arising out of such persons status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article VI.
6.6 | CONFLICTS |
No indemnification or advance shall be made under this Article VI, except where such indemnification or advance is mandated by law or the order, judgment or decree of any court of competent jurisdiction, in any circumstance where it appears:
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(1) That it would be inconsistent with a provision of the Articles of Incorporation, these bylaws, a resolution of the shareholders or an agreement in effect at the time of the accrual of the alleged cause of the action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1 | MAINTENANCE AND INSPECTION OF SHARE REGISTER |
The corporation shall keep either at its principal executive office or at the office of its transfer agent or registrar (if either be appointed), as determined by resolution of the board of directors, a record of its shareholders listing the names and addresses of all shareholders and the number and class of shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least five percent (5%) in the aggregate of the outstanding voting shares of the corporation or who holds at least one percent (1%) of such voting shares and has filed a Schedule 14B with the Securities and Exchange Commission relating to the election of directors, may (i) inspect and copy the records of shareholders names, addresses, and shareholdings during usual business hours on five (5) days prior written demand on the corporation, (ii) obtain from the transfer agent of the corporation, on written demand and on the tender of such transfer agents usual charges for such list, a list of the names and addresses of the shareholders who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which that list has been compiled or as of a date specified by the shareholder after the date of demand. Such list shall be made available to any such shareholder by the transfer agent on or before the later of five (5) days after the demand is received or five (5) days after the date specified in the demand as the date as of which the list is to be compiled.
The record of shareholders shall also be open to inspection on the written demand of any shareholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to the holders interests as a shareholder or as the holder of a voting trust certificate.
Any inspection and copying under this Section 7.1 may be made in person or by an agent or attorney of the shareholder or holder of a voting trust certificate making the demand.
7.2 | MAINTENANCE AND INSPECTION OF BYLAWS |
The corporation shall keep at its principal executive office or, if its principal executive office is not in the State of California, at its principal business office in California the original or a copy of these bylaws as amended to date, which bylaws shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the
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corporation is outside the State of California and the corporation has no principal business office in such state, then the secretary shall, upon the written request of any shareholder, furnish to that shareholder a copy of these bylaws as amended to date.
7.3 | MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS |
The accounting books and records and the minutes of proceedings of the shareholders, of the board of directors, and of any committee or committees of the board of directors shall be kept at such place or places as are designated by the board of directors or, in absence of such designation, at the principal executive office of the corporation. The minutes shall be kept in written form, and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to the holders interests as a shareholder or as the holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney and shall include the right to copy and make extracts. Such rights of inspection shall extend to the records of each subsidiary corporation of the corporation.
7.4 | INSPECTION BY DIRECTORS |
Every director shall have the absolute right at any reasonable time to inspect all books, records, and documents of every kind as well as the physical properties of the corporation and each of its subsidiary corporations. Such inspection by a director may be made in person or by an agent or attorney. The right of inspection includes the right to copy and make extracts of documents.
7.5 | ANNUAL REPORT TO SHAREHOLDERS; WAIVER |
The board of directors shall cause an annual report to be sent to the shareholders not later than one hundred twenty (120) days after the close of the fiscal year adopted by the corporation. Such report shall be sent at least fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days) before the annual meeting of shareholders to be held during the next fiscal year and in the manner specified in Section 2.5 of these bylaws for giving notice to shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of the fiscal year, (ii) an income statement, (iii) a statement of changes in financial position for the fiscal year, and (iv) any report of independent accountants or, if there is no such report, the certificate of an authorized officer of the corporation that the statements were prepared without audit from the books and records of the corporation.
The foregoing requirement of an annual report shall be waived so long as the shares of the corporation are held by fewer than one hundred (100) holders of record.
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7.6 | FINANCIAL STATEMENTS |
If no annual report for the fiscal year has been sent to shareholders, then the corporation shall, upon the written request of any shareholder made more than one hundred twenty (120) days after the close of such fiscal year, deliver or mail to the person making the request, within thirty (30) days thereafter, a copy of a balance sheet as of the end of such fiscal year and an income statement and statement of changes in financial position for such fiscal year.
If a shareholder or shareholders holding at least five percent (5%) of the outstanding shares of any class of stock of the corporation makes a written request to the corporation for an income statement of the corporation for the three-month, six-month or nine-month period of the then current fiscal year ended more than thirty (30) days before the date of the request, and for a balance sheet of the corporation as of the end of that period, then the chief financial officer shall cause that statement to be prepared, if not already prepared, and shall deliver personally or mail that statement or statements to the person making the request within thirty (30) days after the receipt of the request. If the corporation has not sent to the shareholders its annual report for the last fiscal year, the statements referred to in the first paragraph of this Section 7.6 shall likewise be delivered or mailed to the shareholder or shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report, if any, of any independent accountants engaged by the corporation or by the certificate of an authorized officer of the corporation that the financial statements were prepared without audit from the books and records of the corporation.
7.7 | REPRESENTATION OF SHARES OF OTHER CORPORATIONS |
The chairman of the board, the chief executive officer, the president, any vice president, the chief financial officer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the chief executive officer or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority herein granted may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 | RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING |
For purposes of determining the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the shareholders entitled to exercise any rights in respect of any other lawful action (other than action by shareholders by written consent without a meeting), the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days before any such action. In that case, only shareholders of record at the close of business on the date so fixed are entitled to receive the dividend, distribution or allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of
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any shares on the books of the corporation after the record date so fixed, except as otherwise provided in the Code.
If the board of directors does not so fix a record date, then the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the board adopts the applicable resolution or the sixtieth (60th) day before the date of that action, whichever is later.
8.2 | CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS |
From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.
8.3 | CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED |
The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
8.4 | CERTIFICATES FOR SHARES |
A certificate or certificates for shares of the corporation shall be issued to each shareholder when any of such shares are fully paid. The board of directors may authorize the issuance of certificates for shares partly paid provided that these certificates shall state the total amount of the consideration to be paid for them and the amount actually paid. All certificates shall be signed in the name of the corporation by the chairman of the board or the vice chairman of the board or the president or a vice president or the chief executive officer and by the chief financial officer or an assistant treasurer or the secretary or an assistant secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on a certificate ceases to be that officer, transfer agent or registrar before that certificate is issued, it may be issued by the corporation with the same effect as if that person were an officer, transfer agent or registrar at the date of issue.
8.5 | LOST CERTIFICATES |
Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The board of directors may, in case any share certificate or certificate for any other security is lost, stolen or destroyed, authorize the issuance of
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replacement certificates on such terms and conditions as the board may require; the board may require indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of the certificate or the issuance of the replacement certificate.
8.6 | CONSTRUCTION; DEFINITIONS |
Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Code shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term person includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
9.1 | AMENDMENT BY SHAREHOLDERS |
New bylaws may be adopted or these bylaws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote.
9.2 | AMENDMENT BY DIRECTORS |
Subject to the rights of the shareholders as provided in Section 9.1 of these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing the authorized number of directors (except to fix the authorized number of directors pursuant to a bylaw providing for a variable number of directors), may be adopted, amended or repealed by the board of directors.
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Exhibit 3.11
ARTICLES OF INCORPORATION
OF
GYMBOREE PLAY PROGRAMS, INC.
I
The name of this corporation is Gymboree Play Programs, Inc.
II
The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the General Corporation Law.
III
The name and address in the State of California of this corporations initial agent for service of process is:
James P. Curley The Gymboree Corporation 700 Airport Boulevard, Suite 200 Burlingame, California 94010 -1912 |
IV
This corporation is authorized to issue one class of stock, designated Common Stock. The total number of shares of Common Stock which this corporation is authorized to issue is 1,000 shares.
V
Section 1. Limitation of Directors Liability.
The liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law.
Section 2. Indemnification of Corporate Agents.
The corporation is authorized to provide indemnification of agents (as defined in Section 317 of the General Corporation Law) of the corporation to the fullest extent permissible under California law.
Section 3. Repeal or Modification.
Any repeal or modification of the foregoing provisions of this Article V by the shareholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification.
Date: July 5, 1954
/s/ Patrick J. Schultheis |
Patrick J. Schultheis, Incorporator |
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June 30, 1994
Secretary of State of California
1230 J Street
Sacramento, California 95814
Re: | The Gymboree Corporation |
Ladies and Gentlemen:
The Gymboree Corporation hereby gives consent to the use of the corporate name Gymboree Play Programs, Inc.
If you have any questions with regard to this matter, please do not hesitate to call me at any time.
Very truly yours, |
/s/ James P. Curley |
James P. Curley Senior Vice President Chief Financial Officer |
Gymboree Corporation, 700 Airport Blvd., Suite 200 Burlingame, CA 94010-1912 Telephone: 415-579-0600
Main Fax: 415-579-1733 Franchise Fax: 415-696-7452 Merchandise Fax: 415-696-7426 Finance Fax: 415-696-7502
Exhibit 3.12
AMENDED AND RESTATED BYLAWS
OF
GYMBOREE PLAY PROGRAMS, INC.
AMENDED AND RESTATED BYLAWS OF
GYMBOREE PLAY PROGRAMS, INC.
TABLE OF CONTENTS
Page | ||||||
ARTICLE I CORPORATE OFFICES |
1 | |||||
1.1. |
PRINCIPAL OFFICE |
1 | ||||
1.2. |
OTHER OFFICES |
1 | ||||
ARTICLE II MEETINGS OF SHAREHOLDERS |
1 | |||||
2.1. |
PLACE OF MEETINGS |
1 | ||||
2.2. |
ANNUAL MEETING |
1 | ||||
2.3. |
SPECIAL MEETING |
1 | ||||
2.4. |
NOTICE OF SHAREHOLDERS MEETINGS |
2 | ||||
2.5. |
MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE |
2 | ||||
2.6. |
QUORUM |
3 | ||||
2.7. |
ADJOURNED MEETING; NOTICE |
3 | ||||
2.8. |
VOTING |
4 | ||||
2.9. |
VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT |
4 | ||||
2.10. |
SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
5 | ||||
2.11. |
RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS |
6 | ||||
2.12. |
PROXIES |
6 | ||||
2.13. |
INSPECTORS OF ELECTION |
7 | ||||
ARTICLE III DIRECTORS |
7 | |||||
3.1. |
POWERS |
7 | ||||
3.2. |
NUMBER OF DIRECTORS |
8 | ||||
3.3. |
ELECTION AND TERM OF OFFICE OF DIRECTORS |
8 | ||||
3.4. |
RESIGNATION AND VACANCIES |
8 | ||||
3.5. |
PLACE OF MEETINGS: MEETINGS BY TELEPHONE |
9 | ||||
3.6. |
REGULAR MEETINGS |
9 | ||||
3.7. |
SPECIAL MEETINGS; NOTICE |
9 | ||||
3.8. |
QUORUM |
9 | ||||
3.9. |
WAIVER OF NOTICE |
10 | ||||
3.10. |
ADJOURNMENT |
10 | ||||
3.11. |
NOTICE OF ADJOURNMENT |
10 | ||||
3.12. |
BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
10 | ||||
3.13. |
FEES AND COMPENSATION OF DIRECTORS |
10 |
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3.14. |
APPROVAL OF LOANS TO OFFICERS |
11 | ||||
ARTICLE IV COMMITTEES |
11 | |||||
4.1. |
COMMITTEES OF DIRECTORS |
11 | ||||
4.2. |
MEETINGS AND ACTION OF COMMITTEES |
12 | ||||
ARTICLE V OFFICERS |
12 | |||||
5.1. |
OFFICERS |
12 | ||||
5.2. |
ELECTION OF OFFICERS |
12 | ||||
5.3. |
SUBORDINATE OFFICERS |
12 | ||||
5.4. |
REMOVAL AND RESIGNATION OF OFFICERS |
12 | ||||
5.5. |
VACANCIES IN OFFICES |
13 | ||||
5.6. |
CHAIRMAN OF THE BOARD |
13 | ||||
5.7. |
CHIEF EXECUTIVE OFFICER |
13 | ||||
5.8. |
PRESIDENT |
13 | ||||
5.9. |
VICE PRESIDENTS |
13 | ||||
5.10. |
SECRETARY |
14 | ||||
5.11. |
CHIEF FINANCIAL OFFICER |
14 | ||||
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS |
14 | |||||
6.1. |
INDEMNIFICATION OF DIRECTORS AND OFFICERS |
14 | ||||
6.2. |
INDEMNIFICATION OF OTHERS |
15 | ||||
6.3. |
PAYMENT OF EXPENSES IN ADVANCE |
15 | ||||
6.4. |
INDEMNITY NOT EXCLUSIVE |
15 | ||||
6.5. |
INSURANCE INDEMNIFICATION |
15 | ||||
6.6. |
CONFLICTS |
16 | ||||
ARTICLE VII RECORDS AND REPORTS |
16 | |||||
7.1. |
MAINTENANCE AND INSPECTION OF SHARE REGISTER |
16 | ||||
7.2. |
MAINTENANCE AND INSPECTION OF BYLAWS |
17 | ||||
7.3. |
MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS |
17 | ||||
7.4. |
INSPECTION BY DIRECTORS |
17 | ||||
7.5. |
ANNUAL REPORT TO SHAREHOLDERS; WAIVER |
17 | ||||
7.6. |
FINANCIAL STATEMENTS |
18 | ||||
7.7. |
REPRESENTATION OF SHARES OF OTHER CORPORATIONS |
18 | ||||
ARTICLE VIII GENERAL MATTERS |
18 | |||||
8.1. |
RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING |
18 | ||||
8.2. |
CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS |
19 | ||||
8.3. |
CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED |
19 | ||||
8.4. |
CERTIFICATES FOR SHARES |
19 | ||||
8.5. |
LOST CERTIFICATES |
20 |
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8.6. |
CONSTRUCTION: DEFINITIONS |
20 | ||||
ARTICLE IX AMENDMENTS |
20 | |||||
9.1. |
AMENDMENT BY SHAREHOLDERS |
20 | ||||
9.2. |
AMENDMENT BY DIRECTORS |
20 |
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AMENDED AND RESTATED BYLAWS
OF
GYMBOREE PLAY PROGRAMS, INC.
ARTICLE I
CORPORATE OFFICES
1.1. | PRINCIPAL OFFICE |
The board of directors shall fix the location of the principal executive office of the corporation at any place within or outside the State of California. If the principal executive office is located outside such state and the corporation has one or more business offices in such state, then the board of directors shall fix and designate a principal business office in the State of California.
1.2. | OTHER OFFICES |
The board of directors may at any time establish branch or subordinate offices at any place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1. | PLACE OF MEETINGS |
Meetings of shareholders shall be held at any place within or outside the State of California designated by the board of directors. In the absence of any such designation, shareholders meetings shall be held at the principal executive office of the corporation.
2.2. | ANNUAL MEETING |
The annual meeting of shareholders shall be held each year on a date and at a time designated by the board of directors. In the absence of such designation, the annual meeting of shareholders shall be held on the third Tuesday of May of each year at 10:00 a.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding full business day. At the meeting, directors shall be elected, and any other proper business may be transacted.
2.3. | SPECIAL MEETING |
A special meeting of the shareholders may be called at any time by the board of directors, or by the chairman of the board, or by the president, or by the chief executive officer, or by one
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or more shareholders holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the board of directors or the president or the chairman of the board or the chief executive officer, then the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile trans-mission to the chairman of the board, the president, any vice president, the chief executive officer or the secretary of the corporation. The officer receiving the request shall cause notice to be promptly given to the shareholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will be held at the time requested by the person or persons calling the meeting, so long as that time is not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, then the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing or affecting the time when a meeting of shareholders called by action of the board of directors may be held.
2.4. | NOTICE OF SHAREHOLDERS MEETINGS |
All notices of meetings of shareholders shall be sent or otherwise given in accordance with Section 2.5 of these bylaws not less than ten (10) (or, if sent by third-class mail pursuant to Section 2.5 of these bylaws, thirty (30)) nor more than sixty (60) days before the date of the meeting. The notice shall specify the place, date, and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted (no business other than that specified in the notice may be transacted) or (ii) in the case of the annual meeting, those matters which the board of directors, at the time of giving the notice, intends to present for action by the shareholders (but subject to the provisions of the next paragraph of this Section 2.4 any proper matter may be presented at the meeting for such action). The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees who, at the time of the notice, the board intends to present for election.
If action is proposed to be taken at any meeting for approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code of California (the Code), (ii) an amendment of the articles of incorporation, pursuant to Section 902 of the Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to Section 1900 of the Code, or (v) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of the Code, then the notice shall also state the general nature of that proposal.
2.5. | MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE |
Written notice of any meeting of shareholders shall be given either (i) personally or (ii) by first-class mail or (iii) by third-class mail but only if the corporation has outstanding shares held of record by five hundred (500) or more persons (determined as provided in Section
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605 of the Code) on the record date for the shareholders meeting, or (iv) by telegraphic or other written communication. Notices not personally delivered shall be sent charges prepaid and shall be addressed to the shareholder at the address of that shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice. If no such address appears on the corporations books or is given, notice shall be deemed to have been given if sent to that shareholder by mail or telegraphic or other written communication to the corporations principal executive office, or if published at least once in a newspaper of general circulation in the county where that office is located. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at that address, then all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available to the shareholder on written demand of the shareholder at the principal executive office of the corporation for a period of one (1) year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any shareholders meeting, executed by the secretary, assistant secretary or any transfer agent of the corporation giving the notice, shall be prima facie evidence of the giving of such notice.
2.6. | QUORUM |
The presence in person or by proxy of the holders of a majority of the shares entitled to vote thereat constitutes a quorum for the transaction of business at all meetings of shareholders. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.
2.7. | ADJOURNED MEETING; NOTICE |
Any shareholders meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy. In the absence of a quorum, no other business may be transacted at that meeting except as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place are announced at the meeting at which the adjournment is taken. However, if a new record date for the adjourned meeting is fixed or if the adjournment is for more than forty-five (45) days from the date set for the original meeting, then notice of the adjourned meeting shall be given. Notice of any such adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws. At
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any adjourned meeting the corporation may transact any business which might have been transacted at the original meeting.
2.8. | VOTING |
The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to the provisions of Sections 702 through 704 of the Code (relating to voting shares held by a fiduciary, in the name of a corporation or in joint ownership).
The shareholders vote may be by voice vote or by ballot; provided, however, that any election for directors must be by ballot if demanded by any shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as may be otherwise provided in the articles of incorporation, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote of the shareholders. Any shareholder entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or, except when the matter is the election of directors, may vote them against the proposal; but, if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the share-holders approving vote is with respect to all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the shares represented and voting at a duly held meeting (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the shareholders, unless the vote of a greater number or a vote by classes is required by the Code or by the articles of incorporation.
At a shareholders meeting at which directors are to be elected, a shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of votes which such shareholder normally is entitled to cast) if the candidates names have been placed in nomination prior to commencement of the voting and the shareholder has given notice prior to commencement of the voting of the shareholders intention to cumulate votes. If any shareholder has given such a notice, then every shareholder entitled to vote may cumulate votes for candidates in nomination either (i) by giving one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which that shareholders shares are normally entitled or (ii) by distributing the shareholders votes on the same principle among any or all of the candidates, as the shareholder thinks fit. The candidates receiving the highest number of affirmative votes, up to the number of directors to be elected, shall be elected; votes against any candidate and votes withheld shall have no legal effect.
2.9. | VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT |
The transactions of any meeting of shareholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though they had been taken at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an
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approval of the minutes thereof. The waiver of notice or consent or approval need not specify either the business to be transacted or the purpose of any annual or special meeting of shareholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 2.4 of these bylaws, the waiver of notice or consent or approval shall state the general nature of the proposal. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of notice of and presence at that meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Attendance at a meeting is not a waiver of any right to object to the consideration of matters required by the Code to be included in the notice of the meeting but not so included, if that objection is expressly made at the meeting.
2.10. | SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
Any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be effective only if signed by the holders of all outstanding shares entitled to vote for the election of directors. However, a director may be elected at any time to fill any vacancy on the board of directors, provided that it was not created by removal of a director and that it has not been filled by the directors, by the written consent of the holders of a majority of the outstanding shares entitled to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any shareholder giving a written consent, or the shareholders proxy holders, or a transferee of the shares, or a personal representative of the shareholder, or their respective proxy holders, may revoke the consent by a writing received by the secretary of the corporation before written consents of the number of shares required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been solicited in writing and if the unanimous written consent of all such shareholders has not been received, then the secretary shall give prompt notice of the corporate action approved by the shareholders without a meeting. Such notice shall be given to those shareholders entitled to vote who have not consented in writing and shall be given in the manner specified in Section 2.5 of these bylaws. In the case of approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Code, (ii) indemnification of a corporate agent, pursuant to Section 317 of the Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of the Code, and (iv) a distribution in dissolution other than in accordance with the
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rights of outstanding preferred shares, pursuant to Section 2007 of the Code, the notice shall be given at least ten (10) days before the consummation of any action authorized by that approval.
2.11. | RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS |
For purposes of determining the shareholders entitled to notice of any meeting or to vote thereat or entitled to give consent to corporate action without a meeting, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting nor more than sixty (60) days before any such action without a meeting, and in such event only shareholders of record on the date so fixed are entitled to notice and to vote or to give consents, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the Code.
If the board of directors does not so fix a record date:
(a) the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held; and
(b) the record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, (i) when no prior action by the board has been taken, shall be the day on which the first written consent is given, or (ii) when prior action by the board has been taken, shall be at the close of business on the day on which the board adopts the resolution relating to that action, or the sixtieth (60th) day before the date of such other action, whichever is later.
The record date for any other purpose shall be as provided in Article VIII of these bylaws.
2.12. | PROXIES |
Every person entitled to vote for directors, or on any other matter, shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation. A proxy shall be deemed signed if the shareholders name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the shareholder or the shareholders attorney-in-fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) the person who executed the proxy revokes it prior to the time of voting by delivering a writing to the corporation stating that the proxy is revoked or by executing a subsequent proxy and presenting it to the meeting or by voting in person at the meeting, or (ii) written notice of the death or incapacity of the maker of that proxy is received by the corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, unless otherwise provided in the proxy. The dates contained on the forms of proxy presumptively determine the order of execution, regardless of the postmark dates on the envelopes in which
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they are mailed. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of the Code.
2.13. | INSPECTORS OF ELECTION |
Before any meeting of shareholders, the board of directors may appoint an inspector or inspectors of election to act at the meeting or its adjournment. If no inspector of election is so appointed, then the chairman of the meeting may, and on the request of any shareholder or a shareholders proxy shall, appoint an inspector or inspectors of election to act at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting pursuant to the request of one (1) or more shareholders or proxies, then the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, then the chairman of the meeting may, and upon the request of any share-holder or a shareholders proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
3.1. | POWERS |
Subject to the provisions of the Code and any limitations in the articles of incorporation and these bylaws relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.
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3.2. | NUMBER OF DIRECTORS |
The number of directors of the corporation shall be one (1). The number of directors may be changed, by a duly adopted amendment to the articles of incorporation or by an amendment to this bylaw duly adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote.
No reduction of the authorized number of directors shall have the effect of removing any director before that directors term of office expires.
3.3. | ELECTION AND TERM OF OFFICE OF DIRECTORS |
Directors shall be elected at each annual meeting of shareholders to hold office until the next annual meeting. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified.
3.4. | RESIGNATION AND VACANCIES |
Any director may resign effective on giving written notice to the chief executive officer, the president, or the secretary, unless the notice specifies a later time for that resignation to become effective. If the resignation of a director is effective at a future time, the board of directors may elect a successor to take office when the resignation becomes effective.
Vacancies in the board of directors may be filled by a majority of the remaining directors, even if less than a quorum, or by a sole remaining director; however, a vacancy created by the removal of a director by the vote or written consent of the shareholders or by court order may be filled only by the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute a majority of the required quorum), or by the unanimous written consent of all shares entitled to vote thereon. Each director so elected shall hold office until the next annual meeting of the shareholders and until a successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to exist (i) in the event of the death, resignation or removal of any director, (ii) if the board of directors by resolution declares vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony, (iii) if the authorized number of directors is increased, or (iv) if the shareholders fail, at any meeting of shareholders at which any director or directors are elected, to elect the number of directors to be elected at that meeting.
The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election other than to fill a vacancy created by removal, if by written consent, shall require the consent of the holders of a majority of the outstanding shares entitled to vote thereon.
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3.5. | PLACE OF MEETINGS: MEETINGS BY TELEPHONE |
Regular meetings of the board of directors may be held at any place within or outside the State of California that has been designated from time to time by resolution of the board. In the absence of such a designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board may be held at any place within or outside the State of California that has been designated in the notice of the meeting or, if not stated in the notice or if there is no notice, at the principal executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in the meeting can hear one another; and all such directors shall be deemed to be present in person at the meeting.
3.6. | REGULAR MEETINGS |
Regular meetings of the board of directors may be held without notice if the times of such meetings are fixed by the board of directors.
3.7. | SPECIAL MEETINGS; NOTICE |
Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the president, any vice president, the chief executive officer, the secretary or any one director.
Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that directors address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation.
3.8. | QUORUM |
A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 3.10 of these bylaws. Every act or decision done or made by a majority of the directors present at a duly held meeting at which a quorum is present shall be regarded as the act of the board of directors, subject to the provisions of Section 310 of the Code (as to approval of contracts or transactions in which a director has a direct or indirect material financial interest), Section 311 of the Code (as to appointment of committees), Section 317(e) of the Code (as to indemnification of directors), the articles of incorporation, and other applicable law.
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A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
3.9. | WAIVER OF NOTICE |
Notice of a meeting need not be given to any director (i) who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or (ii) who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such directors. All such waivers, consents, and approvals shall be filed with the corporate records or made part of the minutes of the meeting. A waiver of notice need not specify the purpose of any regular or special meeting of the board of directors.
3.10. | ADJOURNMENT |
A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place.
3.11. | NOTICE OF ADJOURNMENT |
Notice of the time and place of holding an adjourned meeting need not be given unless the meeting is adjourned for more than twenty-four (24) hours. If the meeting is adjourned for more than twenty-four (24) hours, then notice of the time and place of the adjourned meeting shall be given before the adjourned meeting takes place, in the manner specified in Section 3.7 of these bylaws, to the directors who were not present at the time of the adjournment.
3.12. | BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
Any action required or permitted to be taken by the board of directors may be taken without a meeting, provided that all members of the board individually or collectively consent in writing to that action. Such action by written consent shall have the same force and effect as a unanimous vote of the board of directors. Such written consent and any counterparts thereof shall be filed with the minutes of the proceedings of the board.
3.13. | FEES AND COMPENSATION OF DIRECTORS |
Directors and members of committees may receive such compensation, if any, for their services and such reimbursement of expenses as may be fixed or determined by resolution of the board of directors. This Section 3.13 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee or otherwise and receiving compensation for those services.
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3.14. | APPROVAL OF LOANS TO OFFICERS1 |
The corporation may, upon the approval of the board of directors alone, make loans of money or property to, or guarantee the obligations of, any officer of the corporation or its parent or subsidiary, whether or not a director, or adopt an employee benefit plan or plans authorizing such loans or guaranties provided that (i) the board of directors determines that such a loan or guaranty or plan may reasonably be expected to benefit the corporation, (ii) the corporation has outstanding shares held of record by 100 or more persons (determined as provided in Section 605 of the Code) on the date of approval by the board of directors, and (iii) the approval of the board of directors is by a vote sufficient without counting the vote of any interested director or directors.
ARTICLE IV
COMMITTEES
4.1. | COMMITTEES OF DIRECTORS |
The board of directors may, by resolution adopted by a majority of the authorized number of directors, designate one (1) or more committees, each consisting of one (1) or more directors, to serve at the pleasure of the board. The board may designate one (1) or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. The appointment of members or alternate members of a committee requires the vote of a majority of the authorized number of directors. Any committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with respect to:
(a) the approval of any action which, under the Code, also requires shareholders approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any committee;
(c) the fixing of compensation of the directors for serving on the board or any committee;
(d) the amendment or repeal of these bylaws or the adoption of new bylaws;
(e) the amendment or repeal of any resolution of the board of directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the board of directors; or
(g) the appointment of any other committees of the board of directors or the members of such committees.
1 | This section is effective only if it has been approved by the shareholders in accordance with Sections 315(b) and 152 of the Code. |
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4.2. | MEETINGS AND ACTION OF COMMITTEES |
Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section 3.12 (action without meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the board of directors, and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
5.1. | OFFICERS |
The officers of the corporation shall be a chief executive officer, a president, a chief financial officer, one or more vice presidents, a secretary, and one or more assistant secretaries. The corporation may also have, at the discretion of the board of directors, a chairman of the board, a treasurer, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person.
5.2. | ELECTION OF OFFICERS |
The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws, shall be chosen by the board, subject to the rights, if any, of an officer under any contract of employment.
5.3. | SUBORDINATE OFFICERS |
The board of directors may appoint, or may empower any officer to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.
5.4. | REMOVAL AND RESIGNATION OF OFFICERS |
Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors at any regular or special meeting of the board or, except in case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors.
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Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.
5.5. | VACANCIES IN OFFICES |
A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to that office.
5.6. | CHAIRMAN OF THE BOARD |
The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the board of directors or as may be prescribed by these bylaws.
5.7. | CHIEF EXECUTIVE OFFICER |
Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the chief executive officer of the corporation shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation. He shall preside at all meetings of the shareholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the board of directors. He shall have the general powers and duties of management usually vested in the office of chief executive officer of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws.
5.8. | PRESIDENT |
In the absence or disability of the chief executive officer, the president shall perform all the duties of the chief executive officer and when so acting shall have all the powers of, and be subject to all the restrictions upon, the chief executive officer. The president shall have such other powers and perform such other duties as from time to time may be prescribed for him by the board of directors, these bylaws, and chief executive officer, or the chairman of the board.
5.9. | VICE PRESIDENTS |
In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the chief executive officer, the president or the chairman of the board.
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5.10. | SECRETARY |
The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors and shareholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors meetings or committee meetings, the number of shares present or represented at shareholders meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporations transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the board of directors required to be given by law or by these bylaws. He shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws.
5.11. | CHIEF FINANCIAL OFFICER |
The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the chief executive officer, the president and directors, whenever they request it, an account of all of his transactions as chief financial officer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1. | INDEMNIFICATION OF DIRECTORS AND OFFICERS |
The corporation shall, to the maximum extent and in the manner permitted by the Code, indemnify each of its directors and officers against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in
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connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Article VI, a director or officer of the corporation includes any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
6.2. | INDEMNIFICATION OF OTHERS |
The corporation shall have the power, to the extent and in the manner permitted by the Code, to indemnify each of its employees and agents (other than directors and officers) against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Article VI, an employee or agent of the corporation (other than a director or officer) includes any person (i) who is or was an employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
6.3. | PAYMENT OF EXPENSES IN ADVANCE |
Expenses incurred in defending any civil or criminal action or proceeding for which indemnification is required pursuant to Section 6.1 or for which indemnification is permitted pursuant to Section 6.2 following authorization thereof by the Board of Directors shall be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of the indemnified party to repay such amount if it shall ultimately be determined that the indemnified party is not entitled to be indemnified as authorized in this Article VI.
6.4. | INDEMNITY NOT EXCLUSIVE |
The indemnification provided by this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the extent that such additional rights to indemnification are authorized in the Articles of Incorporation.
6.5. | INSURANCE INDEMNIFICATION |
The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation against any liability asserted against or incurred by such person in such capacity or arising out of such persons status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article VI.
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6.6. | CONFLICTS |
No indemnification or advance shall be made under this Article VI, except where such indemnification or advance is mandated by law or the order, judgment or decree of any court of competent jurisdiction, in any circumstance where it appears:
(1) That it would be inconsistent with a provision of the Articles of Incorporation, these bylaws, a resolution of the shareholders or an agreement in effect at the time of the accrual of the alleged cause of the action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1. | MAINTENANCE AND INSPECTION OF SHARE REGISTER |
The corporation shall keep either at its principal executive office or at the office of its transfer agent or registrar (if either be appointed), as determined by resolution of the board of directors, a record of its shareholders listing the names and addresses of all shareholders and the number and class of shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least five percent (5%) in the aggregate of the outstanding voting shares of the corporation or who holds at least one percent (1%) of such voting shares and has filed a Schedule 14B with the Securities and Exchange Commission relating to the election of directors, may (i) inspect and copy the records of shareholders names, addresses, and shareholdings during usual business hours on five (5) days prior written demand on the corporation, (ii) obtain from the transfer agent of the corporation, on written demand and on the tender of such transfer agents usual charges for such list, a list of the names and addresses of the shareholders who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which that list has been compiled or as of a date specified by the shareholder after the date of demand. Such list shall be made available to any such shareholder by the transfer agent on or before the later of five (5) days after the demand is received or five (5) days after the date specified in the demand as the date as of which the list is to be compiled.
The record of shareholders shall also be open to inspection on the written demand of any shareholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to the holders interests as a shareholder or as the holder of a voting trust certificate.
Any inspection and copying under this Section 7.1 may be made in person or by an agent or attorney of the shareholder or holder of a voting trust certificate making the demand.
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7.2. | MAINTENANCE AND INSPECTION OF BYLAWS |
The corporation shall keep at its principal executive office or, if its principal executive office is not in the State of California, at its principal business office in California the original or a copy of these bylaws as amended to date, which bylaws shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside the State of California and the corporation has no principal business office in such state, then the secretary shall, upon the written request of any shareholder, furnish to that shareholder a copy of these bylaws as amended to date.
7.3. | MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS |
The accounting books and records and the minutes of proceedings of the shareholders, of the board of directors, and of any committee or committees of the board of directors shall be kept at such place or places as are designated by the board of directors or, in absence of such designation, at the principal executive office of the corporation. The minutes shall be kept in written form, and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to the holders interests as a shareholder or as the holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney and shall include the right to copy and make extracts. Such rights of inspection shall extend to the records of each subsidiary corporation of the corporation.
7.4. | INSPECTION BY DIRECTORS |
Every director shall have the absolute right at any reasonable time to inspect all books, records, and documents of every kind as well as the physical properties of the corporation and each of its subsidiary corporations. Such inspection by a director may be made in person or by an agent or attorney. The right of inspection includes the right to copy and make extracts of documents.
7.5. | ANNUAL REPORT TO SHAREHOLDERS; WAIVER |
The board of directors shall cause an annual report to be sent to the shareholders not later than one hundred twenty (120) days after the close of the fiscal year adopted by the corporation. Such report shall be sent at least fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days) before the annual meeting of shareholders to be held during the next fiscal year and in the manner specified in Section 2.5 of these bylaws for giving notice to shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of the fiscal year, (ii) an income statement, (iii) a statement of changes in financial position for the fiscal year, and (iv) any report of independent accountants or, if there is no such report, the certificate of an authorized officer of the corporation that the statements were prepared without audit from the books and records of the corporation.
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The foregoing requirement of an annual report shall be waived so long as the shares of the corporation are held by fewer than one hundred (100) holders of record.
7.6. | FINANCIAL STATEMENTS |
If no annual report for the fiscal year has been sent to shareholders, then the corporation shall, upon the written request of any shareholder made more than one hundred twenty (120) days after the close of such fiscal year, deliver or mail to the person making the request, within thirty (30) days thereafter, a copy of a balance sheet as of the end of such fiscal year and an income statement and statement of changes in financial position for such fiscal year.
If a shareholder or shareholders holding at least five percent (5%) of the outstanding shares of any class of stock of the corporation makes a written request to the corporation for an income statement of the corporation for the three-month, six-month or nine-month period of the then current fiscal year ended more than thirty (30) days before the date of the request, and for a balance sheet of the corporation as of the end of that period, then the chief financial officer shall cause that statement to be prepared, if not already prepared, and shall deliver personally or mail that statement or statements to the person making the request within thirty (30) days after the receipt of the request. If the corporation has not sent to the shareholders its annual report for the last fiscal year, the statements referred to in the first paragraph of this Section 7.6 shall likewise be delivered or mailed to the shareholder or shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report, if any, of any independent accountants engaged by the corporation or by the certificate of an authorized officer of the corporation that the financial statements were prepared without audit from the books and records of the corporation.
7.7. | REPRESENTATION OF SHARES OF OTHER CORPORATIONS |
The chairman of the board, the chief executive officer, the president, any vice president, the chief financial officer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the chief executive officer or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority herein granted may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1. | RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING |
For purposes of determining the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the shareholders entitled to exercise any rights in respect of any other lawful action (other than action by shareholders by written consent without a meeting), the board of directors may fix, in advance, a record date, which shall not be
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more than sixty (60) days before any such action. In that case, only shareholders of record at the close of business on the date so fixed are entitled to receive the dividend, distribution or allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided in the Code.
If the board of directors does not so fix a record date, then the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the board adopts the applicable resolution or the sixtieth (60th) day before the date of that action, whichever is later.
8.2. | CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS |
From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.
8.3. | CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED |
The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
8.4. | CERTIFICATES FOR SHARES |
A certificate or certificates for shares of the corporation shall be issued to each shareholder when any of such shares are fully paid. The board of directors may authorize the issuance of certificates for shares partly paid provided that these certificates shall state the total amount of the consideration to be paid for them and the amount actually paid. All certificates shall be signed in the name of the corporation by the chairman of the board or the vice chairman of the board or the president or a vice president or the chief executive officer and by the chief financial officer or an assistant treasurer or the secretary or an assistant secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on a certificate ceases to be that officer, transfer agent or registrar before that certificate is issued, it may be issued by the corporation with the same effect as if that person were an officer, transfer agent or registrar at the date of issue.
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8.5. | LOST CERTIFICATES |
Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and can-celled at the same time. The board of directors may, in case any share certificate or certificate for any other security is lost, stolen or destroyed, authorize the issuance of replacement certificates on such terms and conditions as the board may require; the board may require indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of the certificate or the issuance of the replacement certificate.
8.6. | CONSTRUCTION: DEFINITIONS |
Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Code shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes, the singular, and the term person includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
9.1. | AMENDMENT BY SHAREHOLDERS |
New bylaws may be adopted or these bylaws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote.
9.2. | AMENDMENT BY DIRECTORS |
Subject to the rights of the shareholders as provided in Section 9.1 of these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing the authorized number of directors (except to fix the authorized number of directors pursuant to a bylaw providing for a variable number of directors), may be adopted, amended or repealed by the board of directors.
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Exhibit 3.13
ARTICLES OF INCORPORATION
OF
GYMBOREE RETAIL STORES, INC.
I
The name of this corporation is Gymboree Retail Stores, Inc.
II
The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the General Corporation Law.
III
The name and address in the State of California of this corporations initial agent for service of process is:
James P. Curley The Gymboree Corporation 700 Airport Boulevard, Suite 200 Burlingame, California 94010-1912 |
IV
This corporation is authorized to issue one class of stock, designated Common Stock. The total number of shares of Common Stock which this corporation is authorized to issue is 1,000 shares.
V
Section 1. Limitation of Directors Liability.
The liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law.
Section 2. Indemnification of Corporate Agents.
The corporation is authorized to provide indemnification of agents (as defined in Section 317 of the General Corporation Law) of the corporation to the fullest extent permissible under California law.
Section 3. Repeal or Modification.
Any repeal or modification of the foregoing provisions of this Article V by the shareholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification.
Date: July 5, 1994
/s/ Patrick J. Schultheis |
Patrick J. Schultheis, Incorporator |
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June 30, 1994
Secretary of State of California
1230 J Street
Sacramento, California 95814
Re: | The Gymboree Corporation |
Ladies and Gentlemen:
The Gymboree Corporation hereby gives consent to the use of the corporate name Gymboree Retail Stores, Inc.
If you have any questions with regard to this matter, please do not hesitate to call me at any time.
Very truly yours, |
/s/ James P. Curley |
James P. Curley Senior Vice President Chief Financial Officer |
Gymboree Corporation, 700 Airport Blvd., Suite 200 Burlingame, CA 94010-1912 Telephone: 415-579-0600
Main Fax: 415-579-1733 Franchise Fax: 415-696-7452 Merchandise Fax: 415-696-7426 Finance Fax: 415-696-7502
AGREEMENT AND PLAN OF MERGER
BETWEEN
GYMBOREE RETAIL STORES, INC.
AND
THE GYMBOREE STORES, INC.
THIS AGREEMENT AND PLAN OF MERGER dated as of January 29, 2008, (the Agreement) is between Gymboree Retail Stores, Inc., a California corporation (Gymboree Retail Stores) and The Gymboree Stores, Inc., a California corporation (Gymboree Stores). Gymboree Retail Stores and Gymboree Stores are sometimes referred to herein as the Constituent Corporations.
R E C I T A L S
A. Gymboree Retail Stores is a corporation duly organized and existing under the laws of the State of California and has an authorized capital of 1,000 shares, all of which are designated Common Stock, no par value. As of the date of this Agreement, 100 shares of Common Stock are issued and outstanding, all of which were held by The Gymboree Corporation (Parent).
B. Gymboree Stores is a corporation duly organized and existing under the laws of the State of California and has an authorized capital of 1,000 shares, all of which are designated Common Stock, no par value. As of the date of this Agreement, 100 shares of Common Stock are issued and outstanding, all of which were held by Parent.
C. The Board of Directors of Gymboree Retail Stores and Gymboree Stores have each determined that, for the purpose of improving their operating efficiencies and competitive position in the marketplace, it is advisable and in the best interests of Gymboree Retail Stores and Gymboree Stores that Gymboree Stores merge with and into Gymboree Retail Stores upon the terms and conditions herein provided.
D. The respective Boards of Directors of Gymboree Retail Stores and Gymboree Stores and their respective shareholders approved this Agreement on January 29, 2008.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set forth herein, Gymboree Retail Stores and Gymboree Stores hereby agree, subject to the terms and conditions hereinafter set forth, as follows:
I. MERGER
1.1 Merger. In accordance with the provisions of this Agreement and the California General Corporation Law, Gymboree Stores shall be merged with and into Gymboree Retail Stores (the Merger), the separate existence of Gymboree Stores shall cease and Gymboree Retail Stores
shall be, and is herein sometimes referred as, the Surviving Corporation, and the name of the Surviving Corporation shall be Gymboree Retail Stores, Inc.
1.2 Filing and Effectiveness. Pursuant to Section 1103 of the California Corporations Code, the date and time when the Merger shall become effective shall be at 11:59 p.m., PST, on February 2, 2008, herein called the Effective Date of the Merger. This Agreement and Officers Certificates of each Constituent Corporation meeting the requirements of the California General Corporation Law shall be filed with the Secretary of State of the State of California prior to the Effective Date of the Merger.
1.3 Effect of the Merger. Upon the Effective Date of the Merger, the separate existence of Gymboree Stores shall cease and Gymboree Retail Stores, as the Surviving Corporation, (i) shall continue to possess all of Gymboree Retail Stores assets, rights, powers and property as constituted immediately prior to the Effective Date of the Merger, (ii) shall be subject to all actions previously taken by Gymboree Retail Stores and Gymboree Stores Board of Directors, (iii) shall succeed, without other transfer, to all of the assets, rights, powers and property of Gymboree Stores in the manner more fully set forth in Section 1107 of the California General Corporation Law, (iv) shall continue to be subject to all of the debts, liabilities and obligations of Gymboree Retail Stores as constituted immediately prior to the Effective Date of the Merger, and (v) shall succeed, without other transfer, to all of the debts, liabilities and obligations of Gymboree Stores in the same manner as if Gymboree Retail Stores had itself incurred them, all as more fully provided under the applicable provisions of the California Corporations Code.
1.4 Tax-Free Reorganization. The Merger is intended to qualify as a tax-free reorganization under section 368 (a) (1) (D) of the Internal Revenue Code.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Articles of Incorporation. The Articles of Incorporation of Gymboree Retail Stores as in effect immediately prior to the Effective Date of the Merger shall continue in full force and effect as the Articles of Incorporation of the Surviving Corporation until duly amended in accordance with the provisions thereof and applicable law.
2.2 Bylaws. The Bylaws of Gymboree Retail Stores as in effect immediately prior to the Effective Date of the Merger shall continue in full force and effect as the Bylaws of the Surviving Corporation until duly amended in accordance with the provisions thereof and applicable law.
2.3 Directors and Officers. The directors and officers of Gymboree Retail Stores immediately prior to the Effective Date of the Merger shall be the directors and officers of the Surviving Corporation until their successors shall have been duly elected and qualified or until as otherwise provided by law, the Articles of Incorporation of the Surviving Corporation or the Bylaws of the Surviving Corporation.
III. CANCELLATION OF STOCK
3.1 Gymboree Stores Common Shares. Upon the Effective Date of the Merger, each share of Gymboree Stores Common Stock issued and outstanding immediately prior thereto shall by
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virtue of the Merger and without any action by the Constituent Corporations, Parent or any other person, be cancelled without consideration.
IV. GENERAL
4.1 Covenants of Gymboree Retail Stores. Gymboree Retail Stores covenants and agrees that it will, on or before the Effective Date of the Merger:
(a) File any and all documents with the California Franchise Tax Board to the extent necessary for the assumption by Gymboree Retail Stores of all of the franchise tax liabilities of Gymboree Stores.
(b) Take such other actions as may be required by the California Corporations Code.
4.2 Further Assurances. From time to time, as and when required by Gymboree Retail Stores or by its successors or assigns, there shall be executed and delivered on behalf of Gymboree Stores such deeds and other instruments, and there shall be taken or caused to be taken by Gymboree Stores such further and other actions as shall be appropriate or necessary in order to vest or perfect in Gymboree Retail Stores the title to and possession of all the property, interests, assets, rights, privileges, immunities, powers, franchises and authority of Gymboree Stores and otherwise to carry out the purposes of this Agreement, and the officers and directors of Gymboree Retail Stores are fully authorized in the name and on behalf of Gymboree Stores or otherwise to take any and all such action and to execute and deliver any and all such deeds and other instruments.
4.3 Governing Law. This Agreement shall in all respects be construed, interpreted and enforced in accordance with and governed by the laws of the State of California and, so far as applicable, the merger provisions of the California Corporations Code.
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IN WITNESS WHEREOF, this Agreement and Plan of Merger having first been approved by the resolutions of the Board of Directors of Gymboree Retail Stores and Gymboree Stores is hereby executed on behalf of each of such two corporations and attested by their respective officers thereunto duly authorized.
GYMBOREE RETAIL STORES, INC. a California corporation | ||||
By: | /s/ Matthew K. McCauley | |||
Name: | Matthew K. McCauley | |||
Title: | President | |||
By: | /s/ Marina Armstrong | |||
Name: | Marina Armstrong | |||
Title: | Secretary |
THE GYMBOREE STORES, INC. a California corporation | ||||
By: | /s/ Lynda Gustafson | |||
Name: | Lynda Gustafson | |||
Title: | Vice President, Corporate Controller | |||
By: | /s/ Marina Armstrong | |||
Name: | Marina Armstrong | |||
Title: | Secretary |
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OFFICERS CERTIFICATE
OF
GYMBOREE RETAIL STORES, INC.
Matthew K. McCauley and Marina Armstrong hereby certify that:
1. They are the President and Secretary, respectively, of Gymboree Retail Stores, Inc., a California corporation (the Surviving Corporation).
2. There is one authorized class of stock of the Surviving Corporation, consisting of 1,000 shares of common stock (Common Stock), no par value, of which 100 shares are issued and outstanding. All shares of Common Stock outstanding were entitled to vote on the merger.
3. The Agreement and Plan of Merger (Merger Agreement) in the form attached was duly approved by the board of directors and sole shareholder of the Surviving Corporation in accordance with the California General Corporation Law and the vote obtained exceeded the required vote.
4. The percentage vote required was a majority of the outstanding shares of Common Stock of the Surviving Corporation.
We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge.
Executed on January 29, 2008.
/s/ Matthew K. McCauley |
Name: Matthew K. McCauley Title: President |
/s/ Marina Armstrong |
Name: Marina Armstrong Title: Secretary |
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OFFICERS CERTIFICATE
OF
THE GYMBOREE STORES, INC.
Matthew K. McCauley and Marina Armstrong hereby certify that:
1. They are the President and Secretary, respectively, of The Gymboree Stores, Inc., a California corporation (the Disappearing Corporation).
2. There is one authorized class of stock of the Disappearing Corporation, consisting of 1,000 shares of common stock (Common Stock), no par value, of which 100 shares are issued and outstanding. All shares of Common Stock outstanding were entitled to vote on the merger.
3. The Agreement and Plan of Merger (Merger Agreement) in the form attached was duly approved by the board of directors and sole shareholder of the Disappearing Corporation in accordance with the California General Corporation Law and the vote obtained exceeded the required vote.
4. | The percentage vote required was a majority of the outstanding shares of Common Stock of the Disappearing Corporation. |
We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge.
Executed on January 29, 2008.
/s/ Lynda Gustafson | ||||
Name: | Lynda Gustafson | |||
Title: | Vice President, Corporate Controller | |||
/s/ Marina Armstrong | ||||
Name: | Marina Armstrong | |||
Title: | Secretary |
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Exhibit 3.14
AMENDED AND RESTATED BYLAWS
OF
GYMBOREE RETAIL STORES, INC.
AMENDED AND RESTATED BYLAWS OF
GYMBOREE RETAIL STORES, INC.
TABLE OF CONTENTS
Page | ||||||
ARTICLE I CORPORATE OFFICES |
1 | |||||
1.1. |
PRINCIPAL OFFICE |
1 | ||||
1.2. |
OTHER OFFICES |
1 | ||||
ARTICLE II MEETINGS OF SHAREHOLDERS |
1 | |||||
2.1. |
PLACE OF MEETINGS |
1 | ||||
2.2. |
ANNUAL MEETING |
1 | ||||
2.3. |
SPECIAL MEETING |
1 | ||||
2.4. |
NOTICE OF SHAREHOLDERS MEETINGS |
2 | ||||
2.5. |
MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE |
2 | ||||
2.6. |
QUORUM |
3 | ||||
2.7. |
ADJOURNED MEETING; NOTICE |
3 | ||||
2.8. |
VOTING |
4 | ||||
2.9. |
VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT |
4 | ||||
2.10. |
SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
5 | ||||
2.11. |
RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS |
6 | ||||
2.12. |
PROXIES |
6 | ||||
2.13. |
INSPECTORS OF ELECTION |
7 | ||||
ARTICLE III DIRECTORS |
7 | |||||
3.1. |
POWERS |
7 | ||||
3.2. |
NUMBER OF DIRECTORS |
8 | ||||
3.3. |
ELECTION AND TERM OF OFFICE OF DIRECTORS |
8 | ||||
3.4. |
RESIGNATION AND VACANCIES |
8 | ||||
3.5. |
PLACE OF MEETINGS: MEETINGS BY TELEPHONE |
9 | ||||
3.6. |
REGULAR MEETINGS |
9 | ||||
3.7. |
SPECIAL MEETINGS; NOTICE |
9 | ||||
3.8. |
QUORUM |
9 | ||||
3.9. |
WAIVER OF NOTICE |
10 | ||||
3.10. |
ADJOURNMENT |
10 | ||||
3.11. |
NOTICE OF ADJOURNMENT |
10 | ||||
3.12. |
BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
10 | ||||
3.13. |
FEES AND COMPENSATION OF DIRECTORS |
10 |
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3.14. |
APPROVAL OF LOANS TO OFFICERS |
11 | ||||
ARTICLE IV COMMITTEES |
11 | |||||
4.1. |
COMMITTEES OF DIRECTORS |
11 | ||||
4.2. |
MEETINGS AND ACTION OF COMMITTEES |
12 | ||||
ARTICLE V OFFICERS |
12 | |||||
5.1. |
OFFICERS |
12 | ||||
5.2. |
ELECTION OF OFFICERS |
12 | ||||
5.3. |
SUBORDINATE OFFICERS |
12 | ||||
5.4. |
REMOVAL AND RESIGNATION OF OFFICERS |
12 | ||||
5.5. |
VACANCIES IN OFFICES |
13 | ||||
5.6. |
CHAIRMAN OF THE BOARD |
13 | ||||
5.7. |
CHIEF EXECUTIVE OFFICER |
13 | ||||
5.8. |
PRESIDENT |
13 | ||||
5.9. |
VICE PRESIDENTS |
13 | ||||
5.10. |
SECRETARY |
14 | ||||
5.11. |
CHIEF FINANCIAL OFFICER |
14 | ||||
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS |
14 | |||||
6.1. |
INDEMNIFICATION OF DIRECTORS AND OFFICERS |
14 | ||||
6.2. |
INDEMNIFICATION OF OTHERS |
15 | ||||
6.3. |
PAYMENT OF EXPENSES IN ADVANCE |
15 | ||||
6.4. |
INDEMNITY NOT EXCLUSIVE |
15 | ||||
6.5. |
INSURANCE INDEMNIFICATION |
15 | ||||
6.6. |
CONFLICTS |
16 | ||||
ARTICLE VII RECORDS AND REPORTS |
16 | |||||
7.1. |
MAINTENANCE AND INSPECTION OF SHARE REGISTER |
16 | ||||
7.2. |
MAINTENANCE AND INSPECTION OF BYLAWS |
17 | ||||
7.3. |
MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS |
17 | ||||
7.4. |
INSPECTION BY DIRECTORS |
17 | ||||
7.5. |
ANNUAL REPORT TO SHAREHOLDERS; WAIVER |
17 | ||||
7.6. |
FINANCIAL STATEMENTS |
18 | ||||
7.7. |
REPRESENTATION OF SHARES OF OTHER CORPORATIONS |
18 | ||||
ARTICLE VIII GENERAL MATTERS |
18 | |||||
8.1. |
RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING |
18 | ||||
8.2. |
CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS |
19 | ||||
8.3. |
CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED |
19 | ||||
8.4. |
CERTIFICATES FOR SHARES |
19 | ||||
8.5. |
LOST CERTIFICATES |
20 |
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8.6. |
CONSTRUCTION: DEFINITIONS |
20 | ||||
ARTICLE IX AMENDMENTS |
20 | |||||
9.1. |
AMENDMENT BY SHAREHOLDERS |
20 | ||||
9.2. |
AMENDMENT BY DIRECTORS |
20 |
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AMENDED AND RESTATED BYLAWS
OF
GYMBOREE RETAIL STORES, INC.
ARTICLE I
CORPORATE OFFICES
1.1. | PRINCIPAL OFFICE |
The board of directors shall fix the location of the principal executive office of the corporation at any place within or outside the State of California. If the principal executive office is located outside such state and the corporation has one or more business offices in such state, then the board of directors shall fix and designate a principal business office in the State of California.
1.2. | OTHER OFFICES |
The board of directors may at any time establish branch or subordinate offices at any place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1. | PLACE OF MEETINGS |
Meetings of shareholders shall be held at any place within or outside the State of California designated by the board of directors. In the absence of any such designation, shareholders meetings shall be held at the principal executive office of the corporation.
2.2. | ANNUAL MEETING |
The annual meeting of shareholders shall be held each year on a date and at a time designated by the board of directors. In the absence of such designation, the annual meeting of shareholders shall be held on the third Tuesday of May of each year at 10:00 a.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding full business day. At the meeting, directors shall be elected, and any other proper business may be transacted.
2.3. | SPECIAL MEETING |
A special meeting of the shareholders may be called at any time by the board of directors, or by the chairman of the board, or by the president, or by the chief executive officer, or by one
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or more shareholders holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the board of directors or the president or the chairman of the board or the chief executive officer, then the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile trans-mission to the chairman of the board, the president, any vice president, the chief executive officer or the secretary of the corporation. The officer receiving the request shall cause notice to be promptly given to the shareholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will be held at the time requested by the person or persons calling the meeting, so long as that time is not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, then the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing or affecting the time when a meeting of shareholders called by action of the board of directors may be held.
2.4. | NOTICE OF SHAREHOLDERS MEETINGS |
All notices of meetings of shareholders shall be sent or otherwise given in accordance with Section 2.5 of these bylaws not less than ten (10) (or, if sent by third-class mail pursuant to Section 2.5 of these bylaws, thirty (30)) nor more than sixty (60) days before the date of the meeting. The notice shall specify the place, date, and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted (no business other than that specified in the notice may be transacted) or (ii) in the case of the annual meeting, those matters which the board of directors, at the time of giving the notice, intends to present for action by the shareholders (but subject to the provisions of the next paragraph of this Section 2.4 any proper matter may be presented at the meeting for such action). The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees who, at the time of the notice, the board intends to present for election.
If action is proposed to be taken at any meeting for approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code of California (the Code), (ii) an amendment of the articles of incorporation, pursuant to Section 902 of the Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to Section 1900 of the Code, or (v) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of the Code, then the notice shall also state the general nature of that proposal.
2.5. | MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE |
Written notice of any meeting of shareholders shall be given either (i) personally or (ii) by first-class mail or (iii) by third-class mail but only if the corporation has outstanding shares held of record by five hundred (500) or more persons (determined as provided in Section
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605 of the Code) on the record date for the shareholders meeting, or (iv) by telegraphic or other written communication. Notices not personally delivered shall be sent charges prepaid and shall be addressed to the shareholder at the address of that shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice. If no such address appears on the corporations books or is given, notice shall be deemed to have been given if sent to that shareholder by mail or telegraphic or other written communication to the corporations principal executive office, or if published at least once in a newspaper of general circulation in the county where that office is located. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at that address, then all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available to the shareholder on written demand of the shareholder at the principal executive office of the corporation for a period of one (1) year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any shareholders meeting, executed by the secretary, assistant secretary or any transfer agent of the corporation giving the notice, shall be prima facie evidence of the giving of such notice.
2.6. | QUORUM |
The presence in person or by proxy of the holders of a majority of the shares entitled to vote thereat constitutes a quorum for the transaction of business at all meetings of shareholders. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.
2.7. | ADJOURNED MEETING; NOTICE |
Any shareholders meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy. In the absence of a quorum, no other business may be transacted at that meeting except as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place are announced at the meeting at which the adjournment is taken. However, if a new record date for the adjourned meeting is fixed or if the adjournment is for more than forty-five (45) days from the date set for the original meeting, then notice of the adjourned meeting shall be given. Notice of any such adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws. At
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any adjourned meeting the corporation may transact any business which might have been transacted at the original meeting.
2.8. | VOTING |
The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to the provisions of Sections 702 through 704 of the Code (relating to voting shares held by a fiduciary, in the name of a corporation or in joint ownership).
The shareholders vote may be by voice vote or by ballot; provided, however, that any election for directors must be by ballot if demanded by any shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as may be otherwise provided in the articles of incorporation, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote of the shareholders. Any shareholder entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or, except when the matter is the election of directors, may vote them against the proposal; but, if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the share-holders approving vote is with respect to all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the shares represented and voting at a duly held meeting (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the shareholders, unless the vote of a greater number or a vote by classes is required by the Code or by the articles of incorporation.
At a shareholders meeting at which directors are to be elected, a shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of votes which such shareholder normally is entitled to cast) if the candidates names have been placed in nomination prior to commencement of the voting and the shareholder has given notice prior to commencement of the voting of the shareholders intention to cumulate votes. If any shareholder has given such a notice, then every shareholder entitled to vote may cumulate votes for candidates in nomination either (i) by giving one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which that shareholders shares are normally entitled or (ii) by distributing the shareholders votes on the same principle among any or all of the candidates, as the shareholder thinks fit. The candidates receiving the highest number of affirmative votes, up to the number of directors to be elected, shall be elected; votes against any candidate and votes withheld shall have no legal effect.
2.9. | VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT |
The transactions of any meeting of shareholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though they had been taken at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an
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approval of the minutes thereof. The waiver of notice or consent or approval need not specify either the business to be transacted or the purpose of any annual or special meeting of shareholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 2.4 of these bylaws, the waiver of notice or consent or approval shall state the general nature of the proposal. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of notice of and presence at that meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Attendance at a meeting is not a waiver of any right to object to the consideration of matters required by the Code to be included in the notice of the meeting but not so included, if that objection is expressly made at the meeting.
2.10. | SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
Any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be effective only if signed by the holders of all outstanding shares entitled to vote for the election of directors. However, a director may be elected at any time to fill any vacancy on the board of directors, provided that it was not created by removal of a director and that it has not been filled by the directors, by the written consent of the holders of a majority of the outstanding shares entitled to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any shareholder giving a written consent, or the shareholders proxy holders, or a transferee of the shares, or a personal representative of the shareholder, or their respective proxy holders, may revoke the consent by a writing received by the secretary of the corporation before written consents of the number of shares required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been solicited in writing and if the unanimous written consent of all such shareholders has not been received, then the secretary shall give prompt notice of the corporate action approved by the shareholders without a meeting. Such notice shall be given to those shareholders entitled to vote who have not consented in writing and shall be given in the manner specified in Section 2.5 of these bylaws. In the case of approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Code, (ii) indemnification of a corporate agent, pursuant to Section 317 of the Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of the Code, and (iv) a distribution in dissolution other than in accordance with the
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rights of outstanding preferred shares, pursuant to Section 2007 of the Code, the notice shall be given at least ten (10) days before the consummation of any action authorized by that approval.
2.11. | RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS |
For purposes of determining the shareholders entitled to notice of any meeting or to vote thereat or entitled to give consent to corporate action without a meeting, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting nor more than sixty (60) days before any such action without a meeting, and in such event only shareholders of record on the date so fixed are entitled to notice and to vote or to give consents, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the Code.
If the board of directors does not so fix a record date:
(a) the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held; and
(b) the record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, (i) when no prior action by the board has been taken, shall be the day on which the first written consent is given, or (ii) when prior action by the board has been taken, shall be at the close of business on the day on which the board adopts the resolution relating to that action, or the sixtieth (60th) day before the date of such other action, whichever is later.
The record date for any other purpose shall be as provided in Article VIII of these bylaws.
2.12. | PROXIES |
Every person entitled to vote for directors, or on any other matter, shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation. A proxy shall be deemed signed if the shareholders name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the shareholder or the shareholders attorney-in-fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) the person who executed the proxy revokes it prior to the time of voting by delivering a writing to the corporation stating that the proxy is revoked or by executing a subsequent proxy and presenting it to the meeting or by voting in person at the meeting, or (ii) written notice of the death or incapacity of the maker of that proxy is received by the corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, unless otherwise provided in the proxy. The dates contained on the forms of proxy presumptively determine the order of execution, regardless of the postmark dates on the envelopes in which
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they are mailed. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of the Code.
2.13. | INSPECTORS OF ELECTION |
Before any meeting of shareholders, the board of directors may appoint an inspector or inspectors of election to act at the meeting or its adjournment. If no inspector of election is so appointed, then the chairman of the meeting may, and on the request of any shareholder or a shareholders proxy shall, appoint an inspector or inspectors of election to act at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting pursuant to the request of one (1) or more shareholders or proxies, then the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, then the chairman of the meeting may, and upon the request of any share-holder or a shareholders proxy shall, appoint a person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
3.1. | POWERS |
Subject to the provisions of the Code and any limitations in the articles of incorporation and these bylaws relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.
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3.2. | NUMBER OF DIRECTORS |
The number of directors of the corporation shall be one (1). The number of directors may be changed, by a duly adopted amendment to the articles of incorporation or by an amendment to this bylaw duly adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote.
No reduction of the authorized number of directors shall have the effect of removing any director before that directors term of office expires.
3.3. | ELECTION AND TERM OF OFFICE OF DIRECTORS |
Directors shall be elected at each annual meeting of shareholders to hold office until the next annual meeting. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified.
3.4. | RESIGNATION AND VACANCIES |
Any director may resign effective on giving written notice to the chief executive officer, the president, or the secretary, unless the notice specifies a later time for that resignation to become effective. If the resignation of a director is effective at a future time, the board of directors may elect a successor to take office when the resignation becomes effective.
Vacancies in the board of directors may be filled by a majority of the remaining directors, even if less than a quorum, or by a sole remaining director; however, a vacancy created by the removal of a director by the vote or written consent of the shareholders or by court order may be filled only by the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute a majority of the required quorum), or by the unanimous written consent of all shares entitled to vote thereon. Each director so elected shall hold office until the next annual meeting of the shareholders and until a successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to exist (i) in the event of the death, resignation or removal of any director, (ii) if the board of directors by resolution declares vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony, (iii) if the authorized number of directors is increased, or (iv) if the shareholders fail, at any meeting of shareholders at which any director or directors are elected, to elect the number of directors to be elected at that meeting.
The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election other than to fill a vacancy created by removal, if by written consent, shall require the consent of the holders of a majority of the outstanding shares entitled to vote thereon.
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3.5. | PLACE OF MEETINGS: MEETINGS BY TELEPHONE |
Regular meetings of the board of directors may be held at any place within or outside the State of California that has been designated from time to time by resolution of the board. In the absence of such a designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board may be held at any place within or outside the State of California that has been designated in the notice of the meeting or, if not stated in the notice or if there is no notice, at the principal executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in the meeting can hear one another; and all such directors shall be deemed to be present in person at the meeting.
3.6. | REGULAR MEETINGS |
Regular meetings of the board of directors may be held without notice if the times of such meetings are fixed by the board of directors.
3.7. | SPECIAL MEETINGS; NOTICE |
Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the president, any vice president, the chief executive officer, the secretary or any one director.
Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that directors address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation.
3.8. | QUORUM |
A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 3.10 of these bylaws. Every act or decision done or made by a majority of the directors present at a duly held meeting at which a quorum is present shall be regarded as the act of the board of directors, subject to the provisions of Section 310 of the Code (as to approval of contracts or transactions in which a director has a direct or indirect material financial interest), Section 311 of the Code (as to appointment of committees), Section 317(e) of the Code (as to indemnification of directors), the articles of incorporation, and other applicable law.
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A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
3.9. | WAIVER OF NOTICE |
Notice of a meeting need not be given to any director (i) who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or (ii) who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such directors. All such waivers, consents, and approvals shall be filed with the corporate records or made part of the minutes of the meeting. A waiver of notice need not specify the purpose of any regular or special meeting of the board of directors.
3.10. | ADJOURNMENT |
A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place.
3.11. | NOTICE OF ADJOURNMENT |
Notice of the time and place of holding an adjourned meeting need not be given unless the meeting is adjourned for more than twenty-four (24) hours. If the meeting is adjourned for more than twenty-four (24) hours, then notice of the time and place of the adjourned meeting shall be given before the adjourned meeting takes place, in the manner specified in Section 3.7 of these bylaws, to the directors who were not present at the time of the adjournment.
3.12. | BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
Any action required or permitted to be taken by the board of directors may be taken without a meeting, provided that all members of the board individually or collectively consent in writing to that action. Such action by written consent shall have the same force and effect as a unanimous vote of the board of directors. Such written consent and any counterparts thereof shall be filed with the minutes of the proceedings of the board.
3.13. | FEES AND COMPENSATION OF DIRECTORS |
Directors and members of committees may receive such compensation, if any, for their services and such reimbursement of expenses as may be fixed or determined by resolution of the board of directors. This Section 3.13 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee or otherwise and receiving compensation for those services.
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3.14. | APPROVAL OF LOANS TO OFFICERS1 |
The corporation may, upon the approval of the board of directors alone, make loans of money or property to, or guarantee the obligations of, any officer of the corporation or its parent or subsidiary, whether or not a director, or adopt an employee benefit plan or plans authorizing such loans or guaranties provided that (i) the board of directors determines that such a loan or guaranty or plan may reasonably be expected to benefit the corporation, (ii) the corporation has outstanding shares held of record by 100 or more persons (determined as provided in Section 605 of the Code) on the date of approval by the board of directors, and (iii) the approval of the board of directors is by a vote sufficient without counting the vote of any interested director or directors.
ARTICLE IV
COMMITTEES
4.1. | COMMITTEES OF DIRECTORS |
The board of directors may, by resolution adopted by a majority of the authorized number of directors, designate one (1) or more committees, each consisting of one (1) or more directors, to serve at the pleasure of the board. The board may designate one (1) or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. The appointment of members or alternate members of a committee requires the vote of a majority of the authorized number of directors. Any committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with respect to:
(a) the approval of any action which, under the Code, also requires shareholders approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any committee;
(c) the fixing of compensation of the directors for serving on the board or any committee;
(d) the amendment or repeal of these bylaws or the adoption of new bylaws;
(e) the amendment or repeal of any resolution of the board of directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the board of directors; or
(g) the appointment of any other committees of the board of directors or the members of such committees.
1 | This section is effective only if it has been approved by the shareholders in accordance with Sections 315(b) and 152 of the Code. |
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4.2. | MEETINGS AND ACTION OF COMMITTEES |
Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section 3.12 (action without meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the board of directors, and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
5.1. | OFFICERS |
The officers of the corporation shall be a chief executive officer, a president, a chief financial officer, one or more vice presidents, a secretary, and one or more assistant secretaries. The corporation may also have, at the discretion of the board of directors, a chairman of the board, a treasurer, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person.
5.2. | ELECTION OF OFFICERS |
The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws, shall be chosen by the board, subject to the rights, if any, of an officer under any contract of employment.
5.3. | SUBORDINATE OFFICERS |
The board of directors may appoint, or may empower any officer to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.
5.4. | REMOVAL AND RESIGNATION OF OFFICERS |
Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors at any regular or special meeting of the board or, except in case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors.
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Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.
5.5. | VACANCIES IN OFFICES |
A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to that office.
5.6. | CHAIRMAN OF THE BOARD |
The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the board of directors or as may be prescribed by these bylaws.
5.7. | CHIEF EXECUTIVE OFFICER |
Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the chief executive officer of the corporation shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation. He shall preside at all meetings of the shareholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the board of directors. He shall have the general powers and duties of management usually vested in the office of chief executive officer of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws.
5.8. | PRESIDENT |
In the absence or disability of the chief executive officer, the president shall perform all the duties of the chief executive officer and when so acting shall have all the powers of, and be subject to all the restrictions upon, the chief executive officer. The president shall have such other powers and perform such other duties as from time to time may be prescribed for him by the board of directors, these bylaws, and chief executive officer, or the chairman of the board.
5.9. | VICE PRESIDENTS |
In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the chief executive officer, the president or the chairman of the board.
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5.10. | SECRETARY |
The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors and shareholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors meetings or committee meetings, the number of shares present or represented at shareholders meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporations transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the board of directors required to be given by law or by these bylaws. He shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws.
5.11. | CHIEF FINANCIAL OFFICER |
The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the chief executive officer, the president and directors, whenever they request it, an account of all of his transactions as chief financial officer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1. | INDEMNIFICATION OF DIRECTORS AND OFFICERS |
The corporation shall, to the maximum extent and in the manner permitted by the Code, indemnify each of its directors and officers against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in
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connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Article VI, a director or officer of the corporation includes any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
6.2. | INDEMNIFICATION OF OTHERS |
The corporation shall have the power, to the extent and in the manner permitted by the Code, to indemnify each of its employees and agents (other than directors and officers) against expenses (as defined in Section 317(a) of the Code), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding (as defined in Section 317(a) of the Code), arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Article VI, an employee or agent of the corporation (other than a director or officer) includes any person (i) who is or was an employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
6.3. | PAYMENT OF EXPENSES IN ADVANCE |
Expenses incurred in defending any civil or criminal action or proceeding for which indemnification is required pursuant to Section 6.1 or for which indemnification is permitted pursuant to Section 6.2 following authorization thereof by the Board of Directors shall be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of the indemnified party to repay such amount if it shall ultimately be determined that the indemnified party is not entitled to be indemnified as authorized in this Article VI.
6.4. | INDEMNITY NOT EXCLUSIVE |
The indemnification provided by this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the extent that such additional rights to indemnification are authorized in the Articles of Incorporation.
6.5. | INSURANCE INDEMNIFICATION |
The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation against any liability asserted against or incurred by such person in such capacity or arising out of such persons status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article VI.
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6.6. | CONFLICTS |
No indemnification or advance shall be made under this Article VI, except where such indemnification or advance is mandated by law or the order, judgment or decree of any court of competent jurisdiction, in any circumstance where it appears:
(1) That it would be inconsistent with a provision of the Articles of Incorporation, these bylaws, a resolution of the shareholders or an agreement in effect at the time of the accrual of the alleged cause of the action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1. | MAINTENANCE AND INSPECTION OF SHARE REGISTER |
The corporation shall keep either at its principal executive office or at the office of its transfer agent or registrar (if either be appointed), as determined by resolution of the board of directors, a record of its shareholders listing the names and addresses of all shareholders and the number and class of shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least five percent (5%) in the aggregate of the outstanding voting shares of the corporation or who holds at least one percent (1%) of such voting shares and has filed a Schedule 14B with the Securities and Exchange Commission relating to the election of directors, may (i) inspect and copy the records of shareholders names, addresses, and shareholdings during usual business hours on five (5) days prior written demand on the corporation, (ii) obtain from the transfer agent of the corporation, on written demand and on the tender of such transfer agents usual charges for such list, a list of the names and addresses of the shareholders who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which that list has been compiled or as of a date specified by the shareholder after the date of demand. Such list shall be made available to any such shareholder by the transfer agent on or before the later of five (5) days after the demand is received or five (5) days after the date specified in the demand as the date as of which the list is to be compiled.
The record of shareholders shall also be open to inspection on the written demand of any shareholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to the holders interests as a shareholder or as the holder of a voting trust certificate.
Any inspection and copying under this Section 7.1 may be made in person or by an agent or attorney of the shareholder or holder of a voting trust certificate making the demand.
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7.2. | MAINTENANCE AND INSPECTION OF BYLAWS |
The corporation shall keep at its principal executive office or, if its principal executive office is not in the State of California, at its principal business office in California the original or a copy of these bylaws as amended to date, which bylaws shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside the State of California and the corporation has no principal business office in such state, then the secretary shall, upon the written request of any shareholder, furnish to that shareholder a copy of these bylaws as amended to date.
7.3. | MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS |
The accounting books and records and the minutes of proceedings of the shareholders, of the board of directors, and of any committee or committees of the board of directors shall be kept at such place or places as are designated by the board of directors or, in absence of such designation, at the principal executive office of the corporation. The minutes shall be kept in written form, and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to the holders interests as a shareholder or as the holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney and shall include the right to copy and make extracts. Such rights of inspection shall extend to the records of each subsidiary corporation of the corporation.
7.4. | INSPECTION BY DIRECTORS |
Every director shall have the absolute right at any reasonable time to inspect all books, records, and documents of every kind as well as the physical properties of the corporation and each of its subsidiary corporations. Such inspection by a director may be made in person or by an agent or attorney. The right of inspection includes the right to copy and make extracts of documents.
7.5. | ANNUAL REPORT TO SHAREHOLDERS; WAIVER |
The board of directors shall cause an annual report to be sent to the shareholders not later than one hundred twenty (120) days after the close of the fiscal year adopted by the corporation. Such report shall be sent at least fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days) before the annual meeting of shareholders to be held during the next fiscal year and in the manner specified in Section 2.5 of these bylaws for giving notice to shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of the fiscal year, (ii) an income statement, (iii) a statement of changes in financial position for the fiscal year, and (iv) any report of independent accountants or, if there is no such report, the certificate of an authorized officer of the corporation that the statements were prepared without audit from the books and records of the corporation.
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The foregoing requirement of an annual report shall be waived so long as the shares of the corporation are held by fewer than one hundred (100) holders of record.
7.6. | FINANCIAL STATEMENTS |
If no annual report for the fiscal year has been sent to shareholders, then the corporation shall, upon the written request of any shareholder made more than one hundred twenty (120) days after the close of such fiscal year, deliver or mail to the person making the request, within thirty (30) days thereafter, a copy of a balance sheet as of the end of such fiscal year and an income statement and statement of changes in financial position for such fiscal year.
If a shareholder or shareholders holding at least five percent (5%) of the outstanding shares of any class of stock of the corporation makes a written request to the corporation for an income statement of the corporation for the three-month, six-month or nine-month period of the then current fiscal year ended more than thirty (30) days before the date of the request, and for a balance sheet of the corporation as of the end of that period, then the chief financial officer shall cause that statement to be prepared, if not already prepared, and shall deliver personally or mail that statement or statements to the person making the request within thirty (30) days after the receipt of the request. If the corporation has not sent to the shareholders its annual report for the last fiscal year, the statements referred to in the first paragraph of this Section 7.6 shall likewise be delivered or mailed to the shareholder or shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report, if any, of any independent accountants engaged by the corporation or by the certificate of an authorized officer of the corporation that the financial statements were prepared without audit from the books and records of the corporation.
7.7. | REPRESENTATION OF SHARES OF OTHER CORPORATIONS |
The chairman of the board, the chief executive officer, the president, any vice president, the chief financial officer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the chief executive officer or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority herein granted may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1. | RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING |
For purposes of determining the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the shareholders entitled to exercise any rights in respect of any other lawful action (other than action by shareholders by written consent without a meeting), the board of directors may fix, in advance, a record date, which shall not be
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more than sixty (60) days before any such action. In that case, only shareholders of record at the close of business on the date so fixed are entitled to receive the dividend, distribution or allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided in the Code.
If the board of directors does not so fix a record date, then the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the board adopts the applicable resolution or the sixtieth (60th) day before the date of that action, whichever is later.
8.2. | CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS |
From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.
8.3. | CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED |
The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
8.4. | CERTIFICATES FOR SHARES |
A certificate or certificates for shares of the corporation shall be issued to each shareholder when any of such shares are fully paid. The board of directors may authorize the issuance of certificates for shares partly paid provided that these certificates shall state the total amount of the consideration to be paid for them and the amount actually paid. All certificates shall be signed in the name of the corporation by the chairman of the board or the vice chairman of the board or the president or a vice president or the chief executive officer and by the chief financial officer or an assistant treasurer or the secretary or an assistant secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on a certificate ceases to be that officer, transfer agent or registrar before that certificate is issued, it may be issued by the corporation with the same effect as if that person were an officer, transfer agent or registrar at the date of issue.
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8.5. | LOST CERTIFICATES |
Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and can-celled at the same time. The board of directors may, in case any share certificate or certificate for any other security is lost, stolen or destroyed, authorize the issuance of replacement certificates on such terms and conditions as the board may require; the board may require indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of the certificate or the issuance of the replacement certificate.
8.6. | CONSTRUCTION: DEFINITIONS |
Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Code shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes, the singular, and the term person includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
9.1. | AMENDMENT BY SHAREHOLDERS |
New bylaws may be adopted or these bylaws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote.
9.2. | AMENDMENT BY DIRECTORS |
Subject to the rights of the shareholders as provided in Section 9.1 of these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing the authorized number of directors (except to fix the authorized number of directors pursuant to a bylaw providing for a variable number of directors), may be adopted, amended or repealed by the board of directors.
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Exhibit 3.15
ARTICLES OF INCORPORATION
OF
S.C.C. WHOLESALE, INC.
ARTICLE I
The name of the corporation is S.C.C. Wholesale, Inc.
ARTICLE II
The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.
ARTICLE III
The liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. Unless applicable law otherwise provides, any amendment, repeal or modification of this Article III shall not adversely affect any right of any director under this Article III that existed at or prior to the time of such amendment, repeal or modification.
ARTICLE IV
The corporation is authorized to provide indemnification of agents (as defined in Section 317 of the California Corporations Code) through bylaw provisions, agreements with agents, vote of shareholders or disinterested directors or otherwise, in excess of the indemnification otherwise permitted by Section 317 of the California Corporations Code, subject only to the applicable limits on such excess indemnification set forth in Section 204 of the California Corporations Code. Unless applicable law otherwise provides, any amendment, repeal or modification of any provision of this Article IV shall not adversely affect any contract or other right to indemnification of any agent of the corporation that existed at or prior to the time of such amendment, repeal or modification.
ARTICLE V
The corporation is authorized to issue only one class of shares of stock, which shall be designated Common Stock and which shall have no par value. The total number of shares of Common Stock the corporation is authorized to issue is One Thousand (1,000) shares.
ARTICLE VI
The name and address in the State of California of the corporations initial agent for service of process is Corporation Service Company Which Will Do Business In California As CSC - Lawyers Incorporating Service
August 20, 2010 | /s/ Ann Ellias | |||
Ann Ellias, Incorporator |
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Exhibit 3.16
AMENDED AND RESTATED BYLAWS
OF
S.C.C. WHOLESALE, INC.
A California Corporation
AMENDED AND RESTATED BYLAWS
OF
S.C.C. WHOLESALE, INC.
A California Corporation
TABLE OF CONTENTS
Page | ||||||
ARTICLE I OFFICES |
1 | |||||
Section 1.1: |
Principal Office | 1 | ||||
Section 1.2: |
Other Offices | 1 | ||||
ARTICLE II DIRECTORS |
1 | |||||
Section 2.1: |
Exercise of Corporate Powers | 1 | ||||
Section 2.2: |
Number | 1 | ||||
Section 2.3: |
Need Not Be Shareholders | 1 | ||||
Section 2.4: |
Compensation | 1 | ||||
Section 2.5: |
Election and Term of Office | 2 | ||||
Section 2.6: |
Vacancies | 2 | ||||
Section 2.7: |
Removal | 2 | ||||
Section 2.8: |
Powers and Duties | 3 | ||||
ARTICLE III MEETINGS OF DIRECTORS |
5 | |||||
Section 3.1: |
Place of Meetings | 5 | ||||
Section 3.2: |
Regular Meetings | 6 | ||||
Section 3.3: |
Special Meetings | 6 | ||||
Section 3.4: |
Notice of Special Meetings | 6 | ||||
Section 3.5: |
Quorum | 6 | ||||
Section 3.6: |
Conference Telephone | 7 | ||||
Section 3.7: |
Waiver of Notice and Consent | 7 |
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Section 3.8: |
Action Without a Meeting | 7 | ||||
Section 3.9: |
Committees | 7 | ||||
ARTICLE IV COMMITTEES | 7 | |||||
Section 4.1: |
Appointment and Procedure | 7 | ||||
Section 4.2: |
Executive Committee Powers | 8 | ||||
Section 4.3: |
Powers of Other Committees | 8 | ||||
Section 4.4: |
Limitations on Powers of Committees | 8 | ||||
ARTICLE V OFFICERS | 9 | |||||
Section 5.1: |
Election and Qualifications | 9 | ||||
Section 5.2: |
Term of Office and Compensation | 9 | ||||
Section 5.3: |
Chief Executive Officer | 9 | ||||
Section 5.4: |
Chairman of the Board | 10 | ||||
Section 5.5: |
President | 10 | ||||
Section 5.6: |
President Pro Tem | 10 | ||||
Section 5.7: |
Vice President | 10 | ||||
Section 5.8: |
Secretary | 10 | ||||
Section 5.9: |
Chief Financial Officer | 11 | ||||
Section 5.10: |
Instruments in Writing | 12 | ||||
ARTICLE VI INDEMNIFICATION | 12 | |||||
Section 6.1: |
Indemnification of Agents | 12 | ||||
Section 6.2: |
Advancement of Expenses | 13 | ||||
Section 6.3: |
Non-Exclusivity of Rights | 13 | ||||
Section 6.4: |
Indemnification Contracts | 13 | ||||
Section 6.5: |
Effect of Amendment | 13 |
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ARTICLE VII MEETINGS OF, AND REPORTS TO, SHAREHOLDERS |
13 | |||||
Section 7.1: |
Place of Meetings | 13 | ||||
Section 7.2: |
Annual Meetings | 14 | ||||
Section 7.3: |
Special Meetings | 14 | ||||
Section 7.4: |
Notice of Meetings | 14 | ||||
Section 7.5: |
Consent to Shareholders Meetings | 15 | ||||
Section 7.6: |
Quorum | 16 | ||||
Section 7.7: |
Adjourned Meetings | 16 | ||||
Section 7.8: |
Voting Rights | 16 | ||||
Section 7.9: |
Action by Written Consents | 17 | ||||
Section 7.10: |
Election of Directors | 17 | ||||
Section 7.11: |
Proxies | 18 | ||||
Section 7.12: |
Inspectors of Election | 18 | ||||
Section 7.13: |
Annual Reports | 19 | ||||
ARTICLE VIII SHARES AND SHARE CERTIFICATES | 19 | |||||
Section 8.1: |
Shares Held By the Corporation | 19 | ||||
Section 8.2: |
Certificates for Shares | 19 | ||||
Section 8.3: |
Lost, Stolen or Destroyed Certificates | 20 | ||||
Section 8.4: |
Restrictions on Transfer of Shares | 20 | ||||
ARTICLE IX CONSTRUCTION OF BYLAWS WITH REFERENCE TO PROVISIONS OF LAW | 20 | |||||
Section 9.1: |
Bylaw Provisions Construed as Additional and Supplemental to Provisions of Law | 20 | ||||
Section 9.2: |
Bylaw Provisions Contrary to or Inconsistent with Provisions of Law | 21 |
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ARTICLE X CERTIFICATION, ADOPTION, AMENDMENT OR REPEAL OF BYLAWS |
21 | |||||
Section 10.1: |
By Shareholders | 21 | ||||
Section 10.2: |
By the Board of Directors | 21 | ||||
Section 10.3: |
Certification and Inspection of Bylaws | 21 |
iv
AMENDED AND RESTATED BYLAWS
OF
S.C.C. WHOLESALE, INC.
(a California Corporation)
ARTICLE I
OFFICES
Section 1.1: Principal Office. The principal executive office for the transaction of the business of this corporation (the Corporation) shall be located at such place as the Board of Directors may from time to time decide. The Board of Directors is hereby granted full power and authority to change the location of the principal executive office from one location to another.
Section 1.2: Other Offices. One or more branch or other subordinate offices may at any time be fixed and located by the Board of Directors at such place or places within or outside the State of California as it deems appropriate.
ARTICLE II
DIRECTORS
Section 2.1: Exercise of Corporate Powers. Except as otherwise provided by these Bylaws, by the Articles of Incorporation of the Corporation or by the laws of the State of California now or hereafter in force, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the ultimate direction of a board of directors (the Board of Directors).
Section 2.2: Number. The authorized number of directors of the Corporation shall be One (1).
Section 2.3: Need Not Be Shareholders. The directors of the Corporation need not be shareholders of this Corporation.
Section 2.4: Compensation. Directors and members of committees may receive such
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compensation, if any, for their services as may be fixed or determined by resolution of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.
Section 2.5: Election and Term of Office. The directors shall be elected annually by the shareholders at the annual meeting of the shareholders. The term of office of the directors shall begin immediately after their election and shall continue until the next annual meeting of the shareholders and until their respective successors are elected. A reduction of the authorized number of directors shall not shorten the term of any incumbent director or remove any incumbent director prior to the expiration of such directors term of office.
Section 2.6: Vacancies. A vacancy or vacancies on the Board of Directors shall exist:
(a) in the case of the death of any director; or
(b) in the case of the resignation or removal of any director; or
(c) if the authorized number of directors is increased; or
(d) if the shareholders fail, at any annual meeting of shareholders at which any director is elected, to elect the full authorized number of directors at that meeting.
The Board of Directors may declare vacant the office of a director if he or she is declared of unsound mind by an order of court or convicted of a felony or if, within sixty (60) days after notice of his or her election, he or she does not accept the office. Any vacancy, except for a vacancy created by removal of a director as provided in Section 2.7 hereof, may be filled by a person selected by a majority of the remaining directors then in office, whether or not less than a quorum, or by a sole remaining director. Vacancies occurring in the Board of Directors by reason of removal of directors shall be filled only by approval of shareholders. The shareholders may elect a director at any time to fill any vacancy not filled by the directors. Any such election by the written consent of shareholders, other than to fill a vacancy created by removal, requires the consent of shareholders holding a majority of the outstanding shares entitled to vote. If, after the filling of any vacancy by the directors, the directors then in office who have been elected by the shareholders shall constitute less than a majority of the directors then in office, any holder or holders of an aggregate of five percent (5%) or more of the total number of shares at that time outstanding having the right to vote for such directors may call a special meeting of shareholders to be held to elect the entire Board of Directors. The term of office of any director then in office shall terminate upon the election of such directors successor. Any director may resign effective upon giving written notice to the Chief Executive Officer, the President or the Secretary, unless the notice specifies a later time for the effectiveness of such resignation. After the notice is given and if the resignation is effective at a future time, a successor may be elected or appointed to take office when the resignation becomes effective.
Section 2.7: Removal. The entire Board of Directors or any individual director
2
may be removed from office without cause by an affirmative vote of shareholders holding a majority of the outstanding shares entitled to vote. If the entire Board of Directors is not removed, however, then no individual director shall be removed if the votes cast against removal of that director, plus the votes not consenting in writing to such removal, would be sufficient to elect that director if voted cumulatively in an election at which the following were true:
(a) the same total number of votes were cast, or, if such action is taken by written consent, all shares entitled to vote were voted; and
(b) the entire number of directors authorized at the time of the directors most recent election were then being elected.
If any or all directors are so removed, new directors may be elected at the same meeting or at a subsequent meeting. If at any time a class or series of shares is entitled to elect one or more directors under authority granted by the Articles of Incorporation, the provisions of this Section 2.7 shall apply to the vote of that class or series and not to the vote of the outstanding shares as a whole.
Section 2.8: Powers and Duties. Without limiting the generality or extent of the general corporate powers to be exercised by the Board of Directors pursuant to Section 2.1 of these Bylaws, it is hereby provided that the Board of Directors shall have full power with respect to the following matters:
(a) To purchase, lease or otherwise acquire any and all kinds of property, whether real, personal or mixed, and at its discretion to purchase such property with a promissory note, money, property and/or stocks, bonds, debentures or other securities of the Corporation.
(b) To enter into any and all contracts and agreements, written or oral, which in its judgment may be beneficial to the interests and purposes of the Corporation.
(c) To fix and determine and to vary from time to time the amount or amounts to be set aside or retained as reserve funds or as working capital of the Corporation or for maintenance, repairs, replacements, improvements or enlargements of its properties.
(d) To declare and pay dividends in cash, shares and/or property out of any funds of the Corporation at the time legally available for the declaration and payment of dividends on its shares.
(e) To adopt such rules and regulations for the conduct of its meetings and the management of the affairs of the Corporation as it may deem proper.
(f) To prescribe the manner in which and the person or persons by whom any or all of the checks, drafts, notes, bills of exchange, contracts and other corporate instruments shall be executed.
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(g) To accept resignations of directors; to declare vacant the office of a director as provided in Section 2.6 hereof; and, in case of vacancy in the office of directors, to fill the same to the extent provided in Section 2.6 hereof.
(h) To create offices in addition to those for which provision is made by law or these Bylaws; to elect and remove at its pleasure all officers of the Corporation, fix their terms of office, prescribe their titles, powers and duties, limit their authority and fix their salaries in any way it may deem advisable that is not contrary to law or these Bylaws.
(i) To designate one or more persons to perform the duties and exercise the powers of any officer of the Corporation during the temporary absence or disability of such officer.
(j) To appoint or employ and to remove at its pleasure such agents and employees as it may see fit, to prescribe their titles, powers and duties, limit or expand their authority and fix their salaries in any way it may deem advisable that is not contrary to law or these Bylaws.
(k) To fix a time in the future, which shall not be more than sixty (60) days nor less than ten (10 days) prior to the date of the meeting nor more than sixty (60) days prior to any other action for which it is fixed, as a record date for the determination of the shareholders entitled to notice of and to vote at any meeting, or entitled to receive any payment of any dividend or other distribution, or allotment of any rights, or entitled to exercise any rights in respect of any other lawful action; and in such case only shareholders of record on the date so fixed shall be entitled to notice of and to vote at the meeting or to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after any record date fixed as aforesaid. The Board of Directors may close the books of the Corporation against transfers of shares during the whole or any part of such period.
(l) To fix and locate from time to time the principal office for the transaction of the business of the Corporation and one or more branch or other subordinate offices of the Corporation within or without the State of California.
(m) To designate any place within or without the State of California for the holding of any meeting or meetings of the Board of Directors or shareholders, as provided in Sections 3.1 and 7.1 hereof respectively.
(n) To adopt, make and use a corporate seal, and to prescribe the forms of certificates for shares and to alter the form of such seal and of such certificates from time to time as in its judgment it may deem best, provided such seal and such certificates shall at all times comply with the provisions of law now or hereafter in effect.
(o) To authorize the issuance of shares of stock of the Corporation in accordance with the laws of the State of California and the Articles of Incorporation.
(p) Subject to the limitation provided in Section 10.2 hereof, to adopt, amend or repeal from time to time and at any time these Bylaws and any and all amendments thereof.
4
(q) To borrow money, make guarantees of indebtedness or other obligations of third parties (except to the extent such guarantees are not permitted by Section 2.8(r) of these Bylaws, Section 315 of the California Corporations Code (or any successor provision) or other applicable law) and incur indebtedness on behalf of the Corporation, including the power and authority to borrow money from any of the shareholders, directors or officers of the Corporation; and to cause to be executed and delivered therefor in the Corporations name any promissory notes, bonds, debentures, deeds of trust, mortgages, pledges (or other transfers of property as security or collateral for a debt), or other evidences of debt and securities therefor; with the note or other obligation given for any indebtedness of the Corporation, signed officially by any officer or officers duly authorized by the Board of Directors, constituting a binding obligation of the Corporation.
(r) To approve a loan of money or property to any officer or director of the Corporation or of any parent or subsidiary company, to guarantee the obligation of any such officer or director or to approve an employee benefit plan authorizing such a loan or guarantee to any such officer or director, but only if (i) the loan or guarantee is made pursuant to a transaction, plan or agreement (including a stock purchase plan or agreement or stock option plan or agreement) permitted by Section 408 of the California Corporations Code; or (ii) the transaction, or an employee benefit plan authorizing such loans or guarantees after disclosure of the right under such plan to include officers or directors thereunder, is approved by a majority of the shareholders of the Corporation, as required under Section 315 of the California Corporations Code (or any successor provision) or other then applicable law; provided however, that notwithstanding the foregoing, if the Corporation has outstanding shares held of record by one hundred (100) or more persons (determined as provided in Section 605 of the California Corporations Code or any successor provision) on the date of approval by the Board of Directors of a loan or guarantee to an officer of the Corporation, and this Section 2.8(r) has been approved by the outstanding shares (as defined in Section 152 of the California Corporations Code or any successor provision), then the Board of Directors alone (without the need for any further approval by the Corporations shareholders) may, by a vote of the Board of Directors sufficient for approval without counting the vote of any interested director or directors, approve such a loan or guarantee to an officer of the Corporation, whether or not such officer is a director, or an employee benefit plan authorizing such a loan or guarantee to an officer of the Corporation, if the Board of Directors determines (without counting the vote of any interested director or directors) that such loan, guarantee or plan may reasonably be expected to benefit the Corporation.
(s) Generally to do and perform every act and thing whatsoever that may pertain to the office of a director or to a board of directors.
ARTICLE III
MEETINGS OF DIRECTORS
Section 3.1: Place of Meetings. Meetings (whether regular, special or adjourned) of the Board of Directors of the Corporation shall be held at the principal executive office of the Corporation or at any other place within or outside the State of California which may be
5
designated from time to time by resolution of the Board of Directors or which is designated in the notice of the meeting.
Section 3.2: Regular Meetings. Regular meetings of the Board of Directors shall be held after the adjournment of each annual meeting of the shareholders (which meeting shall be designated the Regular Annual Meeting) and at such other times as may be designated from time to time by resolution of the Board of Directors or as otherwise called in accordance with Section 307 of the California Corporations Code (or any successor provision). Notice of the time and place of all regular meetings shall be given in the same manner as for special meetings, except that no such notice need be given if (i) the time and place of such meetings are fixed by the Board of Directors or (ii) the Regular Annual Meeting is held at the principal executive office of this Corporation and on the date specified by the Board of Directors.
Section 3.3: Special Meetings. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board, if any, the Chief Executive Officer, the President, any Vice President, the Secretary, or by any one (1) or more directors.
Section 3.4: Notice of Special Meetings. Special meetings of the Board of Directors shall be held upon no less than four (4) days notice by mail or forty-eight (48) hours notice delivered personally or by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, telegraph, facsimile, electronic mail or other electronic means to each director. Notice need not be given to any director who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the home or office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. A notice or waiver of notice need not specify the purpose of any meeting of the Board of Directors. If the address of a director is not shown on the records of the Corporation and is not readily ascertainable, notice shall be addressed to him or her at the city or place in which meetings of the directors are regularly held. If a meeting is adjourned for more than twenty-four (24) hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to all directors not present at the time of adjournment.
Section 3.5: Quorum. A majority of the authorized number of directors constitutes a quorum of the Board of Directors for the transaction of business. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present is the act of the Board of Directors subject to provisions of law relating to interested directors and indemnification of agents of the Corporation. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time and place. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of
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directors, if any action taken is approved by at least a majority of the required quorum for such meeting.
Section 3.6: Conference Telephone. Members of the Board of Directors may participate in a meeting through use of conference telephone, electronic video screen communication, or other communications equipment. Participation through use of conference telephone constitutes presence in person so long as all directors participating in such meeting can hear one another. Participation in a meeting through use of electronic video screen or other communications equipment (other than conference telephone) constitutes presence in person at such meeting if (i) each member participating in the meeting can communicate with all of the other members concurrently, and (ii) each member is provided the means of participating in all matters before the board, including, without limitation, the capacity to propose, or to interpose an objection to a specific action taken by the Corporation, and (iii) the Corporation adopts and implements some means of verifying both of the following: (a) the person participating in the meeting is a director or other person entitled to participate in the Board Meeting, and (b) all actions of, or votes by, the Board of Directors are taken or cast only by the directors and not by any persons who are not directors.
Section 3.7: Waiver of Notice and Consent. The transactions of any meeting of the Board of Directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum is present, and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding such meeting or an approval of the minutes thereof. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
Section 3.8: Action Without a Meeting. Any action required or permitted by law to be taken by the Board of Directors may be taken without a meeting, if all members of the Board of Directors shall individually or collectively consent in writing to the taking of such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Board of Directors. Such action by written consent shall have the same force and effect as a unanimous vote of such directors at a duly held meeting.
Section 3.9: Committees. The provisions of this Article apply also to committees of the Board of Directors and any actions by such committees.
ARTICLE IV
COMMITTEES
Section 4.1: Appointment and Procedure. The Board of Directors may, by resolution adopted by a majority of the authorized number of directors, appoint from among
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its members one (1) or more committees, including without limitation an executive committee, an audit committee and a compensation committee, consisting of one (1) or more directors to serve at the pleasure of the Board. The Board may designate one (1) or more directors as alternative members of any committee who may replace any absent member of any meeting of the committee. Each committee may make its own rules of procedure subject to Section 3.9 hereof, and shall meet as provided by such rules or by a resolution adopted by the Board of Directors (which resolution shall take precedence). A majority of the members of the committee shall constitute a quorum, and in every case the affirmative vote of a majority of all members of the committee shall be necessary to the adoption of any resolution.
Section 4.2: Executive Committee Powers. During the intervals between the meetings of the Board of Directors, the Executive Committee, if any, in all cases in which specific directions shall not have been given by the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation in such manner as the Executive Committee may deem best for the interests of the Corporation.
Section 4.3: Powers of Other Committees. Other committees shall have such powers as are given them in a resolution of the Board of Directors.
Section 4.4: Limitations on Powers of Committees. No committee shall have the power to act with respect to:
(a) any action for which the laws of the State of California also require shareholder approval or approval of the outstanding shares;
(b) the filling of vacancies on the Board of Directors or in any committee;
(c) the fixing of compensation of the directors for serving on the Board of Directors or on any committee;
(d) the amendment or repeal of these Bylaws or the adoption of new Bylaws;
(e) the amendment or repeal of any resolution of the Board of Directors which by its express terms is not amendable or repealable;
(f) a distribution to the shareholders of the Corporation, except at a rate or in a periodic amount or within a price range as set forth in the Articles of Incorporation or determined by the Board of Directors; and
(g) the appointment of other committees of the Board of Directors or the members thereof.
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ARTICLE V
OFFICERS
Section 5.1: Election and Qualifications. The officers of the Corporation shall consist of a Chief Executive Officer, a President, a Secretary, one or more Assistant Secretaries, one or more Vice Presidents, a Chief Financial Officer and such other officers, including, but not limited to, a Chairman of the Board of Directors, a Treasurer, one or more Assistant Chief Financial Officers, and one or more Assistant Treasurers, as the Board of Directors shall deem expedient. The Board of Directors may appoint, or may empower any officer to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board of Directors may from time to time determine. Such officers shall be chosen in such manner and hold their offices for such terms as the Board of Directors may prescribe. Any number of offices may be held by the same person.
Section 5.2: Term of Office and Compensation. The term of office and salary of each of said officers and the manner and time of the payment of such salaries shall be fixed and determined by the Board of Directors and may be altered by said Board of Directors from time to time at its pleasure, subject to the rights, if any, of any officer under any contract of employment. Any officer may resign at any time upon written notice to the Corporation, without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party If any vacancy occurs in any office of the Corporation, the Board of Directors may appoint a successor to fill such vacancy.
Section 5.3: Chief Executive Officer. Subject to the control of the Board of Directors and such supervisory powers, if any, as may be given by the Board of Directors, the powers and duties of the Chief Executive Officer of the Corporation are:
(a) To act as the general manager and, subject to the control of the Board of Directors, to have general supervision, direction and control of the business and affairs of the Corporation.
(b) To preside at all meetings of the shareholders and, in the absence of the Chairman of the Board of Directors or if there be no Chairman, at all meetings of the Board of Directors.
(c) To call meetings of the shareholders and meetings of the Board of Directors to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper.
(d) To affix the signature of the Corporation to all deeds, conveyances, mortgages, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board of Directors or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; to sign certificates for shares of stock
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of the Corporation; and, subject to the direction of the Board of Directors, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation.
Section 5.4: Chairman of the Board. The Chairman of the Board of Directors, if there be one, shall have the power to preside at all meetings of the Board of Directors and shall have such other powers and shall be subject to such other duties as the Board of Directors may from time to time prescribe.
Section 5.5: President. Subject to the supervisory powers of the Chief Executive Officer, if not the President, and to such supervisory powers as may be given by the Board of Directors to the Chairman of the Board, if one is elected, or to any other officer, the President shall have the general powers and duties of management usually vested in the office of President of a corporation and shall have such other powers and duties as may be prescribed by the Board of Directors or these Bylaws.
Section 5.6: President Pro Tem. If neither the Chairman of the Board of Directors, the President, nor any Vice President is present at any meeting of the Board of Directors, a President pro tem may be chosen by the directors present at the meeting to preside and act at such meeting. If neither the Chief Executive Officer, the President nor any Vice President is present at any meeting of the shareholders, a President pro tem may be chosen by the shareholders present at the meeting to preside at such meeting.
Section 5.7: Vice President. The titles, powers and duties of the Vice President or Vice Presidents, if any, shall be as prescribed by the Board of Directors. In case of the resignation, disability or death of the Chief Executive Officer and there is no President, the Vice President, or one of the Vice Presidents, shall exercise all powers and duties of the Chief Executive Officer. If there is more than one Vice President, the order in which the Vice Presidents shall succeed to the powers and duties of the Chief Executive Officer shall be as fixed by the Board of Directors.
Section 5.8: Secretary. The powers and duties of the Secretary are:
(a) To keep a book of minutes at the principal executive office of the Corporation, or such other place as the Board of Directors may order, of all meetings of its directors and shareholders with the time and place of holding of such meeting, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at directors meetings, the number of shares present or represented at shareholders meetings and the proceedings thereof.
(b) To keep the seal of the Corporation and to affix the same to all instruments which may require it.
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(c) To keep or cause to be kept at the principal executive office of the Corporation, or at the office of the transfer agent or agents, a record of the shareholders of the Corporation, giving the names and addresses of all shareholders and the number and class of shares held by each, the number and date of certificates issued for shares and the number and date of cancellation of every certificate surrendered for cancellation.
(d) To keep a supply of certificates for shares of the Corporation, to fill in all certificates issued, and to make a proper record of each such issuance; provided that, so long as the Corporation shall have one or more duly appointed and acting transfer agents of the shares, or any class or series of shares, of the Corporation, such duties with respect to such shares shall be performed by such transfer agent or transfer agents.
(e) To transfer upon the share books of the Corporation any and all shares of the Corporation; provided that, so long as the Corporation shall have one or more duly appointed and acting transfer agents of the shares, or any class or series of shares, of the Corporation, such duties with respect to such shares shall be performed by such transfer agent or transfer agents, and the method of transfer of each certificate shall be subject to the reasonable regulations of the transfer agent to whom the certificate is presented for transfer and, if the Corporation then has one or more duly appointed and acting registrars, subject to the reasonable regulations of the registrar to which a new certificate is presented for registration; and, provided further, that no certificate for shares of stock shall be issued or delivered or, if issued or delivered, shall have any validity whatsoever until and unless it has been signed or authenticated in the manner provided in Section 8.2 hereof.
(f) To make service and publication of all notices that may be necessary or proper in connection with meetings of the Board of Directors or the shareholders of the Corporation. In case of the absence, disability, refusal or neglect of the Secretary to make service or publication of any notices, then such notices may be served and/or published by the Chief Executive Officer, President, or a Vice President, or by any person thereunto authorized by either of them, or by the Board of Directors, or by the holders of a majority of the outstanding shares of the Corporation.
(g) Generally to do and perform all such duties as pertain to such office and as may be required by the Board of Directors.
Section 5.9: Chief Financial Officer. The powers and duties of the Chief Financial Officer are:
(a) To supervise and control the keeping and maintaining of adequate and correct accounts of the Corporations properties and business transactions, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus and shares. The books of account shall at all reasonable times be open to inspection by any director.
(b) To have the custody of all funds, securities, evidences of indebtedness and other valuable documents of the Corporation and, at his or her discretion, to cause any or all thereof to be deposited for the account of the Corporation with such depository as may be designated from time to time by the Board of Directors.
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(c) To receive or cause to be received, and to give or cause to be given, receipts and acquittances for monies paid in for the account of the Corporation.
(d) To disburse, or cause to be disbursed, all funds of the Corporation as may be directed by the Chief Executive Officer, the President, or the Board of Directors, taking proper vouchers for such disbursements.
(e) To render to the Chief Executive Officer or to the Board of Directors, whenever either may require, accounts of all transactions as Chief Financial Officer and of the financial condition of the Corporation.
(f) Generally to do and perform all such duties as pertain to such office and as may be required by the Board of Directors.
Section 5.10: Instruments in Writing. All checks, drafts, demands for money, notes and written contracts of the Corporation shall be signed by such officer or officers, agent or agents, as the Board of Directors may from time to time designate. No officer, agent, or employee of the Corporation shall have the power to bind the Corporation by contract or otherwise unless authorized to do so by these Bylaws or by the Board of Directors.
ARTICLE VI
INDEMNIFICATION
Section 6.1: Indemnification of Agents. The Corporation shall indemnify each person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative (the Proceeding) by reason of the fact that such person is or was a director, or officer of the Corporation, or is or was serving at the request of the Corporation as an agent of the Corporation or as an agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, or was a director, or officer or agent of a foreign or domestic corporation which was a predecessor corporation of the Corporation or of another enterprise, each at the request of such predecessor corporation, to the fullest extent permitted by the California Corporations Code, against all expenses, including, without limitation, attorneys fees and any expenses of establishing a right to indemnification, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with such Proceeding, and such indemnification shall continue as to a person who has ceased to be such a director, or officer , and shall inure to the benefit of the heirs, executors and administrators of such person; provided, the individual acted in good faith and in a manner reasonably believed to be in the best interests of the Corporation, and in the case of a criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful; and provided, further, that the Corporation shall indemnify any such person seeking indemnity in connection with a Proceeding (or part thereof) initiated by such person only if such Proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.
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Section 6.2: Advancement of Expenses. The Corporation shall pay all expenses incurred by such a director, or officer in defending any Proceeding as they are incurred in advance of its final disposition; provided, however, that the payment of such expenses incurred by a director, or officer in advance of the final disposition of a Proceeding shall be made only upon receipt by the Corporation of an agreement by or on behalf of such director, or officer to repay such amount if it shall be determined ultimately that such person is not entitled to be indemnified under this Article VI or otherwise; and provided further that the Corporation shall not be required to advance any expenses to a person against whom the Corporation brings an action, alleging that such person committed an act or omission not in good faith or that involved intentional misconduct or a knowing violation of law, or that was contrary to the best interest of the Corporation, or derived an improper personal benefit from a transaction.
Section 6.3: Non-Exclusivity of Rights. The rights conferred on any person in this Article VI shall not be deemed exclusive of any other rights that such person may have or hereafter acquire under any statute, by law, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office. Additionally, nothing in this Article VI shall limit the ability of the Corporation, in its discretion, to indemnify or advance expenses to persons whom the Corporation is not obligated to indemnify or advance expenses to pursuant to this Article VI.
Section 6.4: Indemnification Contracts. The Board of Directors is authorized to cause the Corporation to enter into a contract with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, providing for indemnification rights equivalent to or, if the Board of Directors so determines, greater than (to the extent permitted by the Corporations Articles of Incorporation and the California Corporations Code) those provided for in this Article VI.
Section 6.5: Effect of Amendment. Any amendment, repeal or modification of any provision of this Article VI shall be prospective only, and shall not adversely affect any right or protection conferred on a person pursuant to this Article VI and existing at the time of such amendment, repeal or modification.
ARTICLE VII
MEETINGS OF, AND REPORTS TO, SHAREHOLDERS
Section 7.1: Place of Meetings. Meetings (whether regular, special or adjourned) of the shareholders of the Corporation shall be held at any place within or outside the State of California as may be stated in, or fixed in accordance with, these Bylaws. If no place is stated or so fixed, the meeting shall be held at the principal executive office of the Corporation. The
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meeting place may be any place established by written consent of all the shareholders entitled to vote thereat, or which may be designated by resolution of the Board of Directors. Any meeting shall be valid wherever held if held by the written consent of all the shareholders entitled to vote thereat, given either before or after the meeting and filed with the Secretary of the Corporation.
Section 7.2: Annual Meetings. The annual meetings of the shareholders shall be held at the place provided pursuant to Section 7.1 hereof and at such time in a particular year as may be designated by written consent of all the shareholders entitled to vote thereat or which may be designated by resolution of the Board of Directors of the Corporation. Said annual meetings shall be held for the purpose of the election of directors, for the making of reports of the affairs of the Corporation and for the transaction of such other business as may properly come before the meeting.
Section 7.3: Special Meetings. Special meetings of the shareholders for any purpose or purposes whatsoever may be called at any time by the Chief Executive Officer, the President, the Chairman of the Board of Directors or by the Board of Directors, or by one or more members thereof, or by one or more holders of shares entitled to cast not less than ten percent (10%) of the votes at the meeting. Upon request in writing sent by registered mail to the Chairman of the Board of Directors, Chief Executive Officer, President, Vice President or Secretary, or delivered to any such officer in person, by any person entitled to call a special meeting of shareholders, it shall be the duty of such officer forthwith to cause notice to be given to the shareholders entitled to vote that a meeting will be held at a time requested by the person or persons calling the meeting, which (except where called by the Board of Directors) shall be not less than thirty five (35) days nor more than sixty (60) days after the receipt of such request. If the notice is not given within twenty (20) days after receipt of the request, the person entitled to call the meeting may give the notice. Notices of meetings called by the Board of Directors shall be given in accordance with Section 7.4.
Section 7.4: Notice of Meetings. Notice of any meeting of shareholders shall be given in writing not less than ten (10) days (or, if sent by third-class mail, thirty (30) days) nor more than sixty (60) days before the date of the meeting to each shareholder entitled to vote thereat by the Secretary or an Assistant Secretary, or such other person charged with that duty, or if there be no such officer or person, or in case of his or her neglect or refusal, by any director or shareholder. The notice shall state the place, date and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted, or (ii) in the case of the annual meeting, those matters which the Board of Directors, at the time of the mailing of the notice, intends to present for action by the shareholders, but any proper matter may be presented at the meeting for such action, except that notice must be given or waived in writing of any proposal relating to approval of contracts between the Corporation and any director of the Corporation, amendment of the Articles of Incorporation, reorganization of the Corporation, winding up of the affairs of the Corporation, or any plan of distribution pursuant thereto. The notice of any meeting at which directors are to be elected shall include the names of nominees intended at the time of the notice to be presented by the Board of Directors for election. Notice of a shareholders meeting or any report shall be given to any shareholder,
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either (i) personally or (ii) by first-class mail, or, in case the Corporation has outstanding shares held of record by five hundred (500) or more persons on the record date for the shareholders meeting, notice may be sent by third-class mail, or other means of written communication, charges prepaid, addressed to such shareholder at such shareholders address appearing on the books of the Corporation or given by such shareholder to the Corporation for the purpose of notice. If a shareholder gives no address or no such address appears on the books of the Corporation, notice shall be deemed to have been given if sent by mail or other means of written communication addressed to the place where the principal executive office of the Corporation is located, or by publication at least once in a newspaper of general circulation in the county in which such office is located. The notice or report shall be deemed to have been given at the time when delivered personally or deposited in the United States mail, postage prepaid, or sent by other means of written communication and addressed as provided herein. An affidavit or declaration of delivery or mailing of any notice or report in accordance with the provisions of this Section 7.4, executed by the Secretary, Assistant Secretary or any transfer agent, shall be prima facie evidence of the giving of the notice or report. If any notice or report addressed to the shareholder at the address of such shareholder appearing on the books of the Corporation is returned to the Corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice or report to the shareholder at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available for the shareholder upon written demand of the shareholder at the principal executive office of the Corporation for a period of one (1) year from the date of the giving of the notice or report to all other shareholders.
Section 7.5: Consent to Shareholders Meetings. The transactions of any meeting of shareholders, however called and noticed, and wherever held, are as valid as though they had taken place at a meeting duly held after regular call and notice, if the following conditions are met:
(i) a quorum is present, either in person or by proxy, and
(ii) either before or after the meeting, each of the shareholders entitled to vote, who was not present in person or by proxy, signs a written waiver of notice or a consent to the holding of such meeting or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
Attendance of a person at a meeting shall constitute both a waiver of notice of and presence at such meeting, except: (i) when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened; or (ii) when the person expressly makes an objection at some time during the meeting to the consideration of matters required by law to be included in the notice, but not so included.
Neither the business to be transacted at, nor the purpose of, any regular or special meeting of shareholders need be specified in any written waiver of notice, consent to the holding of the meeting or approval of the minutes thereof, except as to approval of contracts between the Corporation and any of its directors, amendment of the Articles of Incorporation, reorganization
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of the Corporation, winding up the affairs of the Corporation or any plan of distribution with respect thereto.
Section 7.6: Quorum. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting of the shareholders shall constitute a quorum for the transaction of business. Shares shall not be counted to make up a quorum for a meeting if voting of such shares at the meeting has been enjoined or for any reason they cannot be lawfully voted at the meeting. Shareholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum. Except as provided herein, the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required.
Section 7.7: Adjourned Meetings. Any shareholders meeting, whether or not a quorum is present, may be adjourned from time to time to another time or place by the vote of a majority of the shares, the holders of which are either present in person or represented by proxy thereat, but, except as provided in Section 7.6 hereof, in the absence of a quorum, no other business may be transacted at such meeting. When a meeting is adjourned for more than forty-five (45) days or if after adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at a meeting. Except as aforesaid, it shall not be necessary to give any notice of the time and place of the adjourned meeting or of the business to be transacted thereat other than by announcement at the meeting at which such adjournment is taken. At any adjourned meeting the shareholders may transact any business which might have been transacted at the original meeting.
Section 7.8: Voting Rights. If no record date is fixed by the Board of Directors, those shareholders entitled to vote include only those holders of shares entitled to vote per the stock records of the Corporation at:
(a) the close of business on the business day immediately preceding the day on which notice is given; or
(b) if notice is waived, at the close of business on the business day immediately preceding the day on which the meeting is held; or
(c) if some other day be fixed for the determination of shareholders of record pursuant to Section 2.8(k) hereof, then on such other day, shall be entitled to vote at such meeting.
The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the Board of Directors has been taken,
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shall be the day on which the first written consent is given. In the absence of any contrary provision in the Articles of Incorporation or in any applicable statute relating to the election of directors or to other particular matters, each such person shall be entitled to one vote for each share.
Pursuant to Section 2.8(k) hereof, the Board of Directors may fix, in advance, a record date, to determine which shareholders are eligible to vote, which date shall be no more than sixty (60) days nor less than ten (10) days prior to the date of such meeting.
Section 7.9: Action by Written Consents. Any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, shall be signed by holders of outstanding shares 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 entitled to vote thereon were present and voted. Unless the consents of all shareholders entitled to vote have been solicited in writing, the Corporation shall provide notice of any shareholder approval obtained without a meeting by less than unanimous written consent to those shareholders entitled to vote but who have not yet consented in writing at least ten (10) days before the consummation of the following actions authorized by such approval: (i) contracts between the Corporation and any of its directors; (ii) indemnification of any person; (iii) reorganization of the Corporation; or (iv) distributions to shareholders upon the winding-up of the affairs of the Corporation. In addition, the Corporation shall provide, to those shareholders entitled to vote who have not consented in writing, prompt notice of the taking of any other corporate action approved by the shareholders without a meeting by less than unanimous written consent. All notices given hereunder shall conform to the requirements of Section 7.4 hereto and applicable law. When written consents are given with respect to any shares, they shall be given by and accepted from the persons in whose names such shares stand on the books of the Corporation at the time such respective consents are given, or their proxies. Any shareholder giving a written consent (including any shareholders proxy holder, or a transferee of the shares or a personal representative of the shareholder, or their respective proxy holders) may revoke the consent by a writing. This written revocation must be received by the Corporation prior to the time that written consents of the number of shares required to authorize the proposed action have been filed with the Secretary of the Corporation. Such revocation is effective upon its receipt by the Secretary of the Corporation. Notwithstanding anything herein to the contrary, and subject to Section 305(b) of the California Corporations Code, directors may not be elected by written consent except by unanimous written consent of all shares entitled to vote for the election of directors.
Section 7.10: Election of Directors. Every shareholder entitled to vote at any election of directors of the Corporation may cumulate such shareholders votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which the shareholders shares are normally entitled, or distribute the shareholders votes on the same principle among as many candidates as such shareholder thinks fit. No shareholder, however, may cumulate such shareholders votes for one or more candidates unless such candidates or candidates names have been placed in nomination prior to the voting and the shareholder has given notice at the meeting, prior to voting, of such shareholders intention to
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cumulate such shareholders votes. If any one shareholder has given such notice, all shareholders may cumulate their votes for candidates in nomination. The candidates receiving the highest number of affirmative votes of the shares entitled to be voted for them up to the number of directors to be elected by such shares shall be declared elected. Votes against the director and votes withheld shall have no legal effect. Election of directors need not be by ballot except upon demand made by a shareholder at the meeting and before the voting begins.
Section 7.11: Proxies. Every person entitled to vote or execute consents shall have the right to do so either in person or by one or more agents authorized by a written proxy executed by such person or such persons duly authorized agent and filed with the Secretary of the Corporation. No proxy shall be valid (i) after revocation thereof, unless the proxy is specifically made irrevocable and otherwise conforms to this Section and applicable law, or (ii) after the expiration of eleven (11) months from the date thereof, unless the person executing it specifies therein the length of time for which such proxy is to continue in force. Revocation may be effected by a writing delivered to the Secretary of the Corporation stating that the proxy is revoked or by a subsequent proxy executed by the person executing the prior proxy and presented to the meeting, or as to any meeting by attendance at the meeting and voting in person by the person executing the proxy. A proxy is not revoked by the death or incapacity of the maker unless, before the vote is counted, a written notice of such death or incapacity is received by the Secretary of the Corporation. In addition, a proxy may be revoked, notwithstanding a provision making it irrevocable, by a transferee of shares without knowledge of the existence of the provision unless the existence of the proxy and its irrevocability appears on the certificate representing such shares, or if uncertificated securities, on the initial transaction statement and written statements.
Section 7.12: Inspectors of Election. Before any meeting of shareholders, the Board of Directors may appoint any persons other than nominees for office as inspectors of election. This appointment shall be valid at the meeting and at any subsequent meeting that is a continuation of the meeting at which the persons were originally appointed to be inspectors. If no inspectors of election are so appointed, the Chairman of the meeting may, and on the request of any shareholder or a shareholders proxy shall, appoint inspectors of election at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting on the request of one (1) or more shareholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, the Chairman of the meeting may, and upon the request of any shareholder or a shareholders proxy shall, appoint a person to fill that vacancy. These inspectors shall:
(a) determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots, or consents;
18
(c) hear and determine all challenges and questions in any way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or vote with fairness to all shareholders.
Section 7.13: Annual Reports. Provided that the Corporation has less than one hundred (100) shareholders, the making of annual reports to the shareholders is dispensed with and the requirement that such annual reports be made to shareholders is expressly waived, except as may be directed from time to time by the Board of Directors, the Chief Executive Officer, or the President. If the Corporation has one hundred (100) or more shareholders of record, as determined pursuant to California Corporations Code § 605, the Board of Directors shall cause an annual report to be sent to the shareholders no later than one hundred twenty (120) days after the close of the fiscal year. The report must contain a balance sheet as of the end of the fiscal year and an income statement and a statement of changes in financial position for that fiscal year, accompanied by any report thereon of independent accounts, or if none, by a certificate of an authorized officer of the Corporation that the statements were prepared without audit from the books and records of the Corporation.
ARTICLE VIII
SHARES AND SHARE CERTIFICATES
Section 8.1: Shares Held By the Corporation. Shares in other companies standing in the name of the Corporation may be voted or represented and all rights incident thereto may be exercised on behalf of the Corporation by any officer of the Corporation authorized to do so by resolution of the Board of Directors.
Section 8.2: Certificates for Shares. There shall be issued to every holder of shares in the Corporation a certificate or certificates signed in the name of the Corporation by (i) the Chairman of the Board, if any, or the Chief Executive Officer, the President or a Vice President and (ii) by the Chief Financial Officer, any Assistant Chief Financial Officer, the Secretary, or any Assistant Secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be by facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.
19
Section 8.3: Lost, Stolen or Destroyed Certificates. Where the owner of any certificate for shares of the Corporation claims that the certificate has been lost, stolen or destroyed, a new certificate shall be issued in place of the original certificate if the owner (i) so requests before the Corporation has notice that the original certificate has been acquired by a bona fide purchaser and (ii) satisfies any reasonable requirements imposed by the Corporation, including without limitation the filing with the Corporation of an indemnity bond or agreement in such form and in such amount as shall be required by the Chief Executive Officer, the President, or a Vice President of the Corporation. The Board of Directors may adopt such other provisions and restrictions with reference to lost certificates, not inconsistent with applicable law, as it shall in its discretion deem appropriate.
Section 8.4: Restrictions on Transfer of Shares. Before any shareholder of the Corporation may sell, assign, gift, pledge or otherwise transfer any shares of the Corporations capital stock, such shareholder shall first notify the Corporation in writing of such transfer and such transfer may not be effected unless and until legal counsel for the Corporation has concluded that such transfer, when effected as proposed by such shareholder (i) will comply with all applicable provisions of any applicable state and federal securities laws, including but not limited to the Securities Act of 1933, as amended, and the California Corporate Securities Law of 1968, as amended, and (ii) will not jeopardize, terminate or adversely affect the Corporations status as an S Corporation, if applicable, as that term is defined in the Internal Revenue Code of 1986, as amended. The Corporation may require that certificates representing shares of stock of the Corporation be endorsed with a legend describing the restrictions set forth in this Section. If (i) any two (2) or more shareholders of the Corporation shall enter into any agreement abridging, limiting or restricting the rights of any one or more of them to sell, assign, transfer, mortgage, pledge, hypothecate or transfer on the books of the Corporation any or all of the shares of the Corporation held by them, and if a copy of said agreement shall be filed with the Corporation, or (ii) shareholders entitled to vote shall adopt any Bylaw provision abridging, limiting or restricting the rights of any shareholders mentioned above, then, and in either of such events, all certificates of shares of stock subject to such abridgments, limitations or restrictions shall have a reference thereto endorsed thereon by an officer of the Corporation and such certificates shall not thereafter be transferred on the books of the Corporation except in accordance with the terms and provisions of such as the case may be. However, no restriction shall be binding with respect to shares issued prior to adoption of the restriction unless the holders of such shares voted in favor of, or consented in writing to, the restriction.
ARTICLE IX
CONSTRUCTION OF BYLAWS WITH
REFERENCE TO PROVISIONS OF LAW
Section 9.1: Bylaw Provisions Construed as Additional and Supplemental to Provisions of Law. All restrictions, limitations, requirements and other provisions of these Bylaws shall be construed, insofar as possible, as supplemental and additional to all provisions of law applicable to the
20
subject matter thereof and shall be fully complied with in addition to the said provisions of law unless such compliance shall be illegal.
Section 9.2: Bylaw Provisions Contrary to or Inconsistent with Provisions of Law. Any article, section, subsection, subdivision, sentence, clause or phrase of these Bylaws which, upon being construed in the manner provided in Section 9.1 hereof, shall be contrary to or inconsistent with any applicable provision of law, shall not apply so long as said provisions of law shall remain in effect, but such result shall not affect the validity or applicability of any other portion of these Bylaws, it being hereby declared that these Bylaws, and each article, section, subsection, subdivision, sentence, clause or phrase thereof, would have been adopted irrespective of the fact that any one or more articles, sections, subsections, subdivisions, sentences, clauses or phrases is or are illegal.
ARTICLE X
CERTIFICATION, ADOPTION, AMENDMENT OR REPEAL OF BYLAWS
Section 10.1: By Shareholders. Bylaws may be adopted, amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote. Bylaws specifying or changing a fixed number of directors or the maximum or minimum number or changing from a fixed to a variable board or vice versa may be adopted only by the shareholders.
Section 10.2: By the Board of Directors. Subject to the right of shareholders to adopt, amend or repeal Bylaws, and other than a Bylaw or amendment thereof specifying or changing a fixed number of directors or the maximum or minimum number or changing from a fixed to a variable board or vice versa, these Bylaws may be adopted, amended or repealed by the Board of Directors. A Bylaw adopted by the shareholders may restrict or eliminate the power of the Board of Directors to adopt, amend or repeal Bylaws.
Section 10.3: Certification and Inspection of Bylaws. The Corporation shall keep at its principal executive office the original or a copy of these Bylaws as amended or otherwise altered to date, which shall be open to inspection by the shareholders at all reasonable times during office hours.
21
Exhibit 4.1
INDENTURE
Dated as of November 23, 2010
Among
GIRAFFE ACQUISITION CORPORATION,
as Issuer,
the Guarantors from time to time party hereto
and
DEUTSCHE BANK TRUST COMPANY AMERICAS,
as Trustee
9.125% SENIOR NOTES DUE 2018
CROSS-REFERENCE TABLE*
Trust Indenture Act Section |
Indenture Section | |||
310 |
(a)(1) |
7.10 | ||
(a)(2) |
7.10 | |||
(a)(3) |
N.A. | |||
(a)(4) |
N.A. | |||
(a)(5) |
7.10 | |||
(b) |
7.03, 7.10 | |||
(c) |
N.A. | |||
311 |
(a) |
7.11 | ||
(b) |
7.11 | |||
(c) |
N.A. | |||
312 |
(a) |
2.05 | ||
(b) |
7.06, 12.03 | |||
(c) |
12.03 | |||
313 |
(a) |
2.05, 7.06 | ||
(b)(1) |
N.A. | |||
(b)(2) |
7.06;7.07 | |||
(c) |
7.06;12.02 | |||
(d) |
7.06 | |||
314 |
(a) |
4.03;12.02;12.05 | ||
(b) |
N.A. | |||
(c)(1) |
12.04 | |||
(c)(2) |
12.04 | |||
(c)(3) |
N.A. | |||
(d) |
N.A. | |||
(e) |
12.05 | |||
(f) |
N.A. | |||
315 |
(a) |
7.01 | ||
(b) |
7.05;12.02 | |||
(c) |
7.01 | |||
(d) |
7.01 | |||
(e) |
6.14 | |||
316 |
(a)(last sentence) |
2.09 | ||
(a)(1)(A) |
6.05 | |||
(a)(1)(B) |
6.04 | |||
(a)(2) |
N.A | |||
(b) |
6.07 | |||
(c) |
2.12;9.04 | |||
317 |
(a)(1) |
6.08 | ||
(a)(2) |
6.12 | |||
(b) |
2.04 | |||
318 |
(a) |
12.01 | ||
(b) |
N.A. | |||
(c) |
12.01 |
N.A. means not applicable.
* | This Cross-Reference Table is not part of this Indenture. |
TABLE OF CONTENTS | ||||||
Page | ||||||
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE |
||||||
Section 1.01 |
Definitions |
1 | ||||
Section 1.02 |
Other Definitions |
32 | ||||
Section 1.03 |
Incorporation by Reference of Trust Indenture Act |
33 | ||||
Section 1.04 |
Rules of Construction. |
33 | ||||
Section 1.05 |
Acts of Holders |
34 | ||||
ARTICLE 2 | ||||||
THE NOTES | ||||||
Section 2.01 |
Form and Dating; Terms |
35 | ||||
Section 2.02 |
Execution and Authentication |
37 | ||||
Section 2.03 |
Registrar and Paying Agent |
37 | ||||
Section 2.04 |
Paying Agent To Hold Money in Trust |
38 | ||||
Section 2.05 |
Holder Lists |
38 | ||||
Section 2.06 |
Transfer and Exchange |
38 | ||||
Section 2.07 |
Replacement Notes |
51 | ||||
Section 2.08 |
Outstanding Notes |
51 | ||||
Section 2.09 |
Treasury Notes |
51 | ||||
Section 2.10 |
Temporary Notes |
51 | ||||
Section 2.11 |
Cancellation |
52 | ||||
Section 2.12 |
Defaulted Interest |
52 | ||||
Section 2.13 |
CUSIP Numbers |
52 | ||||
ARTICLE 3 | ||||||
REDEMPTION | ||||||
Section 3.01 |
Notices to Trustee |
53 | ||||
Section 3.02 |
Selection of Notes To Be Redeemed or Purchased |
53 | ||||
Section 3.03 |
Notice of Redemption |
53 | ||||
Section 3.04 |
Effect of Notice of Redemption |
54 | ||||
Section 3.05 |
Deposit of Redemption or Purchase Price |
55 | ||||
Section 3.06 |
Notes Redeemed or Purchased in Part |
55 | ||||
Section 3.07 |
Optional Redemption |
55 | ||||
Section 3.08 |
Mandatory Redemption |
56 | ||||
Section 3.09 |
Offers To Repurchase by Application of Excess Proceeds |
56 | ||||
Section 3.10 |
Special Redemption |
58 | ||||
Section 3.11 |
Special Mandatory Redemption |
58 |
-i-
Page | ||||||
ARTICLE 4 | ||||||
COVENANTS | ||||||
Section 4.01 |
Payment of Notes |
59 | ||||
Section 4.02 |
Maintenance of Office or Agency |
59 | ||||
Section 4.03 |
Reports and Other Information |
60 | ||||
Section 4.04 |
Compliance Certificate |
61 | ||||
Section 4.05 |
Taxes |
61 | ||||
Section 4.06 |
Stay, Extension and Usury Laws |
61 | ||||
Section 4.07 |
Limitation on Restricted Payments |
62 | ||||
Section 4.08 |
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries |
69 | ||||
Section 4.09 |
Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock |
71 | ||||
Section 4.10 |
Asset Sales |
76 | ||||
Section 4.11 |
Transactions with Affiliates |
79 | ||||
Section 4.12 |
Liens |
81 | ||||
Section 4.13 |
Corporate Existence |
81 | ||||
Section 4.14 |
Offer to Repurchase Upon Change of Control |
81 | ||||
Section 4.15 |
Limitation on Guarantees of Indebtedness by Restricted Subsidiaries |
83 | ||||
Section 4.16 |
Discharge and Suspension of Covenants |
84 | ||||
Section 4.17 |
Activities Prior to the Escrow Release Date |
85 | ||||
ARTICLE 5 | ||||||
SUCCESSORS | ||||||
Section 5.01 |
Merger, Consolidation or Sale of All or Substantially All Assets |
85 | ||||
Section 5.02 |
Successor Corporation Substituted |
87 | ||||
ARTICLE 6 | ||||||
DEFAULTS AND REMEDIES | ||||||
Section 6.01 |
Events of Default |
87 | ||||
Section 6.02 |
Acceleration |
90 | ||||
Section 6.03 |
Other Remedies |
90 | ||||
Section 6.04 |
Waiver of Past Defaults |
90 | ||||
Section 6.05 |
Control by Majority |
91 | ||||
Section 6.06 |
Limitation on Suits |
91 | ||||
Section 6.07 |
Rights of Holders of Notes To Receive Payment |
91 | ||||
Section 6.08 |
Collection Suit by Trustee |
92 | ||||
Section 6.09 |
Restoration of Rights and Remedies |
92 | ||||
Section 6.10 |
Rights and Remedies Cumulative |
92 | ||||
Section 6.11 |
Delay or Omission Not Waiver |
92 | ||||
Section 6.12 |
Trustee May File Proofs of Claim |
92 | ||||
Section 6.13 |
Priorities |
93 | ||||
Section 6.14 |
Undertaking for Costs |
93 |
-ii-
Page | ||||||
ARTICLE 7 | ||||||
TRUSTEE | ||||||
Section 7.01 |
Duties of Trustee |
93 | ||||
Section 7.02 |
Rights of Trustee |
94 | ||||
Section 7.03 |
Individual Rights of Trustee |
96 | ||||
Section 7.04 |
Trustees Disclaimer |
96 | ||||
Section 7.05 |
Notice of Defaults |
96 | ||||
Section 7.06 |
Reports by Trustee to Holders of the Notes |
96 | ||||
Section 7.07 |
Compensation and Indemnity |
96 | ||||
Section 7.08 |
Replacement of Trustee |
97 | ||||
Section 7.09 |
Successor Trustee by Merger, etc. |
98 | ||||
Section 7.10 |
Eligibility; Disqualification |
98 | ||||
Section 7.11 |
Preferential Collection of Claims Against Issuer |
98 | ||||
ARTICLE 8 | ||||||
LEGAL DEFEASANCE AND COVENANT DEFEASANCE | ||||||
Section 8.01 |
Option To Effect Legal Defeasance or Covenant Defeasance |
99 | ||||
Section 8.02 |
Legal Defeasance and Discharge |
99 | ||||
Section 8.03 |
Covenant Defeasance |
99 | ||||
Section 8.04 |
Conditions to Legal or Covenant Defeasance |
100 | ||||
Section 8.05 |
Deposited Money and Government Securities To Be Held in Trust; Other Miscellaneous Provisions |
101 | ||||
Section 8.06 |
Repayment to Issuer |
102 | ||||
Section 8.07 |
Reinstatement |
102 | ||||
ARTICLE 9 | ||||||
AMENDMENT, SUPPLEMENT AND WAIVER | ||||||
Section 9.01 |
Without Consent of Holders of Notes |
102 | ||||
Section 9.02 |
With Consent of Holders of Notes |
103 | ||||
Section 9.03 |
Compliance with Trust Indenture Act |
105 | ||||
Section 9.04 |
Revocation and Effect of Consents |
105 | ||||
Section 9.05 |
Notation on or Exchange of Notes |
105 | ||||
Section 9.06 |
Trustee To Sign Amendments, etc |
105 | ||||
Section 9.07 |
Payment for Consent |
106 | ||||
ARTICLE 10 | ||||||
GUARANTEES | ||||||
Section 10.01 |
Guarantee |
106 | ||||
Section 10.02 |
Limitation on Guarantor Liability |
107 | ||||
Section 10.03 |
Execution and Delivery |
108 | ||||
Section 10.04 |
Subrogation |
108 |
-iii-
Page | ||||||
Section 10.05 |
Benefits Acknowledged |
108 | ||||
Section 10.06 |
Release of Guarantees |
109 | ||||
ARTICLE 11 | ||||||
SATISFACTION AND DISCHARGE | ||||||
Section 11.01 |
Satisfaction and Discharge |
109 | ||||
Section 11.02 |
Application of Trust Money |
110 | ||||
ARTICLE 12 | ||||||
MISCELLANEOUS | ||||||
Section 12.01 |
Trust Indenture Act Controls |
111 | ||||
Section 12.02 |
Notices |
111 | ||||
Section 12.03 |
Communication by Holders of Notes with Other Holders of Notes |
112 | ||||
Section 12.04 |
Certificate and Opinion as to Conditions Precedent |
112 | ||||
Section 12.05 |
Statements Required in Certificate or Opinion |
113 | ||||
Section 12.06 |
Rules by Trustee and Agents |
113 | ||||
Section 12.07 |
No Personal Liability of Directors, Officers, Employees and Stockholders |
113 | ||||
Section 12.08 |
Governing Law |
113 | ||||
Section 12.09 |
Waiver of Jury Trial |
113 | ||||
Section 12.10 |
Force Majeure |
114 | ||||
Section 12.11 |
No Adverse Interpretation of Other Agreements |
114 | ||||
Section 12.12 |
Successors |
114 | ||||
Section 12.13 |
Severability |
114 | ||||
Section 12.14 |
Counterpart Originals |
114 | ||||
Section 12.15 |
Table of Contents, Headings, etc. |
114 | ||||
Section 12.16 |
Qualification of Indenture |
114 | ||||
Section 12.17 |
U.S.A. Patriot Act |
115 | ||||
EXHIBITS |
||||||
Exhibit A |
Form of Senior Note |
|||||
Exhibit B |
Form of Certificate of Transfer |
|||||
Exhibit C |
Form of Certificate of Exchange |
|||||
Exhibit D |
Form of Supplemental Indenture to Be Delivered by Subsequent Guarantors |
|||||
Exhibit E |
Form of Supplemental Indenture to Be Delivered on Effective Date |
-iv-
INDENTURE, dated as of November 23, 2010 among Giraffe Acquisition Corporation, a Delaware corporation, the Guarantors (as defined herein) from time to time party hereto and Deutsche Bank Trust Company Americas, a New York banking corporation, as trustee (the Trustee).
W I T N E S S E T H
WHEREAS, the Issuer has duly authorized the creation of an issue of $400,000,000 aggregate principal amount of 9.125% Senior Notes due 2018 (the Initial Notes); and
WHEREAS, the Issuer has duly authorized the execution and delivery of this Indenture.
NOW, THEREFORE, each party agrees as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the Notes.
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions.
144A Global Note means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.
Acquired Indebtedness means, with respect to any specified Person,
(1) Indebtedness of any other Person existing at the time such other Person is merged or amalgamated with or into or became a Restricted Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such other Person merging or amalgamating with or into, or becoming a Restricted Subsidiary of, such specified Person, and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.
Acquisition means the transactions contemplated by the Transaction Agreement.
Additional Interest means all additional interest then owing pursuant to the Registration Rights Agreement.
Additional Notes means additional Notes (other than the Initial Notes and other than Exchange Notes issued in exchange for such Initial Notes) issued from time to time under this Indenture in accordance with Sections 2.01 and 4.09 hereof.
Affiliate of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, control (including, with correlative meanings, the terms controlling, controlled by and under common control with), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.
Agent means any Registrar or Paying Agent.
Applicable Premium means, with respect to any Note on any Redemption Date, the greater of:
(1) 1.0% of the principal amount of such Note; and
(2) the excess, if any, of (a) the present value at such Redemption Date of (i) the redemption price of such Note at December 1, 2014 (such redemption price being set forth in Section 3.07 hereof), plus (ii) all required interest payments due on such Note through December 1, 2014 (excluding accrued but unpaid interest to the Redemption Date), computed using a discount rate equal to the Treasury Rate as of such Redemption Date plus 50 basis points; over (b) the then outstanding principal amount of such Note.
Applicable Procedures means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and/or Clearstream that apply to such transfer or exchange.
Asset Sale means:
(1) the sale, conveyance, transfer or other disposition, whether in a single transaction or a series of related transactions, of property or assets (including by way of a Sale and Lease-Back Transaction) of the Issuer or any of its Restricted Subsidiaries (each referred to in this definition as a disposition); or
(2) the issuance or sale of Equity Interests of any Restricted Subsidiary, whether in a single transaction or a series of related transactions (other than directors qualifying shares and shares issued to foreign nationals as required under applicable law);
in each case, other than:
(a) any disposition of Cash Equivalents or Investment Grade Securities or obsolete or worn out property or equipment in the ordinary course of business or any disposition of inventory or goods (or other assets) held for sale in the ordinary course of business (it being understood that the sale of inventory or goods (or other assets) in bulk in connection with the closing of any number of retail locations in the ordinary course of business shall be considered a sale in the ordinary course of business);
(b) the disposition of all or substantially all of the assets of the Issuer in a manner permitted pursuant to the provisions described under Section 5.01 hereof or any disposition that constitutes a Change of Control pursuant to this Indenture;
(c) the making of any Restricted Payment that is permitted to be made, and is made, under Section 4.07 hereof or the making of any Permitted Investment;
(d) any disposition of assets or issuance or sale of Equity Interests of any Restricted Subsidiary in any transaction or series of transactions with an aggregate fair market value of less than $15.0 million;
-2-
(e) any disposition of property or assets or issuance of securities by a Restricted Subsidiary of the Issuer to the Issuer or by the Issuer or a Restricted Subsidiary of the Issuer to another Restricted Subsidiary of the Issuer;
(f) to the extent allowable under Section 1031 of the Internal Revenue Code of 1986, as amended, any exchange of like property (excluding any boot thereon) for use in a Similar Business;
(g) the lease, assignment, sublease, license or sublicense of any real or personal property in the ordinary course of business;
(h) any issuance or sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary;
(i) foreclosures on or expropriations of assets;
(j) sales of accounts receivable, or participations therein, in connection with any Receivables Facility, or the disposition of an account receivable in connection with the collection or compromise thereof in the ordinary course of business;
(k) the granting of a Lien that is permitted under Section 4.12;
(l) the issuance by a Restricted Subsidiary of Preferred Stock or Disqualified Stock that is permitted by Section 4.09;
(m) any financing transaction with respect to property built or acquired by the Issuer or any Restricted Subsidiary after the Effective Date, including Sale and Lease-Back Transactions and asset securitizations permitted by this Indenture; and
(n) sales, transfers and other dispositions of Investments in joint ventures to the extent required by, or made pursuant to, customary buy/sell arrangements between the joint venture parties set forth in joint venture arrangements and similar binding arrangements.
Bank Products means any services or facilities on account of credit or debit cards, purchase cards or merchant services constituting a line of credit (including, for the avoidance of doubt, all Bank Products as defined in the Revolving Credit Facility as in effect on the Effective Date).
Bankruptcy Law means Title 11, U.S. Code or any similar federal or state law for the relief of debtors.
Borrowing Base means the FILO Borrowing Base as such term is defined in the Revolving Credit Facility as in effect on the Effective Date (including, for the avoidance of doubt, all advance rates as in effect on the Effective Date).
Business Day means each day which is not a Legal Holiday.
Capital Stock means:
(1) in the case of a corporation, shares in the capital of such corporation;
-3-
(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock;
(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.
Capitalized Lease Obligation means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) prepared in accordance with GAAP.
Cash Equivalents means:
(1) United States dollars and Canadian dollars;
(2)(a) euro, or any national currency of any participating member state of the EMU; or
(b) in the case of any Foreign Subsidiary that is a Restricted Subsidiary, such local currencies held by them from time to time in the ordinary course of business;
(3) securities issued or directly and fully and unconditionally guaranteed or insured by the U.S. government or any agency or instrumentality thereof the securities of which are unconditionally guaranteed as a full faith and credit obligation of such government with maturities of 24 months or less from the date of acquisition;
(4) certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any commercial bank having capital and surplus of not less than $250.0 million in the case of U.S. banks and, in the case of any Foreign Subsidiary that is a Restricted Subsidiary, $100.0 million (or the U.S. dollar equivalent as of the date of determination) in the case of non U.S. banks, and in each case in a currency permitted under clause (1) or (2) above;
(5) repurchase obligations for underlying securities of the types described in clauses (3) and (4) entered into with any financial institution meeting the qualifications specified in clause (4) above, and in each case in a currency permitted under clause (1) or (2) above;
(6) commercial paper rated at least P-2 by Moodys or at least A-2 by S&P and in each case maturing within 24 months after the date of creation thereof, and in each case in a currency permitted under clause (1) or (2) above;
(7) marketable short-term money market and similar securities having a rating of at least P-2 or A-2 from either Moodys or S&P, respectively (or, if at any time neither Moodys nor S&P shall be rating such obligations, an equivalent rating from another Rating Agency) and in each case maturing within 24 months after the date of creation thereof and in a currency permitted under clause (1) or (2) above;
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(8) readily marketable direct obligations issued by any state, commonwealth or territory of the United States or any political subdivision or taxing authority thereof having an Investment Grade Rating from either Moodys or S&P with maturities of 24 months or less from the date of acquisition;
(9) Indebtedness or Preferred Stock issued by Persons with a rating of A or higher from S&P or A2 or higher from Moodys with maturities of 24 months or less from the date of acquisition and in each case in a currency permitted under clause (1) or (2) above;
(10) Investments with average maturities of 12 months or less from the date of acquisition in money market funds rated AAA- (or the equivalent thereof) or better by S&P or Aaa3 (or the equivalent thereof) or better by Moodys and in each case in a currency permitted under clause (1) or (2) above;
(11) investment funds investing substantially all of their assets in securities of the types described in clauses (1) through (10) above; and
(12) credit card receivables and debit card receivables so long as such are considered cash equivalents under GAAP and are so reflected on the Issuers balance sheet.
Notwithstanding the foregoing, Cash Equivalents shall include amounts denominated in currencies other than those set forth in clauses (1) and (2) above, provided that such amounts are converted into any currency listed in clauses (1) and (2) as promptly as practicable and in any event within ten Business Days following the receipt of such amounts.
Cash Management Services means any of the following to the extent not constituting a line of credit: ACH transactions, treasury and/or cash management services, including, without limitation, controlled disbursement services, foreign exchange facilities, deposit and other accounts and merchant services (including, for the avoidance of doubt, all Cash Management Services as defined in the Revolving Credit Facility as in effect on the Effective Date).
Change of Control means the occurrence of any of the following after the Effective Date:
(1) the sale, lease or transfer, in one or a series of related transactions (other than by way of merger or consolidation), of all or substantially all of the assets of the Issuer and its Subsidiaries, taken as a whole, to any Person other than one or more Permitted Holders; or
(2) the Issuer becomes aware of (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) the acquisition by (A) any Person (other than one or more Permitted Holders) or (B) Persons (other than one or more Permitted Holders) that are together (1) a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), or (2) are acting, for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), as a group, in a single transaction or in a related series of transactions, by way of merger, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision) of 50% or more of the total voting power of the Voting Stock of the Issuer or any of its direct or indirect parent companies holding directly or indirectly 100% of the total voting power of the Voting Stock of the Issuer.
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Clearstream means Clearstream Banking, Société Anonyme.
Code means the Internal Revenue Code of 1986, as amended from time to time.
Consolidated Depreciation and Amortization Expense means with respect to any Person for any period, the total amount of depreciation and amortization expense, including the amortization of deferred financing fees of such Person and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP.
Consolidated Interest Expense means, with respect to any Person for any period, without duplication, the sum of:
(1) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted (and not added back) in computing Consolidated Net Income (including (a) amortization of original issue discount resulting from the issuance of Indebtedness at less than par, (b) all commissions, discounts and other fees and charges owed with respect to letters of credit or bankers acceptances, (c) non-cash interest payments (but excluding any non-cash interest expense attributable to the movement in the mark to market valuation of Hedging Obligations or other derivative instruments pursuant to GAAP), (d) the interest component of Capitalized Lease Obligations, and (e) net payments, if any, made (less net payments, if any, received) pursuant to interest rate Hedging Obligations with respect to Indebtedness, and excluding (v) penalties and interest related to taxes, (w) any Additional Interest with respect to the Notes, (x) amortization of deferred financing fees, debt issuance costs, discounted liabilities, commissions, fees and expenses, (y) any expensing of bridge, commitment and other financing fees and (z) commissions, discounts, yield and other fees and charges (including any interest expense) related to any Receivables Facility); plus (2) consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued; less
(3) interest income for such period.
For purposes of this definition, interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by such Person to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP.
Consolidated Net Income means, with respect to any Person for any period, the aggregate of the Net Income, of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP; provided, however, that, without duplication,
(1) any after-tax effect of extraordinary, non-recurring or unusual gains or losses (less all fees and expenses relating thereto) or expenses, Transaction Expenses to the extent incurred on or prior to December 31, 2011, severance, relocation costs, Public Company Costs, integration costs, pre-opening, opening, consolidation and closing costs for facilities (including stores), signing, retention or completion bonuses, transition costs, costs incurred in connection with acquisitions after the Effective Date, restructuring costs and curtailments or modifications to pension and post-retirement employee benefit plans shall be excluded,
(2) the Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period,
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(3) any net after-tax gains or losses on disposal of disposed, abandoned or discontinued operations shall be excluded,
(4) any after-tax effect of gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions other than in the ordinary course of business, as determined in good faith by the Issuer, shall be excluded,
(5) the Net Income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Issuer shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) to the referent Person or a Restricted Subsidiary thereof in respect of such period, by such Person,
(6) solely for the purpose of determining the amount available for Restricted Payments under clause (3)(a) of Section 4.07(a) hereof, the Net Income for such period of any Restricted Subsidiary (other than any Guarantor) shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived, provided that Consolidated Net Income of the Issuer will be increased by the amount of dividends or other distributions or other payments actually paid in cash (or to the extent converted into cash) to the Issuer or a Restricted Subsidiary thereof in respect of such period, to the extent not already included therein,
(7) effects of fair value adjustments (including the effects of such adjustments pushed down to the Issuer and its Restricted Subsidiaries) in the merchandise inventory, property and equipment, goodwill, intangible assets, deferred revenue and debt line items in such Persons consolidated financial statements pursuant to GAAP resulting from the application of purchase accounting in relation to the Transactions or any consummated acquisition and the amortization or write-off or removal of revenue otherwise recognizable of any amounts thereof, net of taxes, shall be excluded or added back in the case of lost revenue,
(8) any after-tax effect of income (loss) from the early extinguishment or conversion of Indebtedness or Hedging Obligations or other derivative instruments shall be excluded,
(9) any impairment charge or asset write-up, write-off or write-down, in each case, pursuant to GAAP and the amortization of intangibles arising pursuant to GAAP shall be excluded,
(10) any non-cash compensation charge or expense, including any such charge or expense arising from the grant of stock appreciation or similar rights, stock options, restricted stock or other equity-incentive programs, and any cash charges associated with the rollover, acceleration or payment of management equity in connection with the Transactions shall be excluded,
(11) any fees and expenses incurred during such period, or any amortization or write-off thereof for such period, in connection with any acquisition, Investment, Asset Sale, issuance or repayment of Indebtedness, issuance of Equity Interests, refinancing transaction or amendment
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or modification of any debt instrument (in each case, including any such transaction consummated prior to the Effective Date and any such transaction undertaken but not completed) and any charges or non-recurring merger costs incurred during such period as a result of any such transaction shall be excluded,
(12) accruals and reserves that are established within twelve months after the Effective Date that are so required to be established as a result of the Transactions in accordance with GAAP shall be excluded,
(13) any net gain or loss resulting from currency translation gains or losses related to currency remeasurements of Indebtedness (including any net loss or gain resulting from hedge agreements for currency exchange risk) and any foreign currency translation gains or losses shall be excluded, and
(14) any unrealized net gains and losses resulting from Hedging Obligations and the application of Statement of Financial Accounting Standards No. 133 shall be excluded.
In addition, to the extent not already included in the Net Income of such Person and its Restricted Subsidiaries, notwithstanding anything to the contrary in the foregoing, Consolidated Net Income shall include the amount of proceeds received from business interruption insurance and reimbursements of any expenses and charges that are covered by indemnification or other reimbursement provisions in connection with any Permitted Investment or any sale, conveyance, transfer or other disposition of assets permitted under this Indenture.
Notwithstanding the foregoing, for the purpose of Section 4.07 hereof only (other than clause (3)(d) of Section 4.07(a) hereof), there shall be excluded from Consolidated Net Income any income arising from any sale or other disposition of Restricted Investments made by the Issuer and its Restricted Subsidiaries, any repurchases and redemptions of Restricted Investments from the Issuer and its Restricted Subsidiaries, any repayments of loans and advances which constitute Restricted Investments by the Issuer or any of its Restricted Subsidiaries, any sale of the stock of an Unrestricted Subsidiary or any distribution or dividend from an Unrestricted Subsidiary, in each case only to the extent such amounts increase the amount of Restricted Payments permitted under clause (3)(d) of Section 4.07(a) hereof.
Consolidated Secured Debt Ratio means, as of any date of determination, the ratio of (1) Consolidated Total Indebtedness of the Issuer and its Restricted Subsidiaries that is secured by Liens as of the end of the most recent fiscal quarter for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur to (2) the Issuers EBITDA for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur, in each case with such pro forma adjustments to Consolidated Total Indebtedness and EBITDA as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of Fixed Charge Coverage Ratio.
Consolidated Total Indebtedness means, as at any date of determination, an amount equal to (x) the sum of (1) the aggregate amount of all outstanding Indebtedness of the Issuer and its Restricted Subsidiaries on a consolidated basis consisting of Indebtedness for borrowed money, Obligations in respect of Capitalized Lease Obligations and debt obligations evidenced by promissory notes and similar instruments (and excluding, for the avoidance of doubt, all obligations relating to Receivables Facilities) and (2) the aggregate amount of all outstanding Disqualified Stock of the Issuer and all Preferred Stock of its Restricted Subsidiaries on a consolidated basis, with the amount of such Disqualified Stock
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and Preferred Stock equal to the greater of their respective voluntary or involuntary liquidation preferences and maximum fixed repurchase prices, in each case determined on a consolidated basis in accordance with GAAP, less (y) an amount equal to the lesser of (i) $50 million and (ii) the aggregate amount of unrestricted cash and Cash Equivalents included on the consolidated balance sheet of the Issuer and any Restricted Subsidiaries as of such date; provided that Indebtedness of the Issuer and its Restricted Subsidiaries under any revolving credit facility as at any date of determination shall be determined using the Average Monthly Balance of such Indebtedness for the most recently ended four fiscal quarters for which internal financial statements are available as of such date of determination (the Reference Period). For purposes hereof, (a) the maximum fixed repurchase price of any Disqualified Stock or Preferred Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock or Preferred Stock as if such Disqualified Stock or Preferred Stock were purchased on any date on which Consolidated Total Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock or Preferred Stock, such fair market value shall be determined reasonably and in good faith by the Issuer, (b) Average Monthly Balance means, with respect to any Indebtedness incurred by the Issuer or its Restricted Subsidiaries under a revolving facility, the quotient of (x) the sum of each Individual Monthly Balance for each fiscal month ended on or prior to such date of determination and included in the Reference Period divided by (y) 12, and (c) Individual Monthly Balance means, with respect to any Indebtedness incurred by the Issuer or its Restricted Subsidiaries under a revolving credit facility during any fiscal month of the Issuer, the quotient of (x) the sum of the aggregate outstanding principal amount of all such Indebtedness at the end of each day of such fiscal month divided by (y) the number of days in such fiscal month
Contingent Obligations means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness (primary obligations) of any other Person (the primary obligor) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent,
(1) to purchase any such primary obligation or any property constituting direct or indirect security therefor,
(2) to advance or supply funds
(a) for the purchase or payment of any such primary obligation, or
(b) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, or
(3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.
Corporate Trust Office of the Trustee shall be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give notice to the Holders and the Issuer.
Custodian means the Trustee, as custodian for the Depositary with respect to the Notes in global form, or any successor entity thereto.
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Default means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.
Definitive Note means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06(c) hereof, substantially in the form of Exhibit A hereto, as the case may be, except that such Note shall not bear the Global Note Legend and shall not have the Schedule of Exchanges of Interests in the Global Note attached thereto.
Depositary means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as Depositary hereunder and having become such pursuant to the applicable provision of this Indenture.
Designated Non-cash Consideration means the fair market value of non-cash consideration received by the Issuer or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Non-cash Consideration pursuant to an Officers Certificate, setting forth the basis of such valuation, executed by the principal financial officer of the Issuer, less the amount of Cash Equivalents received in connection with a subsequent sale, redemption, repurchase of or collection or payment on, such Designated Non-cash Consideration.
Designated Preferred Stock means Preferred Stock of the Issuer or any parent company thereof (in each case other than Disqualified Stock) that is issued for cash (other than to a Restricted Subsidiary or an employee stock ownership plan or trust established by the Issuer or any of its Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to an Officers Certificate executed by the principal financial officer of the Issuer or the applicable parent company thereof, as the case may be, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in clause (3) of Section 4.07(a) hereof.
Disqualified Stock means, with respect to any Person, any Capital Stock of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is putable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable (other than solely as a result of a change of control or asset sale) pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof (other than solely as a result of a change of control or asset sale), in whole or in part, in each case prior to the date 91 days after the earlier of the maturity date of the Notes or the date the Notes are no longer outstanding; provided, however, that if such Capital Stock is issued to any plan for the benefit of employees of the Issuer or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Issuer or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations.
EBITDA means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period
(1) increased (without duplication) by:
(a) provision for taxes based on income or profits or capital, including, without limitation, state, franchise and similar taxes (such as the Pennsylvania capital tax and Texas margin tax) and foreign withholding taxes of such Person paid or accrued during such period deducted (and not added back) in computing Consolidated Net Income; plus
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(b) Fixed Charges of such Person for such period plus bank fees and costs of surety bonds in connection with financing activities plus amounts excluded from Consolidated Interest Expense as set forth in clauses (v), (w), (x), (y) and (z) in the definition thereof, to the extent the same were deducted (and not added back) in calculating such Consolidated Net Income; plus
(c) Consolidated Depreciation and Amortization Expense of such Person for such period to the extent the same was deducted (and not added back) in computing Consolidated Net Income; plus
(d) any expenses or charges (other than depreciation or amortization expense) related to any Equity Offering, Permitted Investment, acquisition, disposition, recapitalization or the incurrence of Indebtedness permitted to be incurred by the Indenture (including a refinancing thereof) (whether or not successful), including (i) such fees, expenses or charges related to the offering of the Notes and (ii) any amendment or other modification of the Notes or any Senior Credit Facility, in each case, deducted (and not added back) in computing Consolidated Net Income; plus
(e) the amount of any restructuring charge or reserve deducted (and not added back) in such period in computing Consolidated Net Income; plus
(f) any other non cash charges, including (i) any write offs or write downs, (ii) equity-based awards compensation expense, (iii) losses on sales, disposals or abandonment of, or any impairment charges or asset write off related to, intangible assets, long-lived assets and investments in debt and equity securities, (iv) all losses from investments recorded using the equity method, and (v) other non-cash charges, non-cash expenses or non-cash losses reducing Consolidated Net Income for such period (provided that if any such non-cash charges represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period); plus
(g) the amount of any minority interest expense consisting of Subsidiary income attributable to minority equity interests of third parties in any non-Wholly Owned Subsidiary deducted (and not added back) in such period in calculating Consolidated Net Income; plus
(h) the amount of management, monitoring, consulting and advisory fees (including termination fees) and related indemnities and expenses paid or accrued in such period to the Investors to the extent otherwise permitted under Section 4.11 hereof and deducted (and not added back) in such period in computing Consolidated Net Income; plus
(i) the amount of net cost savings and operating expense reductions projected by the Issuer in good faith to be realized as a result of specified actions taken within 24 months after the Effective Date, or committed or expected to be taken (in either case, whether or not actually taken within such period) within 24 months after the Effective Date (calculated on a pro forma basis as though such cost savings and operating expense reductions had been realized on the first day of such period and as if such cost savings and operating expense reductions were realized during the entirety of such period),
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net of the amount of actual benefits realized during such period from such actions; provided that (x) such cost savings are reasonably identifiable and factually supportable and (y) the aggregate amount of cost savings and operating expense reductions added pursuant to this clause (i) shall not exceed $30.0 million for any four consecutive quarter period (which adjustments may be incremental to pro forma adjustments made pursuant to the definition of Fixed Charge Coverage Ratio); plus
(j) the amount of loss on sale of receivables and related assets to the Receivables Subsidiary in connection with a Receivables Facility; plus
(k) any costs or expense incurred by the Issuer or a Restricted Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such cost or expenses are funded with cash proceeds contributed to the capital of the Issuer or net cash proceeds of an issuance of Equity Interest of the Issuer (other than Disqualified Stock) solely to the extent that such net cash proceeds are excluded from the calculation set forth in clause (3) of Section 4.07(a) hereof; plus
(l) any net loss from disposed or discontinued operations; plus
(m) cash receipts (or any netting arrangements resulting in reduced cash expenditures) not representing EBITDA or Net Income in any period to the extent non-cash gains relating to such income were deducted in the calculation of EBITDA pursuant to clause (2) below for any previous period and not added back,
(2) decreased (without duplication) by:
(a) non-cash gains increasing Consolidated Net Income of such Person for such period, excluding any non-cash gains to the extent they represent the reversal of an accrual or reserve for a potential cash item that reduced EBITDA in any prior period and any non-cash gains with respect to cash actually received in a prior period so long as such cash did not increase EBITDA in such prior period, plus
(b) any net income from disposed or discontinued operations; and
(3) increased or decreased by (without duplication), as applicable, any adjustments resulting from the application of FASB Interpretation No. 45 (Guarantees).
Effective Date means, (x) if the Acquisition is consummated on the Issue Date, the Issue Date and (y) otherwise, the Escrow Release Date.
EMU means economic and monetary union as contemplated in the Treaty on European Union.
Equity Interests means Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.
Equity Offering means any public or private sale of common stock or Preferred Stock of the Issuer or any of its direct or indirect parent companies (excluding Disqualified Stock), other than:
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(1) public offerings with respect to the Issuers or any direct or indirect parent companys common stock registered on Form S-8;
(2) issuances to any Subsidiary of the Issuer; and
(3) any such public or private sale that constitutes an Excluded Contribution.
Escrow Account means a segregated account, under the sole control of the Trustee, that includes only cash and certain Cash Equivalents, the proceeds thereof and interest earned thereon, free from all Liens other than the Lien in favor of the Trustee for the benefit of the Holders of the Notes.
Escrow Agent means Deutsche Bank Trust Company Americas, as escrow agent under the Escrow Agreement or any successor escrow agent as set forth in the Escrow Agreement.
Escrow Agreement means the Escrow Agreement, if any, to be dated as of the Issue Date, among the Issuer, the Trustee and the Escrow Agent, as amended, supplemented, modified, extended, renewed, restated or replaced in whole or in part from time to time.
Escrow Termination Date has the meaning set forth in the Escrow Agreement
Escrow Property has the meaning set forth in the Escrow Agreement.
euro means the single currency of participating member states of the EMU.
Euroclear means Euroclear S.A./N.V., as operator of the Euroclear system.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.
Exchange Notes means the Notes issued in the Exchange Offer pursuant to Section 2.06(f) hereof.
Exchange Offer has the meaning set forth in the Registration Rights Agreement.
Exchange Offer Registration Statement has the meaning set forth in the Registration Rights Agreement.
Excluded Contribution means net cash proceeds, marketable securities or Qualified Proceeds received by the Issuer from
(1) contributions to its common equity capital, and
(2) the sale (other than to a Subsidiary of the Issuer or to any management equity plan or stock option plan or any other management or employee benefit plan or agreement of the Issuer) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Issuer,
in each case designated as Excluded Contributions pursuant to an Officers Certificate executed by the principal financial officer of the Issuer on the date such capital contributions are made or the date such
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Equity Interests are sold, as the case may be, which are excluded from the calculation set forth in clause (3) of Section 4.07(a) hereof.
Exempted Subsidiary means (x) Gymboree, Inc. (Canada corporation)/Gymboree Canada, Inc. (Delaware corporation), a dual-status entity, and (y) Gymboree Island, LLC (Puerto Rico limited liability company).
Fixed Charge Coverage Ratio means, with respect to any Person for any period, the ratio of EBITDA of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Issuer or any Restricted Subsidiary incurs, assumes, guarantees, redeems, retires or extinguishes any Indebtedness (other than Indebtedness incurred or repaid under any revolving credit facility in the ordinary course of business for working capital purposes) or issues or redeems Disqualified Stock or Preferred Stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to or simultaneously with the event for which the calculation of the Fixed Charge Coverage Ratio is made (the Fixed Charge Coverage Ratio Calculation Date), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, redemption, retirement or extinguishment of Indebtedness, or such issuance or redemption of Disqualified Stock or Preferred Stock, as if the same had occurred at the beginning of the applicable four-quarter period.
For purposes of making the computation referred to above, Investments, acquisitions, dispositions, amalgamations, mergers and consolidations that have been made by the Issuer or any of its Restricted Subsidiaries during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Fixed Charge Coverage Ratio Calculation Date shall be calculated on a pro forma basis assuming that all such Investments, acquisitions, dispositions, amalgamations, mergers and consolidations (and the change in any associated fixed charge obligations and the change in EBITDA resulting therefrom) had occurred on the first day of the four-quarter reference period. If since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged, amalgamated or consolidated with or into the Issuer or any of its Restricted Subsidiaries since the beginning of such period shall have made any Investment, acquisition, disposition, amalgamation, merger or consolidation that would have required adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect thereto for such period as if such Investment, acquisition, disposition, merger or consolidation had occurred at the beginning of the applicable four-quarter period.
For purposes of this definition, whenever pro forma effect is to be given to an Investment, acquisition, disposition, amalgamation, merger or consolidation (including the Transactions) and the amount of income or earnings relating thereto, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Issuer (and may include, for the avoidance of doubt, cost savings and operating expense reductions resulting from such Investment, acquisition, disposition, amalgamation, merger or consolidation (including the Transactions) which is being given pro forma effect that have been or are expected to be realized and for which the actions necessary to realize such cost savings and operating expense reductions are taken or expected to be taken no later than 24 months after the date of any such Investment, acquisition, disposition, amalgamation, merger or consolidation). If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Fixed Charge Coverage Ratio Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness). Interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Issuer to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP. Interest on
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Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Issuer may designate.
Fixed Charges means, with respect to any Person for any period, the sum, without duplication, of:
(1) Consolidated Interest Expense of such Person for such period;
(2) all cash dividends or other distributions paid (excluding items eliminated in consolidation) on any series of Preferred Stock during such period; and
(3) all cash dividends or other distributions paid (excluding items eliminated in consolidation) on any series of Disqualified Stock during such period.
Foreign Subsidiary means, (x) with respect to any Person, any Restricted Subsidiary of such Person that is not organized or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof and any Restricted Subsidiary of such Foreign Subsidiary and (y) each Exempted Subsidiary.
GAAP means generally accepted accounting principles in the United States which are in effect on the Issue Date. For purposes of this Indenture, the term consolidated with respect to any Person means such Person consolidated with its Restricted Subsidiaries and does not include any Unrestricted Subsidiary.
Global Note Legend means the legend set forth in Section 2.06(g)(ii) hereof, which is required to be placed on all Global Notes issued under this Indenture.
Global Notes means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of Exhibit A hereto, issued in accordance with Section 2.01, 2.06(b), 2.06(d) or 2.06(f) hereof.
Government Securities means securities that are:
(1) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged; or
(2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America,
which, in either case, are not callable or redeemable at the option of the issuers thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt.
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guarantee means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations.
Guarantee means the guarantee by any Guarantor of the Issuers Obligations under this Indenture and the Notes.
Guarantor means each Restricted Subsidiary that Guarantees the Notes in accordance with the terms of this Indenture.
Hedging Obligations means, with respect to any Person, the obligations of such Person under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, commodity swap agreement, commodity cap agreement, commodity collar agreement, foreign exchange contract, currency swap agreement or similar agreement providing for the transfer or mitigation of interest rate, commodity price or currency risks either generally or under specific contingencies (including, for the avoidance of doubt, under all Swap Contracts as defined in the Revolving Credit Facility and the Term Loan Facility as in effect on the Effective Date).
Holder means the Person in whose name a Note is registered on the Registrars books.
Indebtedness means, with respect to any Person, without duplication:
(1) any indebtedness (including principal and premium) of such Person, whether or not contingent:
(a) in respect of borrowed money;
(b) evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers acceptances (or, without duplication, reimbursement agreements in respect thereof);
(c) representing the balance deferred and unpaid of the purchase price of any property (including Capitalized Lease Obligations), except (i) any such balance that constitutes an obligation in respect of a commercial letter of credit, a trade payable or similar obligation, in each case accrued in the ordinary course of business and (ii) any earn-out obligations until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP and is not paid after becoming due and payable; or
(d) representing any Hedging Obligations;
if and to the extent that any of the foregoing Indebtedness (other than letters of credit (other than commercial letters of credit) and Hedging Obligations) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP;
(2) to the extent not otherwise included, any obligation by such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the obligations of the type referred to in clause (1) of a third Person (whether or not such items would appear upon the balance sheet of the such obligor or guarantor), other than by endorsement of negotiable instruments for collection in the ordinary course of business; and
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(3) to the extent not otherwise included, the obligations of the type referred to in clause (1) of a third Person secured by a Lien on any asset owned by such first Person, whether or not such Indebtedness is assumed by such first Person;
provided, however, that notwithstanding the foregoing, Indebtedness shall be deemed not to include (a) Contingent Obligations incurred in the ordinary course of business or (b) obligations under or in respect of Receivables Facilities.
Indenture means this Indenture, as amended or supplemented from time to time.
Independent Financial Advisor means an accounting, appraisal, investment banking firm or consultant to Persons engaged in Similar Businesses of nationally recognized standing that is, in the good faith judgment of the Issuer, qualified to perform the task for which it has been engaged.
Indirect Participant means a Person who holds a beneficial interest in a Global Note through a Participant.
Initial Notes is defined in the recitals hereto.
Initial Purchasers means Morgan Stanley & Co. Incorporated and Credit Suisse Securities (USA) LLC.
Interest Payment Date means June 1 and December 1 of each year to stated maturity.
Investment Grade Rating means a rating equal to or higher than Baa3 (or the equivalent) by Moodys and BBB- (or the equivalent) by S&P, or, in either case, an equivalent rating by any other Rating Agency.
Investment Grade Securities means:
(1) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (other than Cash Equivalents);
(2) debt securities or debt instruments with an Investment Grade Rating, but excluding any debt securities or instruments constituting loans or advances among the Issuer and its Subsidiaries;
(3) investments in any fund that invests exclusively in investments of the type described in clauses (1) and (2) which fund may also hold immaterial amounts of cash pending investment or distribution; and
(4) corresponding instruments in countries other than the United States customarily utilized for high quality investments.
Investments means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances or capital contributions (excluding accounts receivable, credit card and debit card receivables, trade credit, advances to customers, commission, travel and similar advances to officers, directors, distributors, consultants and employees, in each case made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities issued by any other Person and investments
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that are required by GAAP to be classified on the balance sheet (excluding the footnotes) of the Issuer in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property. For purposes of the definition of Unrestricted Subsidiary and Section 4.07 hereof:
(1) Investments shall include the portion (proportionate to the Issuers equity interest in such Subsidiary) of the fair market value of the net assets of a Subsidiary of the Issuer at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Issuer shall be deemed to continue to have a permanent Investment in an Unrestricted Subsidiary in an amount (if positive) equal to:
(a) the Issuers Investment in such Subsidiary at the time of such redesignation; less
(b) the portion (proportionate to the Issuers Equity Interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Issuer.
Investors means Bain Capital, LLC, each of its Affiliates and any investment funds advised or managed by any of the foregoing, but not including, however, any portfolio companies of any of the foregoing.
Issue Date means November 23, 2010.
Issuer means (a) prior to the consummation of the Acquisition, Giraffe Acquisition Corporation and (b) from and after the consummation of the Acquisition, The Gymboree Corporation; provided that when used in the context of determining the fair market value of an asset or liability under this Indenture, Issuer shall be deemed to mean the board of directors of the Issuer when the fair market value is equal to or in excess of $30.0 million (unless otherwise expressly stated).
Issuer Order means a written request or order signed on behalf of the Issuer by an Officer of the Issuer, who must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Issuer, and delivered to the Trustee.
Legal Holiday means a Saturday, a Sunday or a day on which commercial banking institutions are not required to be open in the State of New York.
Letter of Transmittal means the letter of transmittal to be prepared by the Issuer and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer.
Lien means, with respect to any asset, any mortgage, lien (statutory or otherwise), pledge, hypothecation, charge, security interest, preference, priority or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement
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under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction; provided that in no event shall an operating lease be deemed to constitute a Lien.
Moodys means Moodys Investors Service, Inc. and any successor to its rating agency business.
Net Income means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends.
Net Proceeds means the aggregate cash proceeds received by the Issuer or any of its Restricted Subsidiaries in respect of any Asset Sale, including any cash received upon the sale or other disposition of any Designated Non-cash Consideration received in any Asset Sale, net of the direct costs relating to such Asset Sale and the sale or disposition of such Designated Non-cash Consideration, including legal, accounting and investment banking fees, and brokerage and sales commissions, any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements directly relating to such Asset Sale), amounts required to be applied to the repayment of principal, premium, if any, and interest on Indebtedness (other than Subordinated Indebtedness) secured by a Lien on the assets disposed of required (other than required by clause (1) of Section 4.10(b) hereof) to be paid as a result of such transaction and any deduction of appropriate amounts to be provided by the Issuer or any of its Restricted Subsidiaries as a reserve in accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by the Issuer or any of its Restricted Subsidiaries after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction.
Non-U.S. Person means a Person who is not a U.S. Person.
Notes means the Initial Notes and more particularly means any Note authenticated and delivered under this Indenture. For all purposes of this Indenture, the term Notes shall also include any Additional Notes that may be issued under a supplemental indenture.
Obligations means any principal, interest (including any interest accruing subsequent to the filing of a petition in bankruptcy, reorganization or similar proceeding at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable state, federal or foreign law), penalties, fees, indemnifications, reimbursements (including reimbursement obligations with respect to letters of credit and bankers acceptances), damages and other liabilities, and guarantees of payment of such principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities, payable under the documentation governing any Indebtedness.
Offering Memorandum means the offering memorandum, dated November 18, 2010, relating to the sale of the Initial Notes.
Officer means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer or the Secretary of the Issuer.
Officers Certificate means a certificate signed on behalf of the Issuer by an Officer of the Issuer, who must be the principal executive officer, the principal financial officer or the principal accounting officer of the Issuer, that meets the requirements set forth in this Indenture.
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Opinion of Counsel means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Issuer or the Trustee.
Participant means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream).
Participating Broker-Dealer has the meaning set forth in the Registration Rights Agreement.
Permitted Asset Swap means the substantially concurrent purchase and sale or exchange of Related Business Assets or a combination of Related Business Assets and Cash Equivalents between the Issuer or any of its Restricted Subsidiaries and another Person; provided that any Net Proceeds received must be applied in accordance with Section 4.10 hereof.
Permitted Holders means each of the Investors and members of management of the Issuer (or its direct parent) who are holders of Equity Interests of the Issuer (or any of its direct or indirect parent companies) on the Effective Date and any group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or any successor provision) of which any of the foregoing are members; provided that, in the case of such group and without giving effect to the existence of such group or any other group, such Investors and members of management, collectively, have beneficial ownership of more than 50% of the total voting power of the Voting Stock of the Issuer or any of its direct or indirect parent companies. Any person or group whose acquisition of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision) constitutes a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of Section 4.14 (or would result in a Change of Control Offer in the absence of the waiver of such requirement by Holders in accordance with Section 4.14, will thereafter, together with its Affiliates, constitute an additional Permitted Holder.
Permitted Investments means:
(1) any Investment in the Issuer or any of its Restricted Subsidiaries;
(2) any Investment in cash and Cash Equivalents or Investment Grade Securities;
(3) any Investment by the Issuer or any of its Restricted Subsidiaries in a Person that is engaged in a Similar Business if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary; or
(b) such Person, in one transaction or a series of related transactions, is merged, amalgamated or consolidated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Issuer or a Restricted Subsidiary,
and, in each case, any Investment held by such Person; provided that such Investment was not acquired by such Person in contemplation of such acquisition, merger, consolidation or transfer;
(4) any Investment in securities or other assets not constituting cash, Cash Equivalents or Investment Grade Securities and received in connection with an Asset Sale made pursuant
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to the provisions of Section 4.10(a) hereof or any other disposition of assets not constituting an Asset Sale;
(5) any Investment existing on the Effective Date and any extension, modification, replacement or renewal of any such Investments existing on the Effective Date, but only to the extent not involving additional advances, contributions or other Investments of cash or other assets or other increases thereof other than as a result of the accrual or accretion of interest or original issue discount or the issuance of pay-in-kind securities, in each case, pursuant to the terms of such Investment as in effect on the Effective Date (or as subsequently amended or otherwise modified in a manner not disadvantageous to the Holders of the Notes in any material respect);
(6) any Investment acquired by the Issuer or any of its Restricted Subsidiaries:
(a) in exchange for any other Investment or accounts receivable held by the Issuer or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable; or
(b) as a result of a foreclosure by the Issuer or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;
(7) Hedging Obligations permitted under clause (10) of Section 4.09(b) hereof;
(8) any Investment in a Similar Business having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (8) that are at that time outstanding, not to exceed the greater of (x) $60.0 million and (y) 2.85% of Total Assets (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value);
(9) Investments the payment for which consists of Equity Interests (exclusive of Disqualified Stock) of the Issuer, or any of its direct or indirect parent companies; provided, however, that such Equity Interests will not increase the amount available for Restricted Payments under clause (3) of Section 4.07(a) hereof;
(10) guarantees (including Guarantees) of Indebtedness of the Issuer or any Restricted Subsidiary permitted under Section 4.09 hereof, performance guarantees and Contingent Obligations in the ordinary course of business and the creation of liens on the assets of the Issuer or any of its Restricted Subsidiaries in compliance with Section 4.12 hereof;
(11) any transaction to the extent it constitutes an Investment that is permitted and made in accordance with the provisions of Section 4.11(b) hereof (except transactions described in clauses (2), (5) and (8) of Section 4.11(b) hereof);
(12) Investments consisting of purchases and acquisitions of inventory, supplies, material or equipment;
(13) Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (13) that are at that time outstanding (without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist
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of, or have not been subsequently sold or transferred for, cash or marketable securities), not to exceed the greater of (x) $80.0 million and (y) 3.70% of Total Assets (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value);
(14) Investments relating to a Receivables Subsidiary that, in the good faith determination of the Issuer are necessary or advisable to effect any Receivables Facility;
(15) advances to, or guarantees of Indebtedness of, employees not in excess of $12.0 million outstanding at any one time, in the aggregate;
(16) loans and advances to officers, directors and employees for business-related travel expenses, moving expenses and other similar expenses, in each case incurred in the ordinary course of business or consistent with past practices or to fund such Persons purchase of Equity Interests of the Issuer or any direct or indirect parent company thereof; and
(17) Investments consisting of licensing of intellectual property pursuant to joint marketing arrangements with other Persons.
Permitted Liens means, with respect to any Person:
(1) pledges, deposits or security by such Person under workmens compensation laws, unemployment insurance , employers health tax and other social security laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or U.S. government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case incurred in the ordinary course of business;
(2) Liens imposed by law, such as carriers, warehousemens, materialmens, repairmens and mechanics Liens, in each case for sums not yet overdue for a period of more than 30 days or being contested in good faith by appropriate actions or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;
(3) Liens for taxes, assessments or other governmental charges not yet overdue for a period of more than 30 days or which are being contested in good faith by appropriate actions diligently conducted, if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP, or for property taxes on property that the Issuer or one of its Subsidiaries has determined to abandon if the sole recourse for such tax, assessment, charge, levy or claim is to such property;
(4) Liens in favor of issuers of performance, surety, bid, indemnity, warranty, release, appeal or similar bonds or with respect to other regulatory requirements or letters of credit or bankers acceptances issued, and completion guarantees provided for, in each case pursuant to the request of and for the account of such Person in the ordinary course of its business or consistent with past practice prior to the Effective Date;
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(5) minor survey exceptions, minor encumbrances, ground leases, easements or reservations of, or rights of others for, licenses, rights-of-way, servitudes, sewers, electric lines, drains, telegraph and telephone and cable television lines, gas and oil pipelines and other similar purposes, or zoning, building codes or other restrictions (including, without limitation, minor defects or irregularities in title and similar encumbrances) as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not incurred in connection with Indebtedness and which do not in the aggregate materially impair their use in the operation of the business of such Person;
(6) Liens securing Indebtedness permitted to be incurred pursuant to clause (4), (12)(b) or (18) of Section 4.09(b) hereof; provided that Liens securing Indebtedness permitted to be incurred pursuant to clause (18) of Section 4.09(b) hereof extend only to the assets of Foreign Subsidiaries;
(7) Liens existing on the Effective Date;
(8) Liens existing on property or shares of stock of a Person at the time such Person becomes a Subsidiary; provided, however, such Liens are not created or incurred in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided, further, however, that such Liens may not extend to any other property owned by the Issuer or any of its Restricted Subsidiaries;
(9) Liens existing on property at the time the Issuer or a Restricted Subsidiary acquired the property, including any acquisition by means of a merger, amalgamation or consolidation with or into the Issuer or any of its Restricted Subsidiaries; provided, however, that such Liens are not created or incurred in connection with, or in contemplation of, such acquisition, merger, amalgamation or consolidation; provided, further, however, that the Liens may not extend to any other property owned by the Issuer or any of its Restricted Subsidiaries;
(10) Liens securing Indebtedness or other obligations of a Restricted Subsidiary owing to the Issuer or another Restricted Subsidiary permitted to be incurred in accordance with Section 4.09 hereof;
(11) Liens securing Hedging Obligations so long as the related Indebtedness is permitted to be incurred under this Indenture;
(12) Liens on specific items of inventory or other goods and proceeds of any Person securing such Persons obligations in respect of bankers acceptances or letters of credit issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;
(13) leases, subleases, licenses or sublicenses granted to others in the ordinary course of business which do not materially interfere with the ordinary conduct of the business of the Issuer or any of its Restricted Subsidiaries and do not secure any Indebtedness;
(14) Liens arising from Uniform Commercial Code (or equivalent statutes) financing statement filings regarding operating leases, consignments or accounts entered into by the Issuer and its Restricted Subsidiaries in the ordinary course of business;
(15) Liens in favor of the Issuer or any Guarantor;
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(16) Liens on equipment of the Issuer or any of its Restricted Subsidiaries granted in the ordinary course of business to the Issuers clients;
(17) Liens on accounts receivable and related assets incurred in connection with a Receivables Facility;
(18) Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancing, refunding, extensions, renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (6), (7), (8) and (9); provided, however, that (a) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property), and (b) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (i) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (6), (7), (8) and (9) at the time the original Lien became a Permitted Lien under this Indenture, and (ii) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement;
(19) deposits made or other security provided to secure liabilities to insurance carriers under insurance or self-insurance arrangements in the ordinary course of business;
(20) Liens securing judgments for the payment of money not constituting an Event of Default under clause (5) of Section 6.01(a) hereof so long as such Liens are adequately bonded and any appropriate legal proceedings that may have been duly initiated for the review of such judgment have not been finally terminated or the period within which such proceedings may be initiated has not expired;
(21) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;
(22) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (ii) attaching to commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business, and (iii) in favor of banking institutions arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;
(23) Liens deemed to exist in connection with Investments in repurchase agreements or other Cash Equivalents permitted under Section 4.09 hereof; provided that such Liens do not extend to any assets other than those that are the subject of such repurchase agreement or other Cash Equivalent;
(24) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;
(25) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Issuer or any of its Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Issuer and its Restricted Subsidiaries or (iii) relating to purchase orders and other agreements
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entered into with customers of the Issuer or any of its Restricted Subsidiaries in the ordinary course of business;
(26) Liens solely on any cash earnest money deposits made by the Issuer or any of its Restricted Subsidiaries in connection with any letter of intent or purchase agreement permitted under this Indenture;
(27) the rights reserved or vested in any Person by the terms of any lease, license, franchise, grant or permit held by the Issuer or any of its Restricted Subsidiaries or by a statutory provision, to terminate any such lease, license, franchise, grant or permit, or to require annual or periodic payments as a condition to the continuance thereof;
(28) restrictive covenants affecting the use to which real property may be put; provided, however, that the covenants are complied with;
(29) security given to a public utility or any municipality or governmental authority when required by such utility or authority in connection with the operations of that Person in the ordinary course of business;
(30) zoning by-laws and other land use restrictions, including, without limitation, site plan agreements, development agreements and contract zoning agreements;
(31) Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods entered into by the Issuer or any Restricted Subsidiary in the ordinary course of business;
(32) Liens arising from Personal Property Security Act financing statement filings regarding leases entered into by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business;
(33) rights of a supplier of unpaid goods to have access to and repossess such goods under the Bankruptcy and Insolvency Act (Canada) and under the provisions in the legislation of Canadian provinces;
(34) the reservations, limitations, provisos and conditions, if any, expressed in any original grants from the crown under Canadian law and any statutory exceptions to title under Canadian law;
(35) customary transfer restrictions and purchase options in joint venture and similar agreements; and
(36) other Liens securing obligations not to exceed $15.0 million at any one time outstanding.
For purposes of this definition, the term Indebtedness shall be deemed to include interest on such Indebtedness.
Person means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
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Preferred Stock means any Equity Interest with preferential rights of payment of dividends or upon liquidation, dissolution, or winding up.
Private Placement Legend means the legend set forth in Section 2.06(g)(i) hereof to be placed on all Notes issued under this Indenture, except where otherwise permitted by the provisions of this Indenture.
Public Company Costs shall mean costs relating to compliance with the Sarbanes-Oxley Act of 2002, as amended, and other expenses arising out of or incidental to the Issuers status as a public company, including costs, fees and expenses (including legal, accounting and other professional fees) relating to compliance with provisions of the Securities Act and the Exchange Act, as applicable to companies with equity securities held by the public, the rules of national securities exchange companies with listed equity securities, directors compensation, fees and expense reimbursement, shareholder meetings and reports to shareholders, directors and officers insurance and other executive costs, legal and other professional fees, and listing fees, in each case incurred or accrued prior to the Effective Date.
QIB means a qualified institutional buyer as defined in Rule 144A.
Qualified Proceeds means assets that are used or useful in, or Capital Stock of any Person engaged in, a Similar Business; provided that the fair market value of any such assets or Capital Stock shall be determined by the Issuer in good faith.
Rating Agencies means Moodys and S&P or if Moodys or S&P or both shall not make a rating on the Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Issuer which shall be substituted for Moodys or S&P or both, as the case may be.
Receivables Facility means any of one or more receivables financing facilities as amended, supplemented, modified, extended, renewed, restated or refunded from time to time, the Obligations of which are non-recourse (except for customary representations, warranties, covenants and indemnities made in connection with such facilities) to the Issuer or any of its Restricted Subsidiaries (other than a Receivables Subsidiary) pursuant to which the Issuer or any of its Restricted Subsidiaries sells its accounts receivable to either (a) a Person that is not a Restricted Subsidiary or (b) a Receivables Subsidiary that in turn sells its accounts receivable to a Person that is not a Restricted Subsidiary.
Receivables Fees means distributions or payments made directly or by means of discounts with respect to any accounts receivable or participation interest therein issued or sold in connection with, and other fees paid to a Person that is not a Restricted Subsidiary in connection with, any Receivables Facility.
Receivables Subsidiary means any Subsidiary formed for the purpose of, and that solely engages only in one or more Receivables Facilities and other activities reasonably related thereto.
Record Date for the interest or Additional Interest, if any, payable on any applicable Interest Payment Date means the May 15 or November 15 (whether or not a Business Day) next preceding such Interest Payment Date.
Registration Rights Agreement means the Registration Rights Agreement related to the Notes dated as of the Issue Date, among the Issuer, the Guarantors and the Initial Purchasers, as such agreement may be amended, modified or supplemented from time to time and, with respect to any Additional
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Notes, one or more registration rights agreements between the Issuer and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time, relating to rights given by the Issuer to the purchasers of Additional Notes to register such Additional Notes under the Securities Act.
Regulation S means Regulation S promulgated under the Securities Act.
Regulation S Global Note means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as applicable.
Regulation S Permanent Global Note means a permanent Global Note in the form of Exhibit A bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Restricted Period.
Regulation S Temporary Global Note means a temporary Global Note in the form of Exhibit A bearing the Global Note Legend, the Private Placement Legend and the Regulation S Temporary Global Note Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903.
Regulation S Temporary Global Note Legend means the legend set forth in Section 2.06(g)(iii) hereof.
Related Business Assets means assets (other than cash or Cash Equivalents) used or useful in a Similar Business, provided that any assets received by the Issuer or a Restricted Subsidiary in exchange for assets transferred by the Issuer or a Restricted Subsidiary shall not be deemed to be Related Business Assets if they consist of securities of a Person, unless upon receipt of the securities of such Person, such Person would become a Restricted Subsidiary.
Responsible Officer means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any managing director, director, vice president, assistant vice president, associate or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such Persons knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.
Restricted Definitive Note means a Definitive Note bearing the Private Placement Legend.
Restricted Global Note means a Global Note bearing the Private Placement Legend.
Restricted Investment means an Investment other than a Permitted Investment.
Restricted Period means the 40-day distribution compliance period as defined in Regulation S.
Restricted Subsidiary means, at any time, any direct or indirect Subsidiary of the Issuer (including any Foreign Subsidiary) that is not then an Unrestricted Subsidiary; provided, however, that
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upon the occurrence of an Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of Restricted Subsidiary.
Revolving Credit Facility means the credit facility provided under the Credit Agreement, to be dated the Effective Date, among the Issuer, the other borrowers party thereto, the facility guarantors party thereto from time to time, the lenders party thereto from time to time in their capacities as lenders thereunder and Bank of America, N.A., as administrative agent and collateral agent, including any notes, mortgages, guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, replacements, renewals, restatements, refundings or refinancings thereof and any one or more indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or investors that extend, replace, refund, refinance, renew or defease any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder or alters the maturity thereof or adds Restricted Subsidiaries as additional borrowers or guarantors thereunder and whether by the same or any other agent, lender or group of lenders.
Rule 144 means Rule 144 promulgated under the Securities Act.
Rule 144A means Rule 144A promulgated under the Securities Act.
Rule 903 means Rule 903 promulgated under the Securities Act.
Rule 904 means Rule 904 promulgated under the Securities Act.
S&P means Standard & Poors, a division of The McGraw-Hill Companies, Inc., and any successor to its rating agency business.
Sale and Lease-Back Transaction means any arrangement providing for the leasing by the Issuer or any of its Restricted Subsidiaries of any real or tangible personal property, which property has been or is to be sold or transferred by the Issuer or such Restricted Subsidiary to a third Person in contemplation of such leasing.
SEC means the U.S. Securities and Exchange Commission.
Secured Indebtedness means any Indebtedness of the Issuer or any of its Restricted Subsidiaries secured by a Lien.
Securities Act means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.
Senior Credit Facilities means the Revolving Credit Facility and the Term Loan Facility.
Shelf Registration Statement means the Shelf Registration Statement as defined in the Registration Rights Agreement.
Significant Subsidiary means any Restricted Subsidiary that would be a significant subsidiary as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such regulation is in effect on the Effective Date.
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Similar Business means any business conducted or proposed to be conducted by the Issuer and its Restricted Subsidiaries on the Effective Date or any business that is a reasonable extension, development or expansion of any of the foregoing or is similar, reasonably related, incidental or ancillary thereto (including, for the avoidance of doubt, any sourcing companies created in connection with any of the foregoing).
Specified Premium means an amount equal to 1.0% of the Initial Issue Price.
Sponsor Management Agreement means that certain Management Agreement, entered into as of October 23, 2010, by and among Giraffe Holding, Inc., Giraffe Acquisition Corporation and Bain Capital Partners, LLC.
Subordinated Indebtedness means, with respect to the Notes,
(1) any Indebtedness of the Issuer which is by its terms subordinated in right of payment to the Notes, and
(2) any Indebtedness of any Guarantor which is by its terms subordinated in right of payment to the Guarantee of such entity of the Notes.
Subsidiary means, with respect to any Person:
(1) any corporation, association, or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof or is consolidated under GAAP with such Person at such time; and
(2) any partnership, joint venture, limited liability company or similar entity of which
(x) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof whether in the form of membership, general, special or limited partnership or otherwise, and
(y) such Person or any Restricted Subsidiary of such Person is a controlling general partner or otherwise controls such entity.
Term Loan Facility means the credit facility provided under the Credit Agreement, to be dated the Effective Date among the Issuer, the guarantors party thereto from time to time, the lenders party thereto from time to time in their capacities as lenders thereunder and Credit Suisse AG, as administrative agent and collateral agent for the lenders, including any notes, mortgages, guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, replacements, renewals, restatements, refundings or refinancings thereof and any one or more indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or investors that extend, replace, refund, refinance, renew or defease any part of the
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loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder or alters the maturity thereof or adds Restricted Subsidiaries as additional borrowers or guarantors thereunder and whether by the same or any other agent, lender or group of lenders.
Total Assets means the total assets of the Issuer and its Restricted Subsidiaries on a consolidated basis, as shown on the most recent balance sheet of the Issuer or such other Person as may be expressly stated.
Transaction Agreement means the Agreement and Plan of Merger, dated as of October 11, 2010 among Giraffe Holding, Inc., Giraffe Acquisition Corporation and The Gymboree Corporation.
Transaction Expenses means any fees or expenses incurred or paid by the Issuer or any Restricted Subsidiary in connection with the Transactions, including payments to officers, employees and directors as change of control payments, severance payments, special or retention bonuses and charges for repurchase or rollover of, or modifications to, stock options and/or restricted stock.
Transactions means the transactions contemplated by the Transaction Agreement, the issuance of the Notes and borrowings under the Senior Credit Facilities.
Treasury Rate means, as of any Redemption Date, the yield to maturity as of such Redemption Date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the Redemption Date to December 1, 2014; provided, however, that if the period from the Redemption Date to December 1, 2014 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.
Trust Indenture Act means the Trust Indenture Act of 1939, as amended (15 U.S.C. §§ 77aaa-77bbbb).
Trustee means Deutsche Bank Trust Company Americas, a New York banking corporation, as trustee, until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.
Unrestricted Definitive Note means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend.
Unrestricted Global Note means a permanent Global Note, substantially in the form of Exhibit A, that bears the Global Note Legend and that has the Schedule of Exchanges of Interests in the Global Note attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing Notes that do not bear the Private Placement Legend.
Unrestricted Subsidiary means:
(1) any Subsidiary of the Issuer which at the time of determination is an Unrestricted Subsidiary (as designated by the Issuer, as provided below); and
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(2) any Subsidiary of an Unrestricted Subsidiary.
The Issuer may designate any Subsidiary of the Issuer (including any existing Subsidiary and any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or holds any Lien on, any property of, the Issuer or any Subsidiary of the Issuer (other than solely any Subsidiary of the Subsidiary to be so designated); provided that
(1) any Unrestricted Subsidiary must be an entity of which the Equity Interests entitled to cast at least a majority of the votes that may be cast by all Equity Interests having ordinary voting power for the election of directors or Persons performing a similar function are owned, directly or indirectly, by the Issuer;
(2) such designation complies with Section 4.07 hereof; and
(3) each of:
(a) the Subsidiary to be so designated; and
(b) its Subsidiaries
has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Issuer or any Restricted Subsidiary.
The Issuer may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that, immediately after giving effect to such designation, no Default shall have occurred and be continuing and either:
(1) the Issuer could incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test described in Section 4.09(a) hereof; or
(2) the Fixed Charge Coverage Ratio for the Issuer and its Restricted Subsidiaries would be greater than such ratio for the Issuer and its Restricted Subsidiaries immediately prior to such designation,
in each case on a pro forma basis taking into account such designation.
Any such designation by the Issuer shall be notified by the Issuer to the Trustee by promptly filing with the Trustee a copy of the resolution of the board of directors of the Issuer or any committee thereof giving effect to such designation and an Officers Certificate certifying that such designation complied with the foregoing provisions.
U.S. Person means a U.S. person as defined in Rule 902(k) under the Securities Act.
Voting Stock of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the board of directors of such Person.
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Weighted Average Life to Maturity means, when applied to any Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, at any date, the quotient obtained by dividing:
(1) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Disqualified Stock or Preferred Stock multiplied by the amount of such payment; by
(2) the sum of all such payments.
Wholly-Owned Subsidiary of any Person means a Subsidiary of such Person, 100% of the outstanding Equity Interests of which (other than directors qualifying shares and shares issued to foreign nationals as required under applicable law) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person or by such Person and one or more Wholly-Owned Subsidiaries of such Person.
Section 1.02 Other Definitions.
Term |
Defined in Section | |
Acceptable Commitment |
4.10(b) | |
Affiliate Transaction |
4.11(a) | |
AHYDO Amount |
3.10 | |
AHYDO Payment Date |
3.10 | |
Asset Sale Offer |
4.10(c) | |
Authentication Order |
2.02 | |
Change of Control Offer |
4.14(a) | |
Change of Control Payment |
4.14(a) | |
Change of Control Payment Date |
4.14(a) | |
Covenant Defeasance |
8.03 | |
Covenant Suspension Event |
4.16(a) | |
DTC |
2.03 | |
Escrow Release Date |
3.11 | |
Event of Default |
6.01(a) | |
Excess Proceeds |
4.10(c) | |
Initial Issue Price |
3.11 | |
incur or incurrence |
4.09(a) | |
Legal Defeasance |
8.02 | |
Note Register |
2.03 | |
Offer Amount |
3.09(b) | |
Offer Period |
3.09(b) | |
Pari Passu Indebtedness |
4.10(c) | |
Paying Agent |
2.03 | |
Purchase Date |
3.09(b) | |
Redemption Date |
3.07(a) | |
Refinancing Indebtedness |
4.09(b) | |
Refunding Capital Stock |
4.07(b) | |
Registrar |
2.03 |
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Term |
Defined in Section | |
Restricted Payments |
4.07(a) | |
Reversion Date |
4.16(b) | |
Second Commitment |
4.10(b) | |
Special Mandatory Redemption |
3.11 | |
Special Mandatory Redemption Amount |
3.11 | |
Successor Company |
5.01(a) | |
Successor Person |
5.01(c) | |
Suspended Covenants |
4.16(a) | |
Suspension Period |
4.16(b) | |
Tax Group |
4.07(b) | |
Treasury Capital Stock |
4.07(b) |
Section 1.03 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the Trust Indenture Act, the provision is incorporated by reference in and made a part of this Indenture.
The following Trust Indenture Act terms used in this Indenture have the following meanings:
indenture securities means the Notes;
indenture security Holder means a Holder of a Note;
indenture to be qualified means this Indenture;
indenture trustee or institutional trustee means the Trustee; and
obligor on the Notes and the Guarantees means the Issuer and the Guarantors, respectively, and any successor obligor upon the Notes and the Guarantees, respectively.
All other terms used in this Indenture that are defined by the Trust Indenture Act, defined by Trust Indenture Act reference to another statute or defined by SEC rule under the Trust Indenture Act have the meanings so assigned to them.
Section 1.04 Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;
(c) or is not exclusive;
(d) words in the singular include the plural, and in the plural include the singular;
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(e) will shall be interpreted to express a command;
(f) provisions apply to successive events and transactions;
(g) references to sections of, or rules under, the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time;
(h) unless the context otherwise requires, any reference to an Article, Section or clause refers to an Article, Section or clause, as the case may be, of this Indenture;
(i) words used herein implying any gender shall apply to both genders;
(j) the words including, includes and similar words shall be deemed to be followed by without limitation;
(k) the principal amount of any non-interest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the Issuer dated such date prepared in accordance with GAAP;
(l) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater; and
(m) the words herein, hereof and hereunder and other words of similar import refer to this Indenture as a whole and not any particular Article, Section, clause or other subdivision.
Section 1.05 Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Issuer. Proof of execution of any such instrument or of a writing appointing any such agent, or the holding by any Person of a Note, shall be sufficient for any purpose of this Indenture and (subject to Section 7.01) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Section 1.05.
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by or on behalf of any legal entity other than an individual, such certificate or affidavit shall also constitute proof of the authority of the Person executing the same. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
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(d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of any action taken, suffered or omitted by the Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note.
(e) The Issuer may, in the circumstances permitted by the Trust Indenture Act, set a record date for purposes of determining the identity of Holders entitled to give any request, demand, authorization, direction, notice, consent, waiver or take any other act, or to vote or consent to any action by vote or consent authorized or permitted to be given or taken by Holders. Unless otherwise specified, if not set by the Issuer prior to the first solicitation of a Holder made by any Person in respect of any such action, or in the case of any such vote, prior to such vote, any such record date shall be the later of 30 days prior to the first solicitation of such consent or the date of the most recent list of Holders furnished to the Trustee prior to such solicitation.
(f) Without limiting the foregoing, a Holder entitled to take any action hereunder with regard to any particular Note may do so with regard to all or any part of the principal amount of such Note or by one or more duly appointed agents, each of which may do so pursuant to such appointment with regard to all or any part of such principal amount. Any notice given or action taken by a Holder or its agents with regard to different parts of such principal amount pursuant to this paragraph shall have the same effect as if given or taken by separate Holders of each such different part.
(g) Without limiting the generality of the foregoing, a Holder, including DTC, that is the Holder of a Global Note, may make, give or take, by a proxy or proxies duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided in this Indenture to be made, given or taken by Holders, and any Person that is the Holder of a Global Note, including DTC, may provide its proxy or proxies to the beneficial owners of interests in any such Global Note through such depositarys standing instructions and customary practices.
(h) The Issuer may fix a record date for the purpose of determining the Persons who are beneficial owners of interests in any Global Note held by DTC entitled under the procedures of such depositary to make, give or take, by a proxy or proxies duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided in this Indenture to be made, given or taken by Holders. If such a record date is fixed, the Holders on such record date or their duly appointed proxy or proxies, and only such Persons, shall be entitled to make, give or take such request, demand, authorization, direction, notice, consent, waiver or other action, whether or not such Holders remain Holders after such record date. No such request, demand, authorization, direction, notice, consent, waiver or other action shall be valid or effective if made, given or taken more than 90 days after such record date.
ARTICLE 2
THE NOTES
Section 2.01 Form and Dating; Terms.
(a) General. The Notes and the Trustees certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rules or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $2,000 and integral multiples of $1,000 in excess of $2,000.
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(b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the Schedule of Exchanges of Interests in the Global Note attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the Schedule of Exchanges of Interests in the Global Note attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified in the Schedule of Exchanges of Interests in the Global Note attached thereto and each shall provide that it shall represent up to the aggregate principal amount of Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as applicable, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream, duly executed by the Issuer and authenticated by the Trustee as hereinafter provided. The Restricted Period shall be terminated upon the receipt by the Trustee of:
(i) a written certificate from the Depositary, together with copies of certificates from Euroclear and Clearstream certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who shall take delivery of a beneficial ownership interest in a 144A Global Note bearing a Private Placement Legend, all as contemplated by Section 2.06(b) hereof); and
(ii) an Officers Certificate from the Issuer.
Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in the Regulation S Permanent Global Note pursuant to the Applicable Procedures. Simultaneously with the authentication of the Regulation S Permanent Global Note, the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided.
(d) Terms. The aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is unlimited.
The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Issuer, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.
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The Notes shall be subject to repurchase by the Issuer pursuant to an Asset Sale Offer as provided in Section 4.10 hereof or a Change of Control Offer as provided in Section 4.14 hereof. The Notes shall not be redeemable, other than as provided in Article 3.
Additional Notes ranking pari passu with the Initial Notes may be created and issued from time to time by the Issuer without notice to or consent of the Holders and shall be consolidated with and form a single class with the Initial Notes and shall have the same terms as to status, redemption or otherwise as the Initial Notes; provided that the Issuers ability to issue Additional Notes shall be subject to the Issuers compliance with Section 4.09 hereof. Any Additional Notes shall be issued with the benefit of an indenture supplemental to this Indenture.
(e) Euroclear and Clearstream Procedures Applicable. The provisions of the Operating Procedures of the Euroclear System and Terms and Conditions Governing Use of Euroclear and the General Terms and Conditions of Clearstream Banking and Customer Handbook of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes that are held by Participants through Euroclear or Clearstream.
Section 2.02 Execution and Authentication.
At least one Officer shall execute the Notes on behalf of the Issuer by manual or facsimile signature.
If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be entitled to any benefit under this Indenture or be valid or obligatory for any purpose until authenticated substantially in the form of Exhibit A attached hereto by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been duly authenticated and delivered under this Indenture.
On the Issue Date, the Trustee shall, upon receipt of an Issuer Order (an Authentication Order), authenticate and deliver the Initial Notes. In addition, at any time, from time to time, the Trustee shall upon an Authentication Order authenticate and deliver any Additional Notes and Exchange Notes for an aggregate principal amount specified in such Authentication Order for such Additional Notes or Exchange Notes issued hereunder.
The Trustee may appoint an authenticating agent acceptable to the Issuer to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Issuer.
Section 2.03 Registrar and Paying Agent.
The Issuer shall maintain an office or agency in the Borough of Manhattan, City of New York, where Notes may be presented for registration of transfer or for exchange (Registrar) and an office or agency in the Borough of Manhattan, City of New York, where Notes may be presented for payment (Paying Agent). The Registrar shall keep a register of the Notes (Note Register) and of their transfer and exchange. The Issuer may appoint one or more co-registrars and one or more additional paying agents. The term Registrar includes any co-registrar and the term Paying Agent includes any additional paying agent. The Issuer may change any Paying Agent or Registrar without prior notice to any
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Holder. The Issuer shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Issuer fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Issuer or any of its Subsidiaries may act as Paying Agent or Registrar.
The Issuer initially appoints The Depository Trust Company (DTC) to act as Depositary with respect to the Global Notes.
The Issuer initially appoints the Trustee to act as the Paying Agent and Registrar for the Notes and to act as Custodian with respect to the Global Notes.
Section 2.04 Paying Agent To Hold Money in Trust.
The Issuer shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium, if any, or Additional Interest, if any, or interest on the Notes, and will notify the Trustee in writing of any default by the Issuer in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Issuer at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Issuer or a Subsidiary) shall have no further liability for the money. If the Issuer or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Issuer, the Trustee shall serve as Paying Agent for the Notes.
Section 2.05 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with Trust Indenture Act Section 312(a). If the Trustee is not the Registrar, the Issuer shall furnish to the Trustee at least two Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Issuer shall otherwise comply with Trust Indenture Act Section 312(a).
Section 2.06 Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. Except as otherwise set forth in this Section 2.06, a Global Note may be transferred, in whole and not in part, only to another nominee of the Depositary or to a successor Depositary or a nominee of such successor Depositary. A beneficial interest in a Global Note may not be exchanged for a Definitive Note unless (i) the Depositary (x) notifies the Issuer that it is unwilling or unable to continue as Depositary for such Global Note or (y) has ceased to be a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Issuer within 120 days or (ii) there shall have occurred and be continuing an Event of Default with respect to the Notes. Upon the occurrence of any of the preceding events in (i) or (ii) above, Definitive Notes delivered in exchange for any Global Note or beneficial interests therein will be registered in the names, and issued in any approved denominations, requested by or on behalf of the Depositary (in accordance with its customary procedures). Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note,
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except for Definitive Notes issued subsequent to any of the preceding events in (i) or (ii) above and pursuant to Section 2.06(c) hereof. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a); provided, however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Temporary Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) hereof, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (A) the expiration of the Restricted Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903. Upon consummation of an Exchange Offer by the Issuer in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof.
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(iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) hereof and the Registrar receives the following:
(A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; or
(B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) hereof and:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Participating Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Issuer;
(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such Holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the
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Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Issuer shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon the occurrence of any of the events in clause (i) or (ii) of Section 2.06(a) hereof and receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder substantially in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a person whom the transferor reasonably believes is a QIB in accordance with Rule 144A, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to the Issuer or any of its Restricted Subsidiaries, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(b) thereof; or
(F) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Issuer shall execute and the Trustee shall authenticate and mail to the Person designated in the instructions a Definitive Note in the applicable principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to
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this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall mail such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.
(ii) Beneficial Interests in Regulation S Temporary Global Note to Definitive Notes. Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (A) the expiration of the Restricted Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) of the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only upon the occurrence of any of the events in subsection (i) or (ii) of Section 2.06(a) hereof and if:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Participating Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Issuer;
(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder substantially in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that
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the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon the occurrence of any of the events in subsection (i) or (ii) of Section 2.06(a) hereof and satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Issuer shall execute and the Trustee shall authenticate and mail to the Person designated in the instructions a Definitive Note in the applicable principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from or through the Depositary and the Participant or Indirect Participant. The Trustee shall mail such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder substantially in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to the Issuer or any of its Restricted Subsidiaries, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(b) thereof; or
(F) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(c) thereof,
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the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the applicable Restricted Global Note, in the case of clause (B) above, the applicable 144A Global Note, and in the case of clause (C) above, the applicable Regulation S Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Participating Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Issuer;
(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder substantially in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.
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If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraph (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Issuer shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holders compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e):
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to a QIB in accordance with Rule 144A, then the transferor must deliver a certificate substantially in the form of Exhibit B hereto, including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904 then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; or
(C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a Participating Broker-Dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Issuer;
(B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
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(1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder substantially in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Issuer shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not Participating Broker-Dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Issuer, and accepted for exchange in the Exchange Offer and (ii) Unrestricted Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not Participating Broker-Dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Issuer, and accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Issuer shall execute and the Trustee shall authenticate and mail to the Persons designated by the Holders of Definitive Notes so accepted Unrestricted Definitive Notes in the applicable principal amount. Any Notes that remain outstanding after the consummation of the Exchange Offer, and Exchange Notes issued in connection with the Exchange Offer, shall be treated as a single class of securities under this Indenture.
(g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture:
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:
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THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF1933, AS AMENDED (THE SECURITIES ACT), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (C) IT IS AN ACCREDITED INVESTOR (AS DEFINED IN RULE 501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT (AN INSTITUTIONAL ACCREDITED INVESTOR), (2) AGREES THAT IT WILL NOT WITHIN ONE YEAR AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER IS ATTACHED AS AN EXHIBIT TO THE INDENTURE RELATING TO THE NOTES), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO REQUESTS), (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN ONE YEAR AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY. IF THE PROPOSED TRANSFER IS BEING MADE PURSUANT TO THE FOREGOING CLAUSES (C) OR (F), THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS OFFSHORE TRANSACTION, UNITED STATES AND U.S. PERSON HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
BY ACCEPTING THIS SECURITY EACH HOLDER AND EACH TRANSFEREE IS DEEMED TO REPRESENT, WARRANT AND AGREE THAT AT THE TIME OF ITS ACQUISITION AND THROUGHOUT THE PERIOD THAT IT HOLDS THIS SECURITY (1) EITHER (A) IT IS NOT ACQUIRING THIS SECURITY FOR OR ON BEHALF OF (AND FOR SO LONG AS IT HOLDS THIS SECURITY WILL NOT BE AND WILL NOT BE ACTING ON BEHALF OF), AND WILL NOT TRANSFER THIS SECURITY TO, (I) ANY EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION
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3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (ERISA)) THAT IS SUBJECT TO TITLE I OF ERISA, (II) ANY PLAN (AS DEFINED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (CODE)) THAT IS SUBJECT TO SECTION 4975 OF THE CODE, OR (III) ANY ENTITY THAT IS DEEMED TO HOLD THE ASSETS OF ANY PLANS DESCRIBED ABOVE IN SUBSECTIONS (I) OR (II) (AS DETERMINED PURSUANT TO SECTION 3(42) OF ERISA), OR (IV) ANY FOREIGN PLAN, GOVERNMENTAL PLAN (AS DEFINED IN SECTION 3(32) OF ERISA) OR CHURCH PLAN (AS DEFINED IN SECTION 3(33) OF ERISA) THAT IS SUBJECT TO ANY FEDERAL, STATE, LOCAL OR FOREIGN LAWS OR REGULATIONS THAT ARE SUBSTANTIALLY SIMILAR TO ERISA OR SECTION 4975 OF THE CODE (A SIMILAR LAW), OR (B) THE ACQUISITION, HOLDING AND DISPOSITION OF THIS SECURITY ARE EXEMPT FROM THE PROHIBITED TRANSACTION RESTRICTIONS OF SECTION 406 OF ERISA AND SECTION 4975 OF THE CODE (OR IN THE CASE OF A FOREIGN PLAN, GOVERNMENTAL PLAN OR CHURCH PLAN THAT IS SUBJECT TO A SIMILAR LAW, EXEMPT FROM THE ANALOGOUS PROVISIONS OF SUCH SIMILAR LAW), PURSUANT TO ONE OR MORE APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTIONS; AND (2) IT WILL NOT SELL OR OTHERWISE TRANSFER THIS SECURITY OR ANY INTEREST HEREIN OTHERWISE THAN TO A PURCHASER OR TRANSFEREE THAT IS DEEMED TO MAKE THESE SAME REPRESENTATIONS, WARRANTIES AND AGREEMENTS WITH RESPECT TO ITS ACQUISITION, HOLDING AND DISPOSITION OF THIS SECURITY.
(B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraph (b)(iv), (c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form:
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06(h) OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUER. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
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SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (DTC) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
(iii) Regulation S Temporary Global Note Legend. The Regulation S Temporary Global Note shall bear a legend in substantially the following form:
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
(h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 hereof or at the Registrars request.
(ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.07, 2.10, 3.06, 3.09, 4.10, 4.14 and 9.05 hereof).
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(iii) Neither the Registrar nor the Issuer shall be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.
(v) The Issuer shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the mailing of a notice of redemption under Section 3.03 hereof and ending at the close of business on the day of such mailing, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a Record Date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Issuer shall deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of (and premium, if any) and interest (including Additional Interest, if any) on such Notes and for all other purposes, and none of the Trustee, any Agent or the Issuer shall be affected by notice to the contrary.
(vii) Upon surrender for registration of transfer of any Note at the office or agency of the Issuer designated pursuant to Section 4.02 hereof, the Issuer shall execute, and the Trustee shall authenticate and mail, in the name of the designated transferee or transferees, one or more replacement Notes of any authorized denomination or denominations of a like aggregate principal amount.
(viii) At the option of the Holder, Notes may be exchanged for other Notes of any authorized denomination or denominations of a like aggregate principal amount upon surrender of the Notes to be exchanged at such office or agency. Whenever any Global Notes or Definitive Notes are so surrendered for exchange, the Issuer shall execute, and the Trustee shall authenticate and mail, the replacement Global Notes and Definitive Notes which the Holder making the exchange is entitled to in accordance with the provisions of Section 2.02 hereof.
(ix) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile.
(x) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depositary Participants or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.
(xi) Neither the Trustee nor any Agent shall have any responsibility or liability for any actions taken or not taken by the Depositary.
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Section 2.07 Replacement Notes.
If any mutilated Note is surrendered to the Trustee, the Registrar or the Issuer or if the Issuer and the Trustee receive evidence to their satisfaction of the ownership and destruction, loss or theft of any Note, the Issuer shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustees requirements are met (including the Trustees expenses). An indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Issuer to protect the Issuer, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Issuer may charge for its expenses in replacing a Note.
Every replacement Note is a contractual obligation of the Issuer and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.
Section 2.08 Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Issuer or an Affiliate of the Issuer holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Issuer, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest.
Section 2.09 Treasury Notes.
In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Issuer, or by any Affiliate of the Issuer, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Notes so owned which have been pledged in good faith shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgees right to deliver any such direction, waiver or consent with respect to the Notes and that the pledgee is not the Issuer or any obligor upon the Notes or any Affiliate of the Issuer or of such other obligor.
Section 2.10 Temporary Notes.
Until certificates representing Notes are ready for delivery, the Issuer may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Issuer considers
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appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Issuer shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders and beneficial holders, as the case may be, of temporary Notes shall be entitled to all of the benefits accorded to Holders, or beneficial holders, respectively, of Notes under this Indenture.
Section 2.11 Cancellation.
The Issuer at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee or, at the direction of the Trustee, the Registrar or the Paying Agent and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of cancelled Notes in accordance with its customary procedures (subject to the record retention requirement of the Exchange Act) in its customary manner. Certification of the disposal of all cancelled Notes shall be delivered to the Issuer upon its written request therefor. The Issuer may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.
Section 2.12 Defaulted Interest.
If the Issuer defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Issuer shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Issuer shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such defaulted interest as provided in this Section 2.12. The Trustee shall fix or cause to be fixed each such special record date and payment date; provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. The Trustee shall promptly notify the Issuer of such special record date. At least 15 days before the special record date, the Issuer (or, upon the written request of the Issuer, the Trustee in the name and at the expense of the Issuer) shall mail or cause to be mailed, first-class postage prepaid, to each Holder a notice at his or her address as it appears in the Note Register that states the special record date, the related payment date and the amount of such interest to be paid.
Subject to the foregoing provisions of this Section 2.12 and for greater certainty, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note.
Section 2.13 CUSIP Numbers
The Issuer in issuing the Notes may use CUSIP numbers (if then generally in use) and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Holders; provided, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of redemption and that reliance may be placed only
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on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Issuer will as promptly as practicable notify the Trustee in writing of any change in the CUSIP numbers.
ARTICLE 3
REDEMPTION
Section 3.01 Notices to Trustee.
If the Issuer elects to redeem Notes pursuant to Section 3.07 hereof, it shall furnish to the Trustee, at least 5 Business Days before notice of redemption is required to be mailed or caused to be mailed to Holders pursuant to Section 3.03 hereof but not more than 60 days (or longer if in connection with Article 8 or Article 11 hereof) before a redemption date, an Officers Certificate setting forth (i) the paragraph or subparagraph of such Notes and/or Section of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of the Notes to be redeemed and (iv) the redemption price.
Section 3.02 Selection of Notes To Be Redeemed or Purchased.
If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased (a) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed or (b) on a pro rata basis or, to the extent that selection on a pro rata basis is not practicable, by lot or by such other method the Trustee considers fair and appropriate and otherwise in accordance with the Applicable Procedures of the Depositary. In the event of partial redemption or purchase by lot, the particular Notes to be redeemed or purchased shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption or purchase.
The Trustee shall promptly notify the Issuer in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Notes and portions of Notes selected shall be in amounts of $2,000 or whole multiples of $1,000; no Notes of $2,000 or less can be redeemed in part, except that if all of the Notes of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed or purchased. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase.
Section 3.03 Notice of Redemption.
Subject to Section 3.09 hereof, the Issuer shall mail or cause to be mailed by first-class mail, postage prepaid, notices of redemption at least 30 days but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at such Holders registered address or shall otherwise deliver on such timeframe such notice in accordance with the procedures of DTC, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with Article 8 or Article 11 hereof. Except as set forth in Section 3.07(b) hereof, notices of redemption may not be conditional.
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The notice shall identify the Notes to be redeemed (including CUSIP numbers) and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is to be redeemed in part only, the portion of the principal amount of that Note that is to be redeemed and that, in the case of Definitive Notes, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion of the original Note representing the same indebtedness to the extent not redeemed will be issued in the name of the Holder of the Notes upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;
(f) that, unless the Issuer defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date;
(g) the paragraph or subparagraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed;
(h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes; and
(i) if in connection with a redemption pursuant to Section 3.07(b) hereof, any condition to such redemption.
At the Issuers written request, the Trustee shall give the notice of redemption in the Issuers name and at its expense; provided that the Issuer shall have delivered to the Trustee, at least 5 Business Days before notice of redemption is required to be mailed or caused to be mailed to Holders pursuant to this Section 3.03, an Officers Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.
Section 3.04 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price (except as provided for in Section 3.07(b) hereof). The notice, if mailed in a manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note designated for redemption in whole or in part shall not affect the validity of the proceedings for the redemption of any other Note. Subject to Section 3.05 hereof, on and after the redemption date, interest ceases to accrue on Notes or portions of Notes called for redemption.
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Section 3.05 Deposit of Redemption or Purchase Price.
Prior to 10:00 a.m. (New York City time) on the redemption or purchase date, the Issuer shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and accrued and unpaid interest (including Additional Interest, if any) on all Notes to be redeemed or purchased on that date. The Trustee or the Paying Agent shall promptly return to the Issuer any money deposited with the Trustee or the Paying Agent by the Issuer in excess of the amounts necessary to pay the redemption price of, and accrued and unpaid interest on, all Notes to be redeemed or purchased.
If the Issuer complies with the provisions of the preceding paragraph, on and after the redemption or purchase date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption or purchase. If a Note is redeemed or purchased on or after a Record Date but on or prior to the related Interest Payment Date, then any accrued and unpaid interest to the redemption or purchase date shall be paid to the Person in whose name such Note was registered at the close of business on such Record Date. If any Note called for redemption or purchase shall not be so paid upon surrender for redemption or purchase because of the failure of the Issuer to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption or purchase date until such principal is paid, and to the extent lawful on any interest accrued to the redemption or purchase date not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.
Section 3.06 Notes Redeemed or Purchased in Part.
In the case of Definitive Notes, upon surrender of a Note that is redeemed or purchased in part, the Issuer shall issue and the Trustee shall authenticate for the Holder at the expense of the Issuer a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered representing the same indebtedness to the extent not redeemed or purchased; provided that each new Note will be in a principal amount of $2,000 or an integral multiple of $1,000. It is understood that, notwithstanding anything in this Indenture to the contrary, only an Authentication Order and not an Opinion of Counsel or Officers Certificate is required for the Trustee to authenticate such new Note.
Section 3.07 Optional Redemption.
(a) At any time prior to December 1, 2014, the Issuer may redeem all or a part of the Notes, upon notice as described in Section 3.03 hereof, at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest and Additional Interest, if any, to the date of redemption (the Redemption Date), subject to the rights of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date.
(b) Until December 1, 2013, the Issuer may, at its option, on one or more occasions redeem up to 35% of the aggregate principal amount of Notes (including the aggregate principal amount of Notes issued after the Issue Date), upon notice provided as described in Section 3.03 hereof, at a redemption price equal to 109.125% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date, with the net cash proceeds of one or more Equity Offerings; provided that at least 50% of the sum of the aggregate principal amount of Notes originally issued under this Indenture and any Additional Notes that are issued under this Indenture after the Issue Date remains outstanding immediately after the occurrence of each such redemption; provided further that each such redemption occurs within 90 days of
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the date of closing of each such Equity Offering. Notice of any redemption of Notes upon any Equity Offering may be given prior to such redemption, and any such redemption or notice may, at the Issuers discretion, be subject to one or more conditions precedent, including, but not limited to, completion of the related Equity Offering.
(c) Except pursuant to Sections 3.07(a) and (b), the Notes will not be redeemable at the Issuers option before December 1, 2014.
(d) On and after December 1, 2014, the Issuer may redeem the Notes, in whole or in part, upon notice as described in Section 3.03 hereof, at the redemption prices (expressed as percentages of principal amount of the Notes to be redeemed) set forth below, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date, if redeemed during the twelve-month period beginning on December 1 of each of the years indicated below:
Year |
Percentage | |||
2014 |
104.563 | % | ||
2015 |
102.281 | % | ||
2016 and thereafter |
100.000 | % |
(e) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.
Section 3.08 Mandatory Redemption.
Except as set forth under Section 3.10 and Section 3.11, the Issuer shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes.
Section 3.09 Offers To Repurchase by Application of Excess Proceeds.
(a) In the event that, pursuant to Section 4.10 hereof, the Issuer shall be required to commence an Asset Sale Offer, it shall follow the procedures specified below.
(b) The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the Offer Period). No later than five Business Days after the termination of the Offer Period (the Purchase Date), the Issuer shall apply all Excess Proceeds (the Offer Amount) to the purchase of Notes and, if required, Pari Passu Indebtedness (on a pro rata basis, if applicable), or, if less than the Offer Amount has been tendered, all Notes and Pari Passu Indebtedness tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made.
(c) If the Purchase Date is on or after a Record Date and on or before the related Interest Payment Date, any accrued and unpaid interest and Additional Interest, if any, up to but excluding the Purchase Date, shall be paid to the Person in whose name a Note is registered at the close of business on such Record Date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer.
(d) Upon the commencement of an Asset Sale Offer, the Issuer shall send, by first-class mail, a notice to each of the Holders, with a copy to the Trustee. The notice shall contain all instructions
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and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders and holders of Pari Passu Indebtedness. The notice, which shall govern the terms of the Asset Sale Offer, shall state:
(i) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open;
(ii) the Offer Amount, the purchase price and the Purchase Date;
(iii) that any Note not tendered or accepted for payment shall continue to accrue interest;
(iv) that, unless the Issuer defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Purchase Date;
(v) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in integral multiples in denominations of $2,000, or integral multiples of $1,000 in excess of $2,000 only;
(vi) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled Option of Holder to Elect Purchase attached to the Note completed, or transfer such Note by book-entry transfer, to the Issuer, the Depositary, if appointed by the Issuer, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date;
(vii) that Holders shall be entitled to withdraw their election if the Issuer, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;
(viii) that, if the aggregate principal amount of Notes and Pari Passu Indebtedness surrendered by the holders thereof exceeds the Offer Amount, the Trustee shall select the Notes and such Pari Passu Indebtedness to be purchased on a pro rata basis based on the accreted value or principal amount of the Notes or such Pari Passu Indebtedness tendered (with such adjustments as may be deemed appropriate by the Trustee so that only Notes in denominations of $2,000, or integral multiples of $1,000, shall be purchased); and
(ix) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer) representing the same indebtedness to the extent not repurchased.
(e) On or before the Purchase Date, the Issuer shall, to the extent lawful, (1) accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof validly tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered and (2) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers Certificate stating the aggregate principal amount of Notes or portions thereof so tendered.
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(f) The Issuer, the Depositary or the Paying Agent, as the case may be, shall promptly mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes properly tendered by such Holder and accepted by the Issuer for purchase, and the Issuer shall promptly issue a new Note, and the Trustee, upon receipt of an Authentication Order, shall authenticate and mail or deliver (or cause to be transferred by book-entry) such new Note to such Holder (it being understood that, notwithstanding anything in this Indenture to the contrary, no Opinion of Counsel or Officers Certificate is required for the Trustee to authenticate and mail or deliver such new Note) in a principal amount equal to any unpurchased portion of the Note surrendered representing the same indebtedness to the extent not repurchased; provided that each such new Note shall be in a principal amount of $ 2,000, or integral multiples of $1,000 in excess of $2,000. Any Note not so accepted shall be promptly mailed or delivered by the Issuer to the Holder thereof. The Issuer shall publicly announce the results of the Asset Sale Offer on or as soon as practicable after the Purchase Date.
Other than as specifically provided in this Section 3.09 or Section 4.10 hereof, any purchase pursuant to this Section 3.09 shall be made pursuant to the applicable provisions of Sections 3.01 through 3.06 hereof.
Section 3.10 Special Redemption
On or before the end of the first accrual period ending after the fifth anniversary of the date of issue (each within the meaning of Section 163(i)(2) of the Code) and prior to the end of each subsequent accrual period (the date of each such payment, an AHYDO Payment Date), the Issuer shall redeem a principal amount of the Notes in an amount equal to the AHYDO Amount at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, to the date of redemption. For purposes of the foregoing, AHYDO Amount means, as of each AHYDO Payment Date as notified to the Trustee in writing, the amount sufficient to ensure that the Notes will not be treated as an applicable high yield discount obligation within the meaning of Section 163(i)(1) of the Code. The AHYDO Amount shall be calculated by the Issuer. Each payment of the AHYDO Amount shall be treated for tax purposes as a payment of original issue discount on such Notes to the extent that the original issue discount has accrued as of the date such payment is due and then as a payment of principal. It is the intention of the foregoing that the Notes will not be an applicable high yield discount obligation within the meaning of Section 163(i)(1) of the Code.
Section 3.11 Special Mandatory Redemption
If the proceeds of the offering of the Notes are deposited into the Escrow Account on the Issue Date, the Notes will be subject to a mandatory redemption (a Special Mandatory Redemption) in the event that the Escrow Property has not been released in accordance with the Escrow Agreement (the date of any such release, the Escrow Release Date) on or before the Escrow Termination Date.
The Escrow Agent shall, upon receipt of Escrow Termination Notice (as defined in the Escrow Agreement) from the Issuer, without the requirement of any other notice to or action by the Issuer, the Trustee or any other Person, release the Escrow Property to the Trustee. The Issuer shall cause the Trustee to (i) send notice of Special Mandatory Redemption to the Holders promptly thereafter and (ii) redeem the Notes no later than on the day falling five Business Days after the Escrow Termination Date (the Special Mandatory Redemption Date) at a redemption price (the Special Mandatory Redemption Amount) equal to (x) the initial issue price of the Notes as set forth on the cover page of the Offering Memorandum (the Initial Issue Price) if the Escrow Termination Date is on or prior to December 31, 2010 or (y) the Initial Issue Price plus the Specified Premium if the Escrow Termination Date is after
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December 31, 2010, plus, in each case, accrued and unpaid interest and accretion, if any, to, but excluding, the Special Mandatory Redemption Date.
The Trustee shall pay to the Issuer or to the Issuers designee any Escrow Property remaining after payment of the Special Mandatory Redemption Amount and payment of fees and expenses.
ARTICLE 4
COVENANTS
Section 4.01 Payment of Notes.
The Issuer shall pay or cause to be paid the principal of, premium, if any, Additional Interest, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, Additional Interest, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Issuer or a Subsidiary, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Issuer in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. If a payment date is not a Business Day, payment may be made on the next succeeding day that is a Business Day.
The Issuer shall pay all Additional Interest, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement.
The Issuer shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest (without regard to any applicable grace period) at the same rate to the extent lawful.
Section 4.02 Maintenance of Office or Agency.
The Issuer shall maintain in the Borough of Manhattan in the City of New York an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange or presented for payment and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.
The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission shall in any manner relieve the Issuer of its obligation to maintain an office or agency in the Borough of Manhattan in the City of New York for such purposes. The Issuer shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.
The Issuer hereby initially designates the office of the Trustee located at 60 Wall Street, 27th Floor, New York, New York 10005, Attention: Trust and Securities Services, as one such office or agency of the Issuer in accordance with Section 2.03 hereof.
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Section 4.03 Reports and Other Information.
(a) Notwithstanding that the Issuer may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act or otherwise report on an annual and quarterly basis on forms provided for such annual and quarterly reporting pursuant to rules and regulations promulgated by the SEC, the Issuer shall file with the SEC (and make available to the Trustee and Holders of the Notes (without exhibits), without cost to any Holder, within 15 days after the Issuer files them with the SEC) from and after the Effective Date,
(1) within 90 days after the end of each fiscal year, annual reports on Form 10-K, or any successor or comparable form, containing the information required to be contained therein, or required in such successor or comparable form;
(2) within 45 days after the end of each of the first three fiscal quarters of each fiscal year, commencing with the first fiscal quarter of the fiscal year commencing January 31, 2011, reports on Form 10-Q containing all quarterly information that would be required to be contained in Form 10-Q, or any successor or comparable form;
(3) promptly from time to time after the occurrence of an event required to be therein reported, such other reports on Form 8-K, or any successor or comparable form; and
(4) any other information, documents and other reports which the Issuer would be required to file with the SEC if it were subject to Section 13 or 15(d) of the Exchange Act beginning on and after the Effective Date;
in each case, in a manner that complies in all material respects with the requirements specified in such form; provided that the Issuer shall not be so obligated to file such reports with the SEC (i) if the SEC does not permit such filing or (ii) prior to the consummation of an exchange offer or the effectiveness of a shelf registration statement as required by the Registration Rights Agreement, so long as clause (i) or (ii) is applicable the Issuer makes available such information to prospective purchasers of Notes, in addition to providing such information to the Trustee and the Holders of the Notes, in each case within 15 days after the time the Issuer would be required to file such information with the SEC, if it were subject to Sections 13 or 15(d) of the Exchange Act, including by posting such information on the website of the Issuer or any of its parent companies (which may be password protected so long as the password is made promptly available by the Issuer to the Trustee, the Holders of the Notes and such prospective purchasers upon request). The Trustee shall have no obligation whatsoever to determine whether or not such information has been posted. To the extent any such information is not so filed or furnished, as applicable, within the time periods specified above and such information is subsequently filed or furnished, as applicable, the Issuer shall be deemed to have satisfied its obligations with respect thereto at such time and any Default with respect thereto shall be deemed to have been cured; provided that such cure shall not otherwise affect the rights of the Holders under Article 6 hereto if Holders of at least 25% in principal amount of the then total outstanding Notes have declared the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes to be due and payable immediately and such declaration shall not have been rescinded or cancelled prior to such cure. In addition, to the extent not satisfied by the foregoing, for so long as any Notes are outstanding, the Issuer shall furnish to Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(b) In the event that any direct or indirect parent company of the Issuer becomes a guarantor of the Notes, the Issuer may satisfy its obligations under this Section 4.03 with respect to financial
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information relating to the Issuer by furnishing financial information relating to such parent; provided that the same is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to such parent, on the one hand, and the information relating to the Issuer and its Restricted Subsidiaries on a standalone basis, on the other hand.
(c) Notwithstanding the foregoing, the requirements of this Section 4.03 shall be deemed satisfied prior to the commencement of the Exchange Offer or the effectiveness of the Shelf Registration Statement by the filing with the SEC of the Exchange Offer Registration Statement or Shelf Registration Statement or any other filing, and any amendments thereto, with such financial information that satisfies Regulation S-X of the Securities Act.
(d) Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustees receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuers compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers Certificates).
Section 4.04 Compliance Certificate.
(a) The Issuer and each Guarantor shall deliver to the Trustee, within 120 days after the end of each fiscal year ending after the Issue Date, a certificate from the principal executive officer, principal financial officer or principal accounting officer stating that a review of the activities of the Issuer and its Restricted Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officer with a view to determining whether the Issuer has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to such Officer signing such certificate, that to the best of his or her knowledge the Issuer has kept, observed, performed and fulfilled each and every condition and covenant contained in this Indenture during such fiscal year and is not in default in the performance or observance of any of the terms, provisions, covenants and conditions of this Indenture (or, if a Default shall have occurred, describing all such Defaults of which he or she may have knowledge and what action the Issuer is taking or proposes to take with respect thereto).
(b) When any Default has occurred and is continuing under this Indenture, or if the Trustee or the holder of any other evidence of Indebtedness of the Issuer or any Subsidiary gives any notice or takes any other action with respect to a claimed Default, the Issuer shall promptly (which shall be no more than five (5) Business Days) deliver to the Trustee by registered or certified mail or by facsimile transmission an Officers Certificate specifying such event and what action the Issuer proposes to take with respect thereto.
Section 4.05 Taxes.
The Issuer shall pay or discharge, and shall cause each of its Restricted Subsidiaries to pay or discharge, prior to delinquency, all material taxes, lawful assessments, and governmental levies except such as are contested in good faith and by appropriate actions or where the failure to effect such payment or discharge is not adverse in any material respect to the Holders of the Notes.
Section 4.06 Stay, Extension and Usury Laws.
The Issuer and each of the Guarantors covenant (to the extent that they may lawfully do so) that they shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in
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force, that may affect the covenants or the performance of this Indenture; and the Issuer and each of the Guarantors (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and covenant (to the extent that they may lawfully do so) that they shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted.
Section 4.07 Limitation on Restricted Payments.
(a) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly:
(I) declare or pay any dividend or make any other payment or any distribution on account of the Issuers, or any of its Restricted Subsidiaries Equity Interests (in such Persons capacity as holder of such Equity Interests), including any dividend or distribution payable in connection with any merger or consolidation other than:
(A) dividends or distributions by the Issuer payable solely in Equity Interests (other than Disqualified Stock) of the Issuer; or
(B) dividends or distributions by a Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary other than a Wholly-Owned Subsidiary, the Issuer or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities;
(II) purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests of the Issuer or any direct or indirect parent of the Issuer, including in connection with any merger or consolidation;
(III) make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value, in each case prior to any scheduled repayment, sinking fund payment or maturity, any Subordinated Indebtedness, other than:
(A) Indebtedness permitted under clauses (7) and (8) of Section 4.09(b) hereof; or
(B) the purchase, repurchase or other acquisition of Subordinated Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase or acquisition; or
(IV) make any Restricted Investment
(all such payments and other actions set forth in clauses (I) through (IV) above being collectively referred to as Restricted Payments), unless, at the time of such Restricted Payment:
(1) no Default shall have occurred and be continuing or would occur as a consequence thereof;
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(2) immediately after giving effect to such transaction on a pro forma basis, the Issuer could incur $1.00 of additional Indebtedness under Section 4.09(a) hereof; and
(3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Issuer and its Restricted Subsidiaries after the Effective Date (including Restricted Payments permitted by clauses (1), (6)(c), (9) and (14) of Section 4.07(b) hereof, but excluding all other Restricted Payments permitted by Section 4.07(b) hereof), is less than the sum of (without duplication):
(a) 50% of the Consolidated Net Income of the Issuer for the period (taken as one accounting period) beginning on the first day of the fiscal quarter of the Issuer in which the Effective Date occurs to the end of the Issuers most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment, or, in the case such Consolidated Net Income for such period is a deficit, minus 100% of such deficit; plus
(b) 100% of the aggregate net cash proceeds and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property received by the Issuer since the Effective Date (other than net cash proceeds to the extent such net cash proceeds have been used to incur Indebtedness, Disqualified Stock or Preferred Stock pursuant to clause (12)(a) of Section 4.09(b) hereof) from the issue or sale of:
(i)(A) Equity Interests of the Issuer, including Treasury Capital Stock, but excluding cash proceeds and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property received from the sale of:
(x) Equity Interests to members of management, directors or consultants of the Issuer, any direct or indirect parent company of the Issuer and the Issuers Subsidiaries since the Effective Date to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of Section 4.07(b) hereof; and
(y) Designated Preferred Stock; and
(B) to the extent such net cash proceeds are actually contributed to the Issuer, Equity Interests of the Issuers direct or indirect parent companies (excluding contributions of the proceeds from the sale of Designated Preferred Stock of such companies or contributions to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of Section 4.07(b) hereof); or
(ii) debt securities of the Issuer that have been converted into or exchanged for Equity Interests of the Issuer;
provided, however, that this clause (b) shall not include the proceeds from (W) Refunding Capital Stock, (X) Equity Interests or convertible debt securities of the Issuer sold to a Restricted Subsidiary, (Y) Disqualified Stock or debt securities that have been converted into Disqualified Stock or (Z) Excluded Contributions; plus
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(c) 100% of the aggregate amount of cash and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property contributed to the capital of the Issuer following the Effective Date other than (X) net cash proceeds to the extent such net cash proceeds have been used to incur Indebtedness or issue Disqualified Stock or Preferred Stock pursuant to clause (12)(a) of Section 4.09(b) hereof), (Y) by a Restricted Subsidiary and (Z) from any Excluded Contributions; plus
(d) 100% of the aggregate amount received in cash and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property received by means of:
(i) the sale or other disposition (other than to the Issuer or a Restricted Subsidiary) of Restricted Investments made by the Issuer or its Restricted Subsidiaries and repurchases and redemptions of such Restricted Investments from the Issuer or its Restricted Subsidiaries and repayments of loans or advances, and releases of guarantees, which constitute Restricted Investments by the Issuer or its Restricted Subsidiaries, in each case since the Effective Date; or
(ii) the sale (other than to the Issuer or a Restricted Subsidiary) of the stock of an Unrestricted Subsidiary or a distribution from an Unrestricted Subsidiary (other than in each case to the extent the Investment in such Unrestricted Subsidiary was made by the Issuer or a Restricted Subsidiary pursuant to clause (7) of Section 4.07(b) hereof or to the extent such Investment constituted a Permitted Investment) or a dividend from an Unrestricted Subsidiary since the Effective Date; plus
(e) in the case of the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary or the merger, amalgamation or consolidation of an Unrestricted Subsidiary into the Issuer or a Restricted Subsidiary or the transfer of all or substantially all of the assets of an Unrestricted Subsidiary to the Issuer or a Restricted Subsidiary after the Effective Date, the fair market value of the Investment in such Unrestricted Subsidiary (or the assets transferred), as determined by the Issuer in good faith or, if such fair market value may exceed $50.0 million, in writing by an Independent Financial Advisor, at the time of the redesignation of such Unrestricted Subsidiary as a Restricted Subsidiary or at the time of such merger, amalgamation, consolidation or transfer of assets other than to the extent the Investment in such Unrestricted Subsidiary was made by the Issuer or a Restricted Subsidiary pursuant to clause (7) of Section 4.07(b) hereof or to the extent such Investment constituted a Permitted Investment.
(b) Section 4.07(a) hereof shall not prohibit:
(1) the payment of any dividend within 60 days after the date of declaration thereof, if at the date of declaration such payment would have complied with the provisions of this Indenture;
(2)(a) the redemption, repurchase, retirement or other acquisition of any Equity Interests (Treasury Capital Stock) of the Issuer or any Equity Interests of any direct or indirect parent company of the Issuer or any Subordinated Indebtedness of the Issuer or a Restricted Subsidiary, in exchange for, or out of the proceeds of, the substantially concurrent sale or issuance (other than to a Restricted Subsidiary) of, Equity Interests of the Issuer or any direct or indirect
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parent company of the Issuer to the extent contributed to the Issuer (in each case, other than any Disqualified Stock) (Refunding Capital Stock), (b) the declaration and payment of dividends on Treasury Capital Stock out of the proceeds of the substantially concurrent sale or issuance (other than to a Subsidiary of the Issuer or to an employee stock ownership plan or any trust established by the Issuer or any of its Subsidiaries) of Refunding Capital Stock, and (c) if immediately prior to the retirement of Treasury Capital Stock, the declaration and payment of dividends thereon was permitted under clause (6) of this Section 4.07(b), the declaration and payment of dividends on the Refunding Capital Stock (other than Refunding Capital Stock the proceeds of which were used to redeem, repurchase, retire or otherwise acquire any Equity Interests of any direct or indirect parent company of the Issuer) in an aggregate amount per year no greater than the aggregate amount of dividends per annum that were declarable and payable on such Treasury Capital Stock immediately prior to such retirement;
(3) the defeasance, redemption, repurchase, exchange or other acquisition or retirement of (x) Subordinated Indebtedness of the Issuer or a Guarantor made by exchange for, or out of the proceeds of, the substantially concurrent sale of, new Indebtedness of the Issuer or a Guarantor, as the case may be, or (y) Disqualified Stock of the Issuer or a Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Disqualified Stock of the Issuer or a Guarantor, that, in each case, is incurred in compliance with Section 4.09 hereof so long as:
(a) the principal amount (or accreted value, if applicable) of such new Indebtedness or the liquidation preference of such new Disqualified Stock does not exceed the principal amount of (or accreted value, if applicable), plus any accrued and unpaid interest on, the Subordinated Indebtedness or the liquidation preference of, plus any accrued and unpaid dividends on, the Disqualified Stock being so defeased, redeemed, repurchased, exchanged, acquired or retired for value, plus the amount of any premium required to be paid under the terms of the instrument governing the Subordinated Indebtedness or Disqualified Stock being so defeased, redeemed, repurchased, exchanged, acquired or retired, defeasance costs and any reasonable fees and expenses incurred in connection with such redemption, repurchase, exchange, acquisition or retirement and the issuance of such new Indebtedness or Disqualified Stock;
(b) such new Indebtedness is subordinated to the Notes or the applicable Guarantee at least to the same extent as such Subordinated Indebtedness so defeased, repurchased, exchanged, redeemed, acquired or retired for value;
(c) such new Indebtedness or Disqualified Stock has a final scheduled maturity date equal to or later than the final scheduled maturity date of the Subordinated Indebtedness or Disqualified Stock being so defeased, redeemed, repurchased, exchanged, acquired or retired; and
(d) such new Indebtedness or Disqualified Stock has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to Maturity of the Subordinated Indebtedness or Disqualified Stock being so defeased, redeemed, repurchased, exchanged, acquired or retired;
(4) a Restricted Payment to pay for the repurchase, retirement or other acquisition or retirement for value of Equity Interests (other than Disqualified Stock) of the Issuer or any of its direct or indirect parent companies held by any future, present or former employee, director or
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consultant of the Issuer, any of its Subsidiaries or any of its direct or indirect parent companies, or any of their respective estates, spouses or former spouses pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement (including, for the avoidance of doubt, any principal and interest payable on any notes issued by the Issuer or any direct or indirect parent company in connection with any such repurchase, retirement or other acquisition or retirement); provided, however, that the aggregate Restricted Payments made under this clause (4) do not exceed $10.0 million in any calendar year (which shall increase to $20.0 million subsequent to the consummation of an underwritten public Equity Offering by the Issuer or any direct or indirect parent company of the Issuer) with unused amounts in any calendar year being carried over to succeeding calendar years subject to a maximum (without giving effect to the following proviso) of $20.0 million in any calendar year (which shall increase to $40.0 million subsequent to the consummation of an underwritten public Equity Offering by the Issuer or any direct or indirect parent company of the Issuer); provided further that such amount in any calendar year may be increased by an amount not to exceed:
(a) the cash proceeds from the sale of Equity Interests (other than Disqualified Stock) of the Issuer and, to the extent contributed to the Issuer, Equity Interests of any of the Issuers direct or indirect parent companies, in each case to any future, present or former employees, officers, members of management, directors or consultants of the Issuer, any of its Subsidiaries or any of its direct or indirect parent companies after the Effective Date, to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of clause (3) of Section 4.07(a) hereof, plus, in respect of any sale of Equity Interests in connection with an exercise of stock options, an amount equal to the amount required to be withheld by the Issuer or any of its direct or indirect parent companies in connection with such exercise under applicable law to the extent such amount is repaid to the Issuer or its direct or indirect parent company, as applicable, constituted a Restricted Payment and has not otherwise been applied to the payment of Restricted Payments by virtue of clause (3) of Section 4.07(a) hereof; plus
(b) the cash proceeds of key man life insurance policies received by the Issuer or its Restricted Subsidiaries after the Effective Date; less
(c) the amount of any Restricted Payments previously made with the cash proceeds described in clauses (a) and (b) of this clause (4);
and provided further that cancellation of Indebtedness owing to the Issuer from any future, present or former employees, directors, officers, managers or consultants of the Issuer, any of the Issuers direct or indirect parent companies or any of the Issuers Restricted Subsidiaries in connection with a repurchase of Equity Interests of the Issuer or any of its direct or indirect parent companies will not be deemed to constitute a Restricted Payment for purposes of this Section 4.07 or any other provision of this Indenture;
(5) the declaration and payment of dividends to holders of any class or series of Disqualified Stock of the Issuer or any of its Restricted Subsidiaries or any class or series of Preferred Stock of any Restricted Subsidiary issued in accordance with Section 4.09 hereof to the extent such dividends are included in the definition of Fixed Charges;
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(6)(a) the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued by the Issuer or any of its Restricted Subsidiaries after the Effective Date;
(b) the declaration and payment of dividends to a direct or indirect parent company of the Issuer, the proceeds of which will be used to fund the payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) of such parent company issued after the Effective Date, provided that the amount of dividends paid pursuant to this clause (b) shall not exceed the aggregate amount of cash actually contributed to the Issuer from the sale of such Designated Preferred Stock; or
(c) the declaration and payment of dividends on Refunding Capital Stock that is Preferred Stock in excess of the dividends declarable and payable thereon pursuant to clause (2) of this Section 4.07(b);
provided, however, in the case of each of (a), (b) and (c) of this clause (6), that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock or the declaration of such dividends on Refunding Capital Stock that is Preferred Stock, after giving effect to such issuance or declaration on a pro forma basis, the Issuer and its Restricted Subsidiaries on a consolidated basis would have had a Fixed Charge Coverage Ratio of at least 2.00 to 1.00;
(7) Investments in Unrestricted Subsidiaries having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (7) that are at the time outstanding, without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of, or have not been subsequently sold or transferred for, cash or marketable securities, not to exceed $30.0 million (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value);
(8) repurchases of Equity Interests deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants;
(9) the declaration and payment of dividends on the Issuers common stock (or the payment of dividends to any direct or indirect parent entity to fund a payment of dividends on such entitys common stock), following the first public offering of the Issuers common stock or the common stock of any of its direct or indirect parent companies after the Effective Date, of up to 6% per annum of the net cash proceeds received by or contributed to the Issuer in or from any public offering, other than public offerings with respect to the Issuers common stock registered on Form S-8 and other than any public sale constituting an Excluded Contribution;
(10) Restricted Payments that are made with Excluded Contributions;
(11) other Restricted Payments in an aggregate amount taken together with all other Restricted Payments made pursuant to this clause (11) that are at the time outstanding (without giving effect to the sale of an Investment to the extent the proceeds of such sale do not consist of, or have not been subsequently sold or transferred for, cash or marketable securities) not to exceed the greater of (x) $60.0 million and (y) 2.85% of Total Assets;
(12) distributions or payments of Receivables Fees;
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(13) any Restricted Payment used to fund the Transactions and the fees and expenses related thereto or owed to Affiliates, in each case with respect to any Restricted Payment to or owed to an Affiliate, to the extent permitted by Section 4.11 hereof;
(14) the repurchase, redemption or other acquisition or retirement for value of any Subordinated Indebtedness pursuant to the provisions similar to those described under Sections 4.10 and Section 4.14 hereof; provided that all Notes tendered by Holders in connection with a Change of Control Offer or Asset Sale Offer, as applicable, have been repurchased, redeemed or acquired for value;
(15) the declaration and payment of dividends or distributions by the Issuer to, or the making of loans to, any direct or indirect parent company in amounts required for any direct or indirect parent companies to pay, in each case without duplication,
(a) franchise taxes and other fees, taxes and expenses required to maintain their corporate existence;
(b) for any taxable period in which the Issuer and/or any of its Subsidiaries is a member of a consolidated, combined or similar income tax group of which a direct or indirect parent of Issuer is the common parent (a Tax Group), federal, foreign, state and local income taxes of such Tax Group that are attributable to the taxable income of the Issuer and/or its Subsidiaries; provided that, for each taxable period, the amount of such payments made in respect of such taxable period in the aggregate shall not exceed the amount that the Issuer and the Subsidiaries would have been required to pay in respect of federal, foreign, state and local income taxes in the aggregate if such entities were corporations paying taxes separately from any Tax Group at the highest combined applicable federal, foreign, state and local tax rate for such fiscal year (it being understood and agreed that if the Issuer or any Subsidiary pays any such federal, foreign, state or local income taxes directly to such taxing authority, that a Restricted Payment in duplication of such amount shall not be permitted to be made pursuant to this clause (b)); provided further that the permitted payment pursuant to this clause (b) with respect to any taxes of any Unrestricted Subsidiary for any taxable period shall be limited to the amount actually paid with respect to such period by such Unrestricted Subsidiary to the Issuer or its Restricted Subsidiaries for the purposes of paying such consolidated, combined or similar taxes;
(c) customary salary, bonus and other benefits payable to officers, directors and employees of any direct or indirect parent company of the Issuer to the extent such salaries, bonuses and other benefits are attributable to the ownership or operation of the Issuer and its Restricted Subsidiaries;
(d) general corporate operating and overhead costs and expenses of any direct or indirect parent company of the Issuer to the extent such costs and expenses are attributable to the ownership or operation of the Issuer and its Restricted Subsidiaries;
(e) fees and expenses other than to Affiliates of the Issuer related to any unsuccessful equity or debt offering of such parent company; and
(f) payments permitted under clauses (3), (4), (7) or (11) of Section 4.11(b) hereof;
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(16) the distribution, by dividend or otherwise, or other transfer or disposition of shares of Capital Stock of, or Indebtedness owed to the Issuer or a Restricted Subsidiary by, Unrestricted Subsidiaries (other than Unrestricted Subsidiaries, the primary assets of which are Cash Equivalents) or the proceeds thereof;
(17) cash payments in lieu of the issuance of fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Capital Stock of the Issuer or any direct or indirect parent company of the Issuer; provided, that any such cash payment shall not be for the purpose of evading the limitation of this Section 4.07; and
(18) the payment of dividends and other distributions in an amount equal to any reduction in taxes actually realized by the Issuer and its Restricted Subsidiaries in the form of refunds or credits or from deductions when applied to offset income or gain as a direct result of (i) transaction fees and expenses, (ii) commitment and other financing fees or (iii) severance, change in control and other compensation expense incurred in connection with the exercise, repurchase, rollover or payout of stock options or bonuses, in each case in connection with the Transactions.
provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (11), (16) and (18) of this Section 4.07(b), no Default shall have occurred and be continuing or would occur as a consequence thereof.
(c) The Issuer shall not permit any Unrestricted Subsidiary to become a Restricted Subsidiary except pursuant to the second to last sentence of the definition of Unrestricted Subsidiary. For purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by the Issuer and its Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so designated shall be deemed to be Investments in an amount determined as set forth in the last sentence of the definition of Investments. Such designation shall be permitted only if a Restricted Payment in such amount would be permitted at such time, whether pursuant to Section 4.07(a) hereof or under clause (7), (10), (11) or (16) of Section 4.07(b) hereof, or pursuant to the definition of Permitted Investments, and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
Section 4.08 Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries.
(a) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries that are not Guarantors to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any such Restricted Subsidiary to:
(1)(A) pay dividends or make any other distributions to the Issuer or any of its Restricted Subsidiaries on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, or
(B) pay any Indebtedness owed to the Issuer or any of its Restricted Subsidiaries;
(2) make loans or advances to the Issuer or any of its Restricted Subsidiaries; or
(3) sell, lease or transfer any of its properties or assets to the Issuer or any of its Restricted Subsidiaries.
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(b) The restrictions in Section 4.08(a) hereof shall not apply to encumbrances or restrictions existing under or by reason of:
(1) contractual encumbrances or restrictions in effect on the Effective Date, including pursuant to the Senior Credit Facilities and the related documentation;
(2) this Indenture and the Notes;
(3) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature discussed in clause (3) of Section 4.08(a) hereof on the property so acquired;
(4) applicable law or any applicable rule, regulation or order;
(5) any agreement or other instrument of a Person acquired by the Issuer or any of its Restricted Subsidiaries in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person so acquired and its Subsidiaries, or the property or assets of the Person so acquired and its Subsidiaries;
(6) contracts for the sale of assets, including customary restrictions with respect to a Subsidiary of the Issuer pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary;
(7) Secured Indebtedness otherwise permitted to be incurred pursuant to Section 4.09 hereof and Section 4.12 hereof that limit the right of the debtor to dispose of the assets securing such Indebtedness;
(8) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;
(9) other Indebtedness, Disqualified Stock or Preferred Stock of Foreign Subsidiaries permitted to be incurred or issued subsequent to the Effective Date pursuant to the provisions of Section 4.09 hereof;
(10) customary provisions in any joint venture agreement and other similar agreement relating solely to such joint venture;
(11) customary provisions contained in leases, subleases, licenses or sublicenses and other agreements, in each case, entered into in the ordinary course of business;
(12) any encumbrances or restrictions of the type referred to in clauses (1), (2) and (3) of Section 4.08(a) hereof imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (11) of this Section 4.08(b); provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Issuer, no more restrictive in any material respect with respect to such encumbrances and other restrictions taken as a whole than those prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing;
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(13) any other agreement governing Indebtedness entered into after the Effective Date that contains encumbrances and other restrictions that are, in the good faith judgment of the Issuer, no more restrictive in any material respect taken as a whole with respect to any Restricted Subsidiary than those encumbrances and other restrictions that are in effect on the Effective Date with respect to that Restricted Subsidiary pursuant to agreements in effect on the Effective Date; and
(14) restrictions created in connection with any Receivables Facility that, in the good faith determination of the Issuer are necessary or advisable to effect such Receivables Facility.
Section 4.09 Limitation on Incurrence of Indebtedness and
Issuance of Disqualified Stock and Preferred Stock.
(a) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise (collectively, incur and collectively, an incurrence) with respect to any Indebtedness (including Acquired Indebtedness) and the Issuer shall not issue any shares of Disqualified Stock and shall not permit any Restricted Subsidiary to issue any shares of Disqualified Stock or Preferred Stock; provided, however, that the Issuer may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock, and any of its Restricted Subsidiaries may incur Indebtedness (including Acquired Indebtedness), issue shares of Disqualified Stock and issue shares of Preferred Stock, if the Fixed Charge Coverage Ratio on a consolidated basis for the Issuer and its Restricted Subsidiaries most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or Preferred Stock is issued would have been at least 2.00 to 1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or Preferred Stock had been issued, as the case may be, and the application of the proceeds therefrom had occurred at the beginning of such four-quarter period; provided that the amount of Indebtedness (including Acquired Indebtedness), Disqualified Stock and Preferred Stock that may be incurred or issued, as applicable, pursuant to the foregoing by Restricted Subsidiaries that are not Guarantors shall not exceed $75.0 million at any one time outstanding.
(b) Section 4.09(a) hereof shall not apply to:
(1)(x) Indebtedness incurred pursuant to the Revolving Credit Facility by the Issuer or any Restricted Subsidiary; provided that immediately after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness incurred under this clause (x) and then outstanding does not exceed the greater of (A) $300.0 million (reduced on a dollar for dollar basis by the aggregate principal amount Indebtedness under clause (y) below in excess of $945.0 million up to a maximum reduction under this clause (A) of $75.0 million) and (B) the Borrowing Base and (y) Indebtedness incurred pursuant to the Term Loan Facility by the Issuer or any Restricted Subsidiary; provided that after giving effect to any such incurrence, the aggregate principal amount of all Indebtedness incurred under this clause (y) and then outstanding does not exceed $1020.0 million (reduced on a dollar for dollar basis by the aggregate principal amount of Indebtedness under clause (x)(A) above in excess of $225.0 million);
(2) the incurrence by the Issuer and any Guarantor of Indebtedness represented by the Notes (including any Guarantee) (other than any Additional Notes) and Exchange Notes issued in respect of the Notes and any Guarantee thereof;
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(3) Indebtedness of the Issuer and its Restricted Subsidiaries in existence on the Effective Date (other than Indebtedness described in clauses (1) and (2) of this Section 4.09(b));
(4)(i) Indebtedness (including Capitalized Lease Obligations) incurred or Disqualified Stock and Preferred Stock issued by the Issuer or any of its Restricted Subsidiaries, to finance the purchase, lease or improvement of property (real or personal) or equipment that is used or useful in a Similar Business, whether through the direct purchase of assets or the Capital Stock of any Person owning such assets and (ii) any Indebtedness incurred or Disqualified Stock or Preferred Stock issued to refund, refinance or replace any other Indebtedness incurred or Disqualified Stock or Preferred Stock issued pursuant to this clause (4); provided that the aggregate amount of Indebtedness incurred and Disqualified Stock and Preferred Stock issued pursuant to clauses (i) and (ii) of this clause (4) does not exceed $50.0 million at any one time outstanding;
(5) Indebtedness incurred by the Issuer or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including letters of credit in respect of workers compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance, or other Indebtedness with respect to reimbursement type obligations regarding workers compensation claims; provided, however, that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 Business Days following such drawing or incurrence;
(6) Indebtedness arising from agreements of the Issuer or its Restricted Subsidiaries providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; provided, however, that
(A) such Indebtedness is not reflected on the balance sheet of the Issuer, or any of its Restricted Subsidiaries prepared in accordance with GAAP (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (6)(A)); and
(B) the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including non-cash proceeds (the fair market value of such non-cash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by the Issuer and its Restricted Subsidiaries in connection with such disposition;
(7) Indebtedness of the Issuer to a Restricted Subsidiary; provided that any such Indebtedness owing to a Restricted Subsidiary that is not a Guarantor is expressly subordinated in right of payment to the Notes; provided further that any subsequent issuance or transfer of any Capital Stock or any other event which results in any Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Subsidiary or any pledge of such Indebtedness constituting a Permitted Lien) shall be deemed, in each case, to be an incurrence of such Indebtedness not permitted by this clause (7);
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(8) Indebtedness of a Restricted Subsidiary to the Issuer or another Restricted Subsidiary; provided that if a Guarantor incurs such Indebtedness to a Restricted Subsidiary that is not a Guarantor, such Indebtedness is expressly subordinated in right of payment to the Guarantee of the Notes of such Guarantor; provided further that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Subsidiary or any pledge of such Indebtedness constituting a Permitted Lien) shall be deemed, in each case, to be an incurrence of such Indebtedness not permitted by this clause (8);
(9) shares of Preferred Stock of a Restricted Subsidiary issued to the Issuer or another Restricted Subsidiary, provided that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such shares of Preferred Stock (except to the Issuer or another of its Restricted Subsidiaries or any pledge of such Capital Stock constituting a Permitted Lien) shall be deemed in each case to be an issuance of such shares of Preferred Stock not permitted by this clause (9);
(10)(x) Hedging Obligations (excluding Hedging Obligations entered into for speculative purposes) for the purpose of limiting interest rate risk, exchange rate risk or commodity pricing risk, and (y) Indebtedness in respect of any Bank Products or Cash Management Services provided by any lender party to a Senior Credit Facility or any affiliate of such lender (or any Person that was a lender or an affiliate of a lender at the time the applicable agreement pursuant to which such Bank Products or Cash Management Services are provided was entered into);
(11) obligations in respect of performance, bid, appeal and surety bonds and performance and completion guarantees or obligations in respect of letters of credit related thereto provided by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business;
(12)(a) Indebtedness or Disqualified Stock of the Issuer and Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or any Restricted Subsidiary equal to 100.0% of the net cash proceeds received by the Issuer since immediately after the Effective Date from the issue or sale of Equity Interests of the Issuer or cash contributed to the capital of the Issuer (in each case, other than proceeds of Disqualified Stock or sales of Equity Interests to the Issuer or any of its Subsidiaries) as determined in accordance with clauses (3)(b) and (3)(c) of Section 4.07(a) hereof to the extent such net cash proceeds or cash have not been applied pursuant to such clauses to make Restricted Payments or to make other Investments, payments or exchanges pursuant to Section 4.07(b) hereof or to make Permitted Investments (other than Permitted Investments specified in clauses (1) and (3) of the definition thereof) and (b) Indebtedness or Disqualified Stock of the Issuer and Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or any Restricted Subsidiary not otherwise permitted hereunder in an aggregate principal amount or liquidation preference, which when aggregated with the principal amount and liquidation preference of all other Indebtedness, Disqualified Stock and Preferred Stock then outstanding and incurred or issued, as applicable, pursuant to this clause (12)(b), does not at any one time outstanding exceed $100.0 million (it being understood that any Indebtedness incurred or Disqualified Stock or Preferred Stock issued pursuant to this clause (12)(b) shall cease to be deemed incurred, issued or outstanding for purposes of this clause (12)(b) but shall be deemed incurred or issued for the purposes of Section 4.09(a) hereof from and after the first date on which the Issuer or such Restricted Subsidiary could have incurred such Indebtedness or issued such Disqualified Stock or Preferred Stock under Section 4.09(a) hereof without reliance on this clause (12)(b));
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(13) the incurrence by the Issuer or any Restricted Subsidiary of Indebtedness or issuance by the Issuer or any Restricted Subsidiary of Disqualified Stock or Preferred Stock which serves to extend, replace, refund, refinance, renew or defease any Indebtedness incurred or Disqualified Stock or Preferred Stock issued as permitted under Section 4.09(a) hereof and clauses (2), (3) and (12)(a) of this Section 4.09(b), this clause (13) and clause (14) of this Section 4.09(b) or any Indebtedness incurred or Disqualified Stock or Preferred Stock issued to so refund or refinance such Indebtedness, Disqualified Stock or Preferred Stock including additional Indebtedness incurred or Disqualified Stock or Preferred Stock issued to pay premiums (including tender premiums), defeasance costs and fees and expenses in connection therewith (the Refinancing Indebtedness) prior to its respective maturity; provided, however, that such Refinancing Indebtedness:
(A) has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred or issued which is not less than the remaining Weighted Average Life to Maturity of the Indebtedness, Disqualified Stock or Preferred Stock being extended, replaced, refunded, refinanced, renewed or defeased (except by virtue of prepayment of such Indebtedness),
(B) to the extent such Refinancing Indebtedness extends, replaces, refunds, refinances, renews or defeases (i) Indebtedness subordinated to or pari passu with the Notes or any Guarantee thereof, such Refinancing Indebtedness is subordinated to or pari passu with the Notes or the Guarantee at least to the same extent as the Indebtedness being extended, replaced, refunded, refinanced, renewed or defeased or (ii) Disqualified Stock or Preferred Stock, such Refinancing Indebtedness must be Disqualified Stock or Preferred Stock, respectively, and
(C) shall not include:
(i) Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary of the Issuer that is not a Guarantor that refinances Indebtedness, Disqualified Stock or Preferred Stock of the Issuer;
(ii) Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary of the Issuer that is not a Guarantor that refinances Indebtedness, Disqualified Stock or Preferred Stock of a Guarantor; or
(iii) Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or a Restricted Subsidiary that refinances Indebtedness, Disqualified Stock or Preferred Stock of an Unrestricted Subsidiary;
and provided further that subclause (A) of this clause (13) will not apply to any extension, replacement, refunding, refinancing, renewal or defeasance of any Indebtedness outstanding under a Senior Credit Facility;
(14) Indebtedness, Disqualified Stock or Preferred Stock of (x) the Issuer or a Restricted Subsidiary incurred or issued to finance an acquisition or (y) Persons that are acquired by the Issuer or any Restricted Subsidiary or merged into or amalgamated or consolidated with the Issuer or a Restricted Subsidiary in accordance with the terms of this Indenture; provided that after giving effect to such acquisition, merger, amalgamation or consolidation, either
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(a) the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a) hereof, or
(b) the Fixed Charge Coverage Ratio of the Issuer and the Restricted Subsidiaries is greater than immediately prior to such acquisition, merger, amalgamation or consolidation;
(15) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, provided that such Indebtedness is extinguished within five Business Days of its incurrence;
(16) Indebtedness of the Issuer or any of its Restricted Subsidiaries supported by a letter of credit issued pursuant to a Senior Credit Facility, in a principal amount not in excess of the stated amount of such letter of credit;
(17)(a) any guarantee by the Issuer or a Restricted Subsidiary of Indebtedness or other obligations of any Restricted Subsidiary so long as the incurrence of such Indebtedness incurred by such Restricted Subsidiary is permitted under the terms of this Indenture, or
(b) any guarantee by a Restricted Subsidiary of Indebtedness of the Issuer provided that such guarantee is incurred in accordance with Section 4.15 hereof;
(18) Indebtedness of Foreign Subsidiaries of the Issuer incurred not to exceed together with any other Indebtedness incurred under this clause (18) at any one time outstanding, the greater of (x) $50.0 million and (y) 2.35% of the Total Assets of the Foreign Subsidiaries (it being understood that any Indebtedness incurred pursuant to this clause (18) shall cease to be deemed incurred or outstanding for purposes of this clause (18) but shall be deemed incurred for the purposes of Section 4.09(a) hereof from and after the first date on which the applicable Foreign Subsidiary could have incurred such Indebtedness under Section 4.09(a) hereof without reliance on this clause (18));
(19) Indebtedness of the Issuer or any of its Restricted Subsidiaries consisting of (i) the financing of insurance premiums or (ii) take-or-pay obligations contained in supply arrangements, in each case incurred in the ordinary course of business; and
(20) Indebtedness consisting of Indebtedness issued by the Issuer or any of its Restricted Subsidiaries to current or former officers, directors, employees and consultants thereof, their respective estates, spouses or former spouses, in each case to finance the purchase or redemption of Equity Interests of the Issuer or any direct or indirect parent company of the Issuer to the extent described in clause (4) of Section 4.07(b) hereof.
(c) For purposes of determining compliance with this Section 4.09:
(1) in the event that an item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) meets the criteria of more than one of the categories of permitted Indebtedness, Disqualified Stock or Preferred Stock described in clauses (1) through (20) of Section 4.09(b) hereof or is entitled to be incurred pursuant to Section 4.09(a) hereof, the Issuer, in its sole discretion, shall classify or reclassify such item of Indebtedness, Disqualified Stock or
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Preferred Stock (or any portion thereof) and shall only be required to include the amount and type of such Indebtedness, Disqualified Stock or Preferred Stock in one of the above clauses; provided that all Indebtedness outstanding under the Senior Credit Facilities on the Effective Date shall at all times be deemed to be outstanding in reliance on clause (1) of Section 4.09(b) hereof; and
(2) at the time of incurrence, the Issuer shall be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described in Sections 4.09(a) and 4.09(b) hereof.
Accrual of interest or dividends, the accretion of accreted value, the accretion or amortization of original issue discount, and the payment of interest or dividends in the form of additional Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, of the same class will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock or Preferred Stock for purposes of this Section 4.09.
For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed, in the case of revolving credit debt; provided that if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable U.S. dollar denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced.
The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such refinancing.
The Issuer shall not, and shall not permit any Guarantor to, directly or indirectly, incur any Indebtedness (including Acquired Indebtedness) that is contractually subordinated or junior in right of payment to any Indebtedness of the Issuer or such Guarantor, as the case may be, unless such Indebtedness is expressly subordinated in right of payment to the Notes or such Guarantors Guarantee to the extent and in the same manner as such Indebtedness is subordinated to other Indebtedness of the Issuer or such Guarantor, as the case may be. For purposes of this Indenture, Indebtedness that is unsecured is not deemed to be subordinated or junior to Secured Indebtedness merely because it is unsecured, and senior indebtedness is not deemed to be subordinated or junior to any other senior indebtedness merely because it has a junior priority with respect to the same collateral.
Section 4.10 Asset Sales.
(a) After the Effective Date, the Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale, unless:
(1) the Issuer or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value (as determined in good faith by the Issuer) of the assets sold or otherwise disposed of; and
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(2) except in the case of a Permitted Asset Swap, at least 75% of the consideration therefor received by the Issuer or such Restricted Subsidiary, as the case may be, is in the form of Cash Equivalents; provided that the amount of:
(A) any liabilities (as shown on the Issuers or such Restricted Subsidiarys most recent balance sheet or in the footnotes thereto) of the Issuer or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the Notes, that are assumed by the transferee of any such assets and for which the Issuer and all of its Restricted Subsidiaries have been validly released by all creditors in writing,
(B) any securities, notes or other obligations received by the Issuer or such Restricted Subsidiary from such transferee that are converted by the Issuer or such Restricted Subsidiary into Cash Equivalents (to the extent of the Cash Equivalents received) within 180 days following the closing of such Asset Sale, and
(C) any Designated Non-cash Consideration received by the Issuer or such Restricted Subsidiary in such Asset Sale having an aggregate fair market value, taken together with all other Designated Non-cash Consideration received pursuant to this clause (C) that is at that time outstanding, not to exceed the greater of (x) $30.0 million and (y) 1.4% of Total Assets at the time of the receipt of such Designated Non-cash Consideration, with the fair market value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value,
shall be deemed to be Cash Equivalents for purposes of this provision and for no other purpose.
(b) Within 365 days after the receipt of any Net Proceeds of any Asset Sale, the Issuer or such Restricted Subsidiary, at its option, may apply the Net Proceeds from such Asset Sale,
(1) to permanently reduce:
(A) Obligations under the Senior Credit Facilities and to correspondingly reduce commitments with respect thereto;
(B) Obligations under Indebtedness (other than Subordinated Indebtedness) that is secured by a Lien, which Lien is permitted by this Indenture, and to correspondingly reduce commitments with respect thereto;
(C) Obligations under other Indebtedness (other than Subordinated Indebtedness) (and to correspondingly reduce commitments with respect thereto), provided that the Issuer shall equally and ratably reduce Obligations under the Notes as provided under Section 3.07 hereof through open-market purchases (to the extent such purchases are at or above 100% of the principal amount thereof) or by making an offer (in accordance with the procedures set forth under Section 4.10(c) hereof) to all Holders to purchase their Notes at 100% of the principal amount thereof, plus the amount of accrued but unpaid interest, if any, and Additional Interest, if any, on the amount of Notes that would otherwise be prepaid; or
(D) Indebtedness of a Restricted Subsidiary that is not a Guarantor, other than Indebtedness owed to the Issuer or another Restricted Subsidiary;
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(2) to make (A) an Investment in any one or more businesses, provided that such Investment in any business is in the form of the acquisition of Capital Stock and results in the Issuer or another of its Restricted Subsidiaries, as the case may be, owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (B) capital expenditures or (C) acquisitions of other assets, in the case of each of (A), (B) and (C), used or useful in a Similar Business; or
(3) to make an Investment in (A) any one or more businesses, provided that such Investment in any business is in the form of the acquisition of Capital Stock and results in the Issuer or another of its Restricted Subsidiaries, as the case may be, owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (B) properties or (C) other assets that, in the case of each of (A), (B) and (C), replace the businesses, properties and/or assets that are the subject of such Asset Sale;
provided that, in the case of clauses (2) and (3) above, a binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment so long as the Issuer or such other Restricted Subsidiary enters into such commitment with the good faith expectation that such Net Proceeds shall be applied to satisfy such commitment within 180 days of such commitment (an Acceptable Commitment) and, in the event any Acceptable Commitment is later cancelled or terminated for any reason before the Net Proceeds are applied in connection therewith, the Issuer or such Restricted Subsidiary enters into another Acceptable Commitment (a Second Commitment) within 180 days of such cancellation or termination; provided further that if any Second Commitment is later cancelled or terminated for any reason before such Net Proceeds are applied, then such Net Proceeds shall constitute Excess Proceeds (as defined below).
(c) Any Net Proceeds from the Asset Sale that are not invested or applied as provided and within the time period set forth in Section 4.10(b) shall be deemed to constitute Excess Proceeds. When the aggregate amount of Excess Proceeds exceeds $25.0 million, the Issuer shall make an offer to all Holders of the Notes and, if required by the terms of any Indebtedness that is pari passu with the Notes (Pari Passu Indebtedness), to the holders of such Pari Passu Indebtedness (an Asset Sale Offer), to purchase the maximum aggregate principal amount of the Notes and such Pari Passu Indebtedness that is an integral multiple of $1,000 that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in this Indenture. The Issuer shall commence an Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that Excess Proceeds exceed $25.0 million by mailing the notice required pursuant to the terms of this Indenture, with a copy to the Trustee or otherwise in accordance with the procedures of DTC.
To the extent that the aggregate amount of Notes and such Pari Passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Issuer may use any remaining Excess Proceeds for general corporate purposes, subject to compliance with this Indenture. If the aggregate principal amount of Notes and the Pari Passu Indebtedness surrendered in an Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such Pari Passu Indebtedness to be purchased on a pro rata basis based on the accreted value or principal amount of the Notes or such Pari Passu Indebtedness tendered in accordance with Section 3.09. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero (regardless of whether there are any remaining Excess Proceeds upon such completion).
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(d) Pending the final application of any Net Proceeds pursuant to this Section 4.10, the holder of such Net Proceeds may apply such Net Proceeds temporarily to reduce Indebtedness outstanding under a revolving credit facility or otherwise invest such Net Proceeds in any manner not prohibited by this Indenture.
(e) The Issuer shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue thereof.
Section 4.11 Transactions with Affiliates.
(a) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Issuer (each of the foregoing, an Affiliate Transaction) involving aggregate payments or consideration in excess of $10.0 million, unless:
(1) such Affiliate Transaction is on terms that are not materially less favorable to the Issuer or its relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person on an arms-length basis; and
(2) the Issuer delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate payments or consideration in excess of $20.0 million, a resolution adopted by the majority of the board of directors of the Issuer approving such Affiliate Transaction and set forth in an Officers Certificate certifying that such Affiliate Transaction complies with clause (1) of this Section 4.11(a).
(b) Section 4.11(a) hereof shall not apply to the following:
(1) transactions between or among the Issuer or any of its Restricted Subsidiaries;
(2) Restricted Payments permitted by Section 4.07 hereof and Investments constituting Permitted Investments;
(3) the payment of management, consulting, monitoring and advisory fees and termination fees and related indemnities and expenses pursuant to the Sponsor Management Agreement as in effect on the Effective Date;
(4) the payment of reasonable and customary fees and compensation paid to, and indemnities and reimbursements provided on behalf of or for the benefit of, current and former officers, directors, employees, managers or consultants of the Issuer, any of its direct or indirect parent companies or any of its Restricted Subsidiaries;
(5) transactions in which the Issuer or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such
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transaction is fair to the Issuer or such Restricted Subsidiary from a financial point of view or stating that the terms are not materially less favorable to the Issuer or its relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person on an arms-length basis;
(6) any agreement as in effect as of the Effective Date, or any amendment thereto (so long as any such amendment is not disadvantageous in any material respect to the Holders when taken as a whole as compared to the applicable agreement as in effect on the Effective Date);
(7) the existence of, or the performance by the Issuer, any of its Restricted Subsidiaries or any direct or indirect parent of the Issuer of its obligations under the terms of, any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Effective Date and any similar agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of obligations under, any future amendment to any such existing agreement or any similar agreement entered into after the Effective Date shall only be permitted by this clause (7) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous in any material respect to the Holders when taken as a whole as compared to the original agreement in effect on the Effective Date;
(8) transactions with customers, clients, suppliers, contractors or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture which are fair to the Issuer and its Restricted Subsidiaries, in the reasonable determination of the board of directors of the Issuer or the senior management thereof, or are on terms at least as favorable as would reasonably have been obtained at such time from an unaffiliated party;
(9) the issuance of Equity Interests (other than Disqualified Stock) of the Issuer to any direct or indirect parent of the Issuer or to any Permitted Holder or to any director, officer, employee, manager or consultant of the Issuer, any Subsidiary or any direct or indirect parent of the Issuer;
(10) sales of accounts receivable, or participations therein, in connection with any Receivables Facility;
(11) payments by the Issuer or any of its Restricted Subsidiaries to any of the Investors made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures which payments are approved by a majority of the board of directors of the Issuer in good faith or are otherwise permitted by this Indenture;
(12) payments or loans (or cancellation of loans) to employees or consultants of the Issuer, any of its direct or indirect parent companies or any of its Restricted Subsidiaries and employment agreements, stock option plans and other similar arrangements with such employees or consultants which, in each case, are approved by the Issuer in good faith;
(13) investments by the Investors in securities of the Issuer or any of its 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% of the proposed or outstanding issue amount of such class of securities; and
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(14) the Transactions and the payment of all fees and expenses related to the Transactions, including Transaction Expenses, in each case as disclosed in the Offering Memorandum.
Section 4.12 Liens.
The Issuer shall not, and shall not permit any Guarantor to, directly or indirectly, create, incur, assume or suffer to exist any Lien (except Permitted Liens) that secures obligations under any Indebtedness or any related guarantee, on any asset or property of the Issuer or any Guarantor, or any income or profits therefrom, or assign or convey any right to receive income therefrom, unless:
(1) in the case of Liens securing Subordinated Indebtedness, the Notes and related Guarantees are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens; or
(2) in all other cases, the Notes or the Guarantees are equally and ratably secured, except that the foregoing shall not apply to or restrict (a) Liens securing the Notes and the related Guarantees, (b) Liens securing Indebtedness permitted to be incurred under Senior Credit Facilities, including any letter of credit facility relating thereto, that was permitted by the terms of this Indenture to be incurred pursuant to clause (1) of Section 4.09(b) hereof, (c) Liens securing both (i) Indebtedness described in subclause (b) or in respect of a Senior Credit Facility secured by Liens pursuant to subclause (d) below or pursuant to clause (6) of the definition of Permitted Liens and (ii) obligations of the Issuer or any Guarantor in respect of any Bank Products or Cash Management Services provided by any lender party to any Senior Credit Facility or any affiliate of such lender (or any Person that was a lender or an affiliate of a lender at the time the applicable agreements pursuant to which such Bank Products or Cash Management Services are provided were entered into) and (d) Liens incurred to secure Obligations in respect of any Indebtedness permitted to be incurred pursuant to Section 4.09 hereof; provided that, with respect to Liens securing Obligations permitted under this subclause (d), at the time of incurrence and after giving pro forma effect thereto, the Consolidated Secured Debt Ratio would be no greater than 3.50 to 1.0.
Any Lien created for the benefit of the Holders of the Notes pursuant to this Section 4.12 shall be deemed automatically and unconditionally released and discharged upon the release and discharge of each of the Liens described in clauses (1) and (2) of this Section 4.12.
Section 4.13 Corporate Existence.
Subject to Article 5 hereof, the Issuer shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Issuer or any such Restricted Subsidiary.
Section 4.14 Offer to Repurchase Upon Change of Control.
(a) If a Change of Control occurs after the Effective Date, unless the Issuer has previously or concurrently mailed a redemption notice with respect to all the outstanding Notes as described under Section 3.07 hereof, the Issuer shall make an offer to purchase all of the Notes pursuant to the offer described below (the Change of Control Offer) at a price in cash (the Change of Control Payment) equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, subject to the right of Holders of record of the Notes on the
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relevant Record Date to receive interest due on the relevant Interest Payment Date. Within 30 days following any Change of Control, the Issuer shall send notice of such Change of Control Offer by first-class mail, with a copy to the Trustee, to each Holder of Notes to the address of such Holder appearing in the security register or otherwise in accordance with the procedures of DTC, with the following information:
(1) that a Change of Control Offer is being made pursuant to this Section 4.14 and that all Notes properly tendered pursuant to such Change of Control Offer will be accepted for payment by the Issuer;
(2) the purchase price and the purchase date, which will be no earlier than 30 days nor later than 60 days from the date such notice is mailed (the Change of Control Payment Date);
(3) that any Note not properly tendered will remain outstanding and continue to accrue interest;
(4) that unless the Issuer defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on the Change of Control Payment Date;
(5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender such Notes, with the form entitled Option of Holder to Elect Purchase on the reverse of such Notes completed, to the paying agent specified in the notice at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;
(6) that Holders shall be entitled to withdraw their tendered Notes and their election to require the Issuer to purchase such Notes, provided that the paying agent receives, not later than the close of business on the second Business Day prior to the Change of Control Payment Date, a facsimile transmission or letter setting forth the name of the Holder of the Notes, the principal amount of Notes tendered for purchase, and a statement that such Holder is withdrawing its tendered Notes and its election to have such Notes purchased;
(7) that if the Issuer is redeeming less than all of the Notes, the Holders of the remaining Notes will be issued new Notes and such new Notes will be equal in principal amount to the unpurchased portion of the Notes surrendered. The unpurchased portion of the Notes must be equal to $2,000 or an integral multiple of $1,000 in excess of $2,000; and
(8) the other instructions, as determined by the Issuer, consistent with this Section 4.14, that a Holder must follow.
The notice, if mailed in a manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice. If (a) the notice is mailed in a manner herein provided and (b) any Holder fails to receive such notice or a Holder receives such notice but it is defective, such Holders failure to receive such notice or such defect shall not affect the validity of the proceedings for the purchase of the Notes as to all other Holders that properly received such notice without defect. The Issuer shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase by the Issuer of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section
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4.14, the Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.14 by virtue thereof.
(b) On the Change of Control Payment Date, the Issuer shall, to the extent permitted by law,
(1) accept for payment all Notes issued by it or portions thereof properly tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the aggregate Change of Control Payment in respect of all Notes or portions thereof so tendered; and
(3) deliver, or cause to be delivered, to the Trustee for cancellation the Notes so accepted together with an Officers Certificate to the Trustee stating that such Notes or portions thereof have been tendered to and purchased by the Issuer.
(c) The Issuer shall not be required to make a Change of Control Offer following a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.14 applicable to a Change of Control Offer made by the Issuer and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. Notwithstanding anything to the contrary herein, a Change of Control Offer may be made in advance of a Change of Control, conditional upon such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making of the Change of Control Offer.
(d) Other than as specifically provided in this Section 4.14, any purchase pursuant to this Section 4.14 shall be made pursuant to the provisions of Sections 3.02, 3.05 and 3.06 hereof.
Section 4.15 Limitation on Guarantees of Indebtedness by Restricted Subsidiaries.
The Issuer shall not permit any of its Wholly-Owned Subsidiaries that are Restricted Subsidiaries (and non-Wholly-Owned Subsidiaries if such non-Wholly-Owned Subsidiaries guarantee other capital markets debt securities), other than a Guarantor or a Foreign Subsidiary, to guarantee the payment of any Indebtedness of the Issuer or any other Guarantor unless:
(1) such Restricted Subsidiary within 30 days executes and delivers a supplemental indenture to this Indenture, the form of which is attached as Exhibit D hereto, providing for a Guarantee by such Restricted Subsidiary, except that with respect to a guarantee of Indebtedness of the Issuer or any Guarantor, if such Indebtedness is by its express terms subordinated in right of payment to the Notes or such Guarantors Guarantee, any such guarantee by such Restricted Subsidiary with respect to such Indebtedness shall be subordinated in right of payment to such Guarantee substantially to the same extent as such Indebtedness is subordinated to the Notes;
(2) such Restricted Subsidiary waives and shall not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Issuer or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Guarantee; and
(3) such Restricted Subsidiary shall deliver to the Trustee an Opinion of Counsel to the effect that:
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(a) such Guarantee has been duly executed and authorized; and
(b) such Guarantee constitutes a valid, binding and enforceable obligation of such Restricted Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy, insolvency or similar laws (including, without limitation, all laws relating to fraudulent transfers) and except insofar as enforcement thereof is subject to general principles of equity;
provided that this Section 4.15 shall not be applicable to any guarantee of any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary.
The Issuer may elect, in its sole discretion, to cause any Subsidiary that is not otherwise required to be a Guarantor to become a Guarantor, in which case, such Subsidiary shall only be required to comply with clauses (1) (other than with respect to any time period) and (2) of this Section 4.15.
Section 4.16 Discharge and Suspension of Covenants.
(a) After the Effective Date, during any period of time that (i) the Notes have Investment Grade Ratings from both Rating Agencies and (ii) no Default has occurred and is continuing under this Indenture (the occurrence of the events described in the foregoing clauses (i) and (ii) being collectively referred to as a Covenant Suspension Event), the Issuer and the Restricted Subsidiaries shall not be subject to Section 4.07 hereof, Section 4.08 hereof, Section 4.09 hereof, Section 4.10 hereof, Section 4.11 hereof, Section 4.14 hereof, Section 4.15 hereof and clause (4) of Section 5.01(a) hereof (the Suspended Covenants).
(b) In the event that the Issuer and the Restricted Subsidiaries are not subject to the Suspended Covenants under this Indenture for any period of time as a result of the foregoing, and on any subsequent date (the Reversion Date) (a) one or both of the Rating Agencies withdraw their Investment Grade Rating or downgrade the rating assigned to the Notes below an Investment Grade Rating or (b) the Issuer or any of its Affiliates enters into an agreement to effect a transaction that would result in a Change of Control and one or more of the Rating Agencies indicate that if consummated, such transaction (alone or together with any related recapitalization or refinancing transactions) would cause such Rating Agency to withdraw its Investment Grade Rating or downgrade the ratings assigned to the Notes below an Investment Grade Rating, then the Issuer and the Restricted Subsidiaries shall thereafter again be subject to the Suspended Covenants under this Indenture with respect to future events. The period beginning on the day of a Covenant Suspension Event and ending on a Reversion Date is called a Suspension Period.
(c) On each Reversion Date, all Indebtedness incurred, or Disqualified Stock or Preferred Stock issued, during the Suspension Period will be deemed to have been outstanding on the Effective Date, so that it is classified as permitted under Section 4.09(b)(3) hereof. Calculations made after the Reversion Date of the amount available to be made as Restricted Payments under Section 4.07 hereof will be made as though Section 4.07 hereof had been in effect since the Effective Date and throughout the Suspension Period. Accordingly, Restricted Payments made during the Suspension Period will reduce the amount available to be made as Restricted Payments under Section 4.07(a) hereof (but will not reduce any amounts available to be made as Restricted Payments under Section 4.07(b) hereof). However, no Default or Event of Default will be deemed to have occurred on the Reversion Date (or thereafter) under any Suspended Covenant solely as a result of any actions taken by the Issuer or its Restricted Subsidiaries, or events occurring, during the Suspension Period. For purposes of Section 4.10 hereof, on the Reversion Date, the unutilized Excess Proceeds amount will be reset to zero.
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(d) The Issuer shall deliver promptly to the Trustee an Officers Certificate notifying it of any such occurrence under this Section 4.16.
Section 4.17 Activities Prior to the Escrow Release Date; Effectiveness of Covenants
Prior to the Escrow Release Date, the Issuers primary activities will be restricted to issuing the Notes, issuing capital stock to, and receiving capital contributions from, Giraffe Intermediate B, Inc., performing its obligations in respect of the Notes under the Indenture and the Escrow Agreement, performing its obligations under the Transaction Agreement, consummating the Transactions and release of the Escrow Property and redeeming the Notes, if applicable, and conducting such other activities as are necessary or appropriate to carry out the activities described above. Prior to the Escrow Release Date, the Issuer will not own, hold or otherwise have any interest in any assets other than the Escrow Account, cash and Cash Equivalents and its rights under the Transaction Agreement.
Prior to the Escrow Release Date, the Issuer and its Restricted Subsidiaries shall not engage in any business activity or enter into any transaction or agreement (including, without limitation, making any Restricted Payment, incurring any Indebtedness, incurring any Liens except in favor of the Holders of the Notes, entering into any merger, consolidation or sale of all or substantially all of its assets or engaging in any transaction with its Affiliates) except in the ordinary course of business or necessary to effectuate the Transactions substantially in accordance with the description of the Transactions set forth in the Offering Memorandum relating to the original issuance of the Notes, together with such amendments, modifications and waivers that are not, individually or in the aggregate, materially adverse to The Gymboree Corporation and its Subsidiaries (after giving effect to the consummation of the Transactions), taken as a whole, or to the Holders of the Notes.
Notwithstanding anything to the contrary in this Indenture, (i) the covenants in Sections 4.03, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16 and 5.01 shall not be operative and shall not take effect until the Effective Date and (ii) the covenants in this Section 4.17 shall only be applicable if this proceeds of the offering of the Notes are deposited into the Escrow Account on the Issue Date.
ARTICLE 5
SUCCESSORS
Section 5.01 Merger, Consolidation or Sale of All or Substantially All Assets.
(a) The Issuer shall not consolidate or merge with or into or wind up into (whether or not the Issuer is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:
(1) either: (x) the Issuer is the surviving corporation; or (y) the Person formed by or surviving any such consolidation or merger (if other than the Issuer) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation organized or existing under the laws of the jurisdiction of organization of the Issuer or the laws of the United States, any state thereof, the District of Columbia or any territory thereof (the Issuer or such Person, as the case may be, being herein called the Successor Company);
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(2) the Successor Company, if other than the Issuer, expressly assumes all the obligations of the Issuer under the Notes pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;
(3) immediately after such transaction, no Default exists;
(4) immediately after giving pro forma effect to such transaction and any related financing transactions, as if such transactions had occurred at the beginning of the applicable four-quarter period,
(A) the Successor Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a) hereof, or
(B) the Fixed Charge Coverage Ratio for the Successor Company and its Restricted Subsidiaries would be greater than the Fixed Charge Coverage Ratio for the Issuer and its Restricted Subsidiaries immediately prior to such transaction;
(5) each Guarantor, unless it is the other party to the transactions described above, in which case Section 5.01(c)(1)(B) hereof shall apply, shall have by supplemental indenture confirmed that its Guarantee shall apply to such Persons obligations under this Indenture, the Notes and the Registration Rights Agreement; and
(6) the Issuer shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with this Indenture.
(b) The Successor Company shall succeed to, and be substituted for the Issuer, as the case may be, under this Indenture, the Guarantees and the Notes, as applicable. Clauses (3), (4), (5) and (6) of Section 5.01(a) hereof shall not apply to the merger contemplated by the Transaction Agreement. Notwithstanding clauses (3) and (4) of Section 5.01(a) hereof,
(x) any Restricted Subsidiary may consolidate with or merge into or transfer all or part of its properties and assets to the Issuer, and
(y) the Issuer may merge with an Affiliate of the Issuer solely for the purpose of reincorporating the Issuer in a State of the United States so long as the amount of Indebtedness of the Issuer and its Restricted Subsidiaries is not increased thereby.
(c) No Guarantor shall, and the Issuer shall not permit any Guarantor to, consolidate or merge with or into or wind up into (whether or not the Issuer or Guarantor is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:
(1)(A) such Guarantor is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation organized or existing under the laws of the jurisdiction of organization of such Guarantor, as the case may be, or the laws of the United States, any state thereof, the District of Columbia or any
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territory thereof (such Guarantor or such Person, as the case may be, being herein called the Successor Person);
(B) the Successor Person, if other than such Guarantor, expressly assumes all the obligations of such Guarantor under this Indenture and such Guarantors related Guarantee pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;
(C) immediately after such transaction, no Default exists; and
(D) the Issuer shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with this Indenture; or
(2) the transaction is made in compliance with clauses (1) and (2) of Section 4.10(a) hereof.
(d) Subject to certain limitations described in this Indenture, the Successor Person shall succeed to, and be substituted for, such Guarantor under this Indenture and such Guarantors Guarantee. Notwithstanding the foregoing, any Guarantor may merge into or with or wind up into or transfer all or part of its properties and assets to another Guarantor or the Issuer.
Section 5.02 Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Issuer in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Issuer is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the Issuer shall refer instead to the successor corporation and not to the Issuer), and may exercise every right and power of the Issuer under this Indenture with the same effect as if such successor Person had been named as the Issuer herein; provided that the predecessor Issuer shall not be relieved from the obligation to pay the principal of and interest and Additional Interest, if any, on the Notes except in the case of a sale, assignment, transfer, lease, conveyance or other disposition of all of the Issuers assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default.
(a) An Event of Default wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(1) default in payment when due and payable, upon redemption, acceleration or otherwise, of principal of, or premium, if any, on the Notes;
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(2) default for 30 days or more in the payment when due of interest or Additional Interest on or with respect to the Notes;
(3) failure by the Issuer or any Guarantor for 60 days after receipt of written notice given by the Trustee or the Holders of not less than 25% in principal amount of the Notes to comply with any of its obligations, covenants or agreements (other than a default referred to in clauses (1) and (2) above) contained in this Indenture or the Notes;
(4) default under any mortgage, indenture or instrument under which there is issued or by which there is secured or evidenced any Indebtedness for money borrowed by the Issuer or any of its Restricted Subsidiaries or the payment of which is guaranteed by the Issuer or any of its Restricted Subsidiaries, other than Indebtedness owed to the Issuer or a Restricted Subsidiary, whether such Indebtedness or guarantee now exists or is created after the issuance of the Notes, if both:
(a) such default either results from the failure to pay any principal of such Indebtedness at its stated final maturity (after giving effect to any applicable grace periods) or relates to an obligation other than the obligation to pay principal of any such Indebtedness at its stated final maturity and results in the holder or holders of such Indebtedness causing such Indebtedness to become due prior to its stated maturity; and
(b) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay any principal at its stated final maturity (after giving effect to any applicable grace periods), or the maturity of which has been so accelerated, aggregate $25.0 million or more at any one time outstanding;
(5) failure by the Issuer or any Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, to pay final judgments aggregating in excess of $25.0 million, which final judgments remain unpaid, undischarged and unstayed for a period of more than 60 days after such judgment becomes final, and in the event such judgment is covered by insurance, an enforcement proceeding has been commenced by any creditor upon such judgment or decree which is not promptly stayed;
(6) the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, pursuant to or within the meaning of any Bankruptcy Law:
(i) commences proceedings to be adjudicated bankrupt or insolvent;
(ii) consents to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under applicable Bankruptcy Law;
(iii) consents to the appointment of a receiver, liquidator, assignee, trustee, sequestrator or other similar official of it or for all or substantially all of its property;
(iv) makes a general assignment for the benefit of its creditors; or
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(v) generally is not paying its debts as they become due;
(7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
(i) is for relief against the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, in a proceeding in which the Issuer or any such Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, is to be adjudicated bankrupt or insolvent;
(ii) appoints a receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, or for all or substantially all of the property of the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days; or
(8) the Guarantee of any Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, shall for any reason cease to be in full force and effect or any responsible officer of any Guarantor that is a Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, as the case may be, denies that it has any further liability under its or their Guarantee(s) or gives notice to such effect, other than by reason of the termination of this Indenture or the release of any such Guarantee in accordance with this Indenture.
(b) In the event of any Event of Default specified in clause (4) of Section 6.01(a) hereof, such Event of Default and all consequences thereof (excluding any resulting payment default, other than as a result of acceleration of the Notes) shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders, if within 20 days after such Event of Default arose:
(1) the Indebtedness or guarantee that is the basis for such Event of Default has been discharged; or
(2) holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default; or
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(3) the default that is the basis for such Event of Default has been cured.
Section 6.02 Acceleration.
If any Event of Default (other than an Event of Default specified in clause (6) or (7) of Section 6.01(a) hereof with respect to the Issuer) occurs and is continuing under this Indenture, the Trustee or the Holders of at least 25% in principal amount of the then total outstanding Notes may declare the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes to be due and payable immediately. Upon the effectiveness of such declaration, such principal and interest shall be due and payable immediately. The Trustee shall have no obligation to accelerate the Notes if and so long as it in good faith determines acceleration is not in the best interest of the Holders of the Notes.
Notwithstanding the foregoing, in the case of an Event of Default arising under clause (6) or (7) of Section 6.01(a) hereof with respect to the Issuer, all outstanding Notes shall be due and payable immediately without further action or notice.
The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences:
(1) if the rescission would not conflict with any judgment or decree;
(2) if all existing Events of Default have been cured, waived, annulled or rescinded except nonpayment of principal interest, Additional Interest, if any, or premium that has become due solely because of the acceleration;
(3) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid; and
(4) if the Issuer has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances.
Section 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.
Section 6.04 Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default
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and its consequences hereunder, except a continuing Default in the payment of the principal of, premium, if any, Additional Interest, if any, or interest on, any Note held by a non-consenting Holder (including in connection with an Asset Sale Offer or a Change of Control Offer); provided, subject to Section 6.02 hereof, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto.
Section 6.05 Control by Majority.
Holders of a majority in principal amount of the then total outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder of a Note or that would involve the Trustee in personal liability.
Section 6.06 Limitation on Suits.
Subject to Section 6.07 hereof, no Holder of a Note may pursue any remedy with respect to this Indenture or the Notes unless:
(1) such Holder has previously given the Trustee written notice that an Event of Default is continuing;
(2) Holders of at least 25% in principal amount of the total outstanding Notes have requested the Trustee to pursue the remedy;
(3) Holders of the Notes have offered the Trustee security or indemnity reasonably satisfactory to it against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and
(5) Holders of a majority in principal amount of the total outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period.
A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note (it being understood that the Trustee does not have an affirmative duty to ascertain whether or not such actions or forebearances are unduly prejudicial to such Holders).
Section 6.07 Rights of Holders of Notes To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, and Additional Interest, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an Asset Sale Offer or a Change of Control Offer), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.
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Section 6.08 Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a)(1) or (2) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Issuer for the whole amount of principal of, premium, if any, and Additional Interest, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.
Section 6.09 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceedings, the Issuer, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding has been instituted.
Section 6.10 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in Section 2.07 hereof, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
Section 6.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as necessary, by the Trustee or by the Holders, as the case may be.
Section 6.12 Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Issuer (or any other obligor upon the Notes including the Guarantors), its creditors or its property and shall be entitled and empowered to participate as a member in any official committee of creditors appointed in such matter and to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the
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Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.13 Priorities.
If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order:
(i) to the Trustee, Agent, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expenses and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection;
(ii) to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, if any, and Additional Interest, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, and Additional Interest, if any, and interest, respectively; and
(iii) to the Issuer or to such party as a court of competent jurisdiction shall direct including a Guarantor, if applicable.
The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.13.
Section 6.14 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.14 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.01 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its
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exercise, as a prudent person would exercise or use under the circumstances in the conduct of such persons own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of willful misconduct on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(i) this paragraph (c) does not limit the effect of paragraph (b) of this Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved in a court of competent jurisdiction that the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to this Section 7.01.
(e) The Trustee shall be under no obligation to exercise any of its rights or powers under this Indenture at the request or direction of any of the Holders of the Notes unless the Holders have offered to the Trustee indemnity or security reasonably satisfactory to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.
Section 7.02 Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer,
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personally or by agent or attorney at the sole cost of the Issuer and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.
(b) Before the Trustee acts or refrains from acting, it may require an Officers Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers Certificate or Opinion of Counsel. The Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Issuer shall be sufficient if signed by an Officer of the Issuer.
(f) None of the provisions of this Indenture shall require the Trustee to expend or risk its own funds or otherwise to incur any liability, financial or otherwise, in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or indemnity satisfactory to it against such risk or liability is not assured to it.
(g) The Trustee shall not be deemed to have knowledge or notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a Default or Event of Default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture.
(h) In no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.
(i) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.
(j) In the event the Issuer is required to pay Additional Interest, the Issuer will provide written notice to the Trustee of the Issuers obligation to pay Additional Interest no later than 15 days prior to the next Interest Payment Date, which notice shall set forth the amount of the Additional Interest to be paid by the Issuer. The Trustee shall not at any time be under any duty or responsibility to any Holders to determine whether the Additional Interest is payable and the amount thereof.
(k) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.
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(l) The Trustee may request that the Company deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture.
Section 7.03 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or any Affiliate of the Issuer with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04 Trustees Disclaimer.
The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuers use of the proceeds from the Notes or any money paid to the Issuer or upon the Issuers direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication.
Section 7.05 Notice of Defaults.
If a Default occurs and is continuing and if it is actually known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default within 90 days after it occurs. Except in the case of a Default relating to the payment of principal, premium, if any, or interest on any Note, the Trustee may withhold from the Holders notice of any continuing Default if and so long as it in good faith determines that withholding the notice is in the interests of the Holders of the Notes.
Section 7.06 Reports by Trustee to Holders of the Notes.
Within 60 days after each June 1, beginning with the June 1 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with Trust Indenture Act Section 313(a) (but if no event described in Trust Indenture Act Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with Trust Indenture Act Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by Trust Indenture Act Section 313(c).
A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Issuer and filed with the SEC and each stock exchange on which the Notes are listed in accordance with Trust Indenture Act Section 313(d). The Issuer shall promptly notify the Trustee in writing when the Notes are listed on any stock exchange or delisted therefrom.
Section 7.07 Compensation and Indemnity.
The Issuer shall pay to the Trustee from time to time such compensation for its acceptance of this Indenture and services hereunder as the parties shall agree in writing from time to time. The
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Trustees compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustees agents and counsel.
The Issuer and the Guarantors, jointly and severally, shall indemnify the Trustee for, and hold the Trustee harmless against, any and all loss, damage, claims, liability or expense (including attorneys fees and expenses) incurred by it in connection with the acceptance or administration of this trust and the performance of its duties hereunder (including the costs and expenses of enforcing this Indenture against the Issuer or any of the Guarantors (including this Section 7.07) or defending itself against any claim whether asserted by any Holder, the Issuer or any Guarantor, or liability in connective with the acceptance, exercise or performance of any of its powers or duties hereunder). The Trustee shall notify the Issuer promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Issuer shall not relieve the Issuer of its obligations hereunder. The Issuer shall defend the claim and the Trustee may have separate counsel and the Issuer shall pay the fees and expenses of such counsel. The Issuer need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustees own willful misconduct or negligence.
The obligations of the Issuer under this Section 7.07 shall survive the satisfaction and discharge of this Indenture or the earlier resignation or removal of the Trustee.
To secure the payment obligations of the Issuer and the Guarantors in this Section 7.07, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(a)(6) or (7) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.
The Trustee shall comply with the provisions of Trust Indenture Act Section 313(b)(2) to the extent applicable.
Section 7.08 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustees acceptance of appointment as provided in this Section 7.08. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Issuer. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Issuer in writing. The Issuer may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its property; or
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(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Issuer shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Issuer.
If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee (at the Issuers expense), the Issuer or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10 hereof, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Issuers obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee.
Section 7.09 Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee.
Section 7.10 Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements of Trust Indenture Act Sections 310(a)(1), (2) and (5). The Trustee is subject to Trust Indenture Act Section 310(b).
Section 7.11 Preferential Collection of Claims Against Issuer.
The Trustee is subject to Trust Indenture Act Section 311(a), excluding any creditor relationship listed in Trust Indenture Act Section 311(b). A Trustee who has resigned or been removed shall be subject to Trust Indenture Act Section 311(a) to the extent indicated therein.
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ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01 Option To Effect Legal Defeasance or Covenant Defeasance.
The Issuer may, at its option and at any time, elect to have either Section 8.02 or 8.03 hereof applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8.
Section 8.02 Legal Defeasance and Discharge.
Upon the Issuers exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Issuer and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their obligations with respect to all outstanding Notes and Guarantees on the date the conditions set forth below are satisfied (Legal Defeasance). For this purpose, Legal Defeasance means that the Issuer shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be outstanding only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture including that of the Guarantors (and the Trustee, on written demand of and at the expense of the Issuer, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder:
(a) the rights of Holders of Notes to receive payments in respect of the principal of, premium, if any, and interest on the Notes when such payments are due solely out of the trust created pursuant to this Indenture referred to in Section 8.04 hereof;
(b) the Issuers obligations with respect to Notes concerning issuing temporary Notes, registration of such Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust;
(c) the rights, powers, trusts, duties and immunities of the Trustee, and the Issuers obligations in connection therewith; and
(d) this Section 8.02.
Subject to compliance with this Article 8, the Issuer may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.
Section 8.03 Covenant Defeasance.
Upon the Issuers exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Issuer and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from their obligations under the covenants contained in Sections 4.03, 4.04, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14 and 4.15 hereof and clauses (4) and (5) of Section 5.01(a), Sections 5.01(c) and 5.01(d) hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied (Covenant Defeasance), and the Notes shall thereafter be deemed not outstanding for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue
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to be deemed outstanding for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Issuer may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Issuers exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(a)(3), 6.01(a)(4), 6.01(a)(5), 6.01(a)(6) (solely with respect to Restricted Subsidiaries subject thereto), 6.01(a)(7) (solely with respect to Restricted Subsidiaries subject thereto) and 6.01(a)(8) hereof shall not constitute Events of Default.
Section 8.04 Conditions to Legal or Covenant Defeasance.
In order to exercise either Legal Defeasance or Covenant Defeasance with respect to the Notes:
(1) the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest due on the Notes on the stated maturity date or on the redemption date, as the case may be, of such principal, premium, if any, or interest on such Notes (provided that if such redemption is made as provided under Section 3.07 hereof, (x) the amount of cash in U.S. dollars, Government Securities, or a combination thereof, that the Issuer must irrevocably deposit or cause to be deposited will be determined using an assumed Applicable Premium calculated as of the date of such deposit and (y) the Issuer must irrevocably deposit or cause to be deposited additional money in trust on the redemption date as necessary to pay the Applicable Premium as determined on such date) and the Issuer must specify whether such Notes are being defeased to maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions,
(a) the Issuer has received from, or there has been published by, the United States Internal Revenue Service a ruling, or
(b) since the issuance of the Notes, there has been a change in the applicable U.S. federal income tax law,
in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, subject to customary assumptions and exclusions, the Holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes, as applicable, as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;
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(3) in the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, the Holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to such tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;
(4) no Default (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness, and in each case the granting of Liens in connection therewith) shall have occurred and be continuing on the date of such deposit;
(5) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the Senior Credit Facilities or any other material agreement or instrument (other than this Indenture) to which the Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is bound;
(6) the Issuer shall have delivered to the Trustee an Opinion of Counsel to the effect that, as of the date of such opinion and subject to customary assumptions and exclusions following the deposit, the trust funds will not be subject to the effect of Section 547 of Title 11 of the United States Code;
(7) the Issuer shall have delivered to the Trustee an Officers Certificate stating that the deposit was not made by the Issuer with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuer or any Guarantor or others; and
(8) the Issuer shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel (which Opinion of Counsel may be subject to customary assumptions and exclusions) each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with.
Section 8.05 Deposited Money and Government Securities
To Be Held in Trust; Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the Trustee) pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuer or a Guarantor acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Additional Interest, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.
The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuer from time to time upon the request of the Issuer any money or Government Securities held
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by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(1) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.06 Repayment to Issuer.
Any money deposited with the Trustee or any Paying Agent, or then held by the Issuer, in trust for the payment of the principal of, premium and Additional Interest, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium and Additional Interest, if any, or interest has become due and payable shall be paid to the Issuer on its request or (if then held by the Issuer) shall be discharged from such trust; and the Holder of such Note shall thereafter look only to the Issuer for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuer as trustee thereof, shall thereupon cease.
Section 8.07 Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States dollars or Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuers obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided that, if the Issuer makes any payment of principal of, premium and Additional Interest, if any, or interest on any Note following the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01 Without Consent of Holders of Notes.
Notwithstanding Section 9.02 hereof, the Issuer, any Guarantor (with respect to a Guarantee to which it is a party or this Indenture) and the Trustee may amend or supplement this Indenture and any Guarantee or Notes without the consent of any Holder:
(1) to cure any ambiguity, omission, mistake, defect or inconsistency;
(2) to provide for uncertificated Notes of such series in addition to or in place of certificated Notes;
(3) to comply with Section 5.01 hereof;
(4) to provide for the assumption of the Issuers or any Guarantors obligations to the Holders in a transaction that complies with this Indenture;
(5) to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under this Indenture of any such Holder;
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(6) to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Issuer or any Guarantor;
(7) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act;
(8) to evidence and provide for the acceptance and appointment under this Indenture of a successor Trustee thereunder pursuant to the requirements thereof;
(9) to provide for the issuance of exchange notes or private exchange notes, which are identical to exchange notes except that they are not freely transferable;
(10) to add a Guarantor under this Indenture;
(11) to conform the text of this Indenture, Guarantees or the Notes to any provision of the Description of Notes section of the Offering Memorandum to the extent that such provision in such Description of Notes section was intended to be a verbatim recitation of a provision of this Indenture, Guarantee or Notes; or
(12) to make any amendment to the provisions of this Indenture relating to the transfer and legending of Notes as permitted by this Indenture, including, without limitation to facilitate the issuance and administration of the Notes; provided, however, that (i) compliance with this Indenture as so amended would not result in Notes being transferred in violation of the Securities Act or any applicable securities law and (ii) such amendment does not materially and adversely affect the rights of Holders to transfer Notes.
Upon the request of the Issuer accompanied by a resolution of its board of directors authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Issuer and the Guarantors in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Notwithstanding the foregoing, no Opinion of Counsel shall be required in connection with the addition of a Guarantor under this Indenture upon execution and delivery by such Guarantor and the Trustee of a supplemental indenture to this Indenture, the form of which is attached as Exhibit D hereto, and delivery of an Officers Certificate.
Section 9.02 With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Issuer and the Trustee may amend or supplement this Indenture, the Notes and the Guarantees with the consent of the Holders of at least a majority in principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium and Additional Interest, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.08
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hereof and Section 2.09 hereof shall determine which Notes are considered to be outstanding for the purposes of this Section 9.02.
Upon the request of the Issuer accompanied by a resolution of its board of directors authorizing the execution of any such amended or supplemental indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Issuer in the execution of such amended or supplemental indenture unless such amended or supplemental indenture directly affects the Trustees own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Issuer shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental indenture or waiver.
Without the consent of each affected Holder of Notes, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder):
(1) reduce the principal amount of such Notes whose Holders must consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed final maturity of any such Note or alter or waive the provisions with respect to the redemption of such Notes (other than provisions relating to Section 3.09, Section 4.10 and Section 4.14 hereof;
(3) reduce the rate of or change the time for payment of interest on any Note;
(4) waive a Default in the payment of principal of or premium, if any, or interest on the Notes, except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration, or in respect of a covenant or provision contained in this Indenture or any Guarantee which cannot be amended or modified without the consent of all affected Holders;
(5) make any Note payable in money other than that stated therein;
(6) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders to receive payments of principal of or premium, if any, or interest on the Notes;
(7) make any change to this paragraph of this Section 9.02;
(8) impair the right of any Holder to receive payment of principal of, or interest on, such Holders Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holders Notes;
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(9) make any change to or modify the ranking of the Notes that would adversely affect the Holders; or
(10) except as expressly permitted by this Indenture, modify the Guarantees of any Significant Subsidiary, or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Issuer), would constitute a Significant Subsidiary, in any manner adverse to the Holders of the Notes.
Section 9.03 Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental indenture that complies with the Trust Indenture Act as then in effect.
Section 9.04 Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holders Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.
The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement, or waiver. If a record date is fixed, then, notwithstanding the preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only such Persons, shall be entitled to consent to such amendment, supplement, or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date unless the consent of the requisite number of Holders has been obtained.
Section 9.05 Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Issuer in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.
Section 9.06 Trustee To Sign Amendments, etc.
The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Issuer may not sign an amendment, supplement or waiver until the board of directors (or any authorized committee of the board of directors) of the Issuer approves it. In executing any amendment, supplement or waiver, the Trustee shall be provided with and (subject to Section 7.01 hereof) shall be fully protected in conclusively relying upon, in addition to the documents required by Section 12.04 hereof, an Officers Certificate and an Opinion of Counsel stating that the execution of such
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amended or supplemental indenture is authorized or permitted by this Indenture and that such amendment, supplement or waiver is the legal, valid and binding obligation of the Issuer and any Guarantors party thereto, enforceable against them in accordance with its terms, subject to customary exceptions, and complies with the provisions hereof (including Section 9.03). Notwithstanding the foregoing, no Opinion of Counsel will be required for the Trustee to execute any amendment or supplement adding a new Guarantor under this Indenture.
Section 9.07 Payment for Consent.
The Issuer shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to or for the benefit of any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to all Holders and is paid to all Holders that so consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.
ARTICLE 10
GUARANTEES
Section 10.01 Guarantee.
Subject to this Article 10, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Issuer hereunder or thereunder, that: (a) the principal of, and interest, premium and Additional Interest, if any, on the Notes shall be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other Obligations of the Issuer to the Holders or the Trustee hereunder or thereunder shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Issuer, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest, notice and all demands whatsoever and covenants that this Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture.
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Each Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys fees and expenses) incurred by the Trustee or any Holder in enforcing any rights under this Section 10.01.
If any Holder or the Trustee is required by any court or otherwise to return to the Issuer, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Issuer or the Guarantors, any amount paid either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantees.
Each Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Issuer for liquidation, reorganization, should the Issuer become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Issuers assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Notes are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Notes or Guarantees, whether as a voidable preference, fraudulent transfer or otherwise, all as though such payment or performance had not been made. In the event that any payment or any part thereof, is rescinded, reduced, restored or returned, the Notes shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
In case any provision of any Guarantee shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
The Guarantee issued by any Guarantor shall be a general unsecured senior obligation of such Guarantor and shall be pari passu in right of payment with all existing and future senior Indebtedness of such Guarantor, if any.
Each payment to be made by a Guarantor in respect of its Guarantee shall be made without set-off, counterclaim, reduction or diminution of any kind or nature.
Section 10.02 Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Guarantee. To
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effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of each Guarantor shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 10, result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent conveyance or fraudulent transfer under applicable law. Each Guarantor that makes a payment under its Guarantee shall be entitled upon payment in full of all guaranteed obligations under this Indenture to a contribution from each other Guarantor in an amount equal to such other Guarantors pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with GAAP.
Section 10.03 Execution and Delivery.
To evidence its Guarantee set forth in Section 10.01 hereof, each Guarantor hereby agrees that this Indenture shall be executed on behalf of such Guarantor by its Chief Financial Officer, President, one of its Vice Presidents or one of its Assistant Vice Presidents.
Each Guarantor hereby agrees that its Guarantee set forth in Section 10.01 hereof shall remain in full force and effect notwithstanding the absence of the endorsement of any notation of such Guarantee on the Notes.
If an Officer whose signature is on this Indenture no longer holds that office at the time the Trustee authenticates the Note, the Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this Indenture on behalf of the Guarantors.
If required by Section 4.15 hereof, the Issuer shall cause any newly created or acquired Restricted Subsidiary to comply with the provisions of Section 4.15 hereof and this Article 10, to the extent applicable.
Section 10.04 Subrogation.
Each Guarantor shall be subrogated to all rights of Holders of Notes against the Issuer in respect of any amounts paid by any Guarantor pursuant to the provisions of Section 10.01 hereof; provided that, if an Event of Default has occurred and is continuing, no Guarantor shall be entitled to enforce or receive any payments arising out of, or based upon, such right of subrogation until all amounts then due and payable by the Issuer under this Indenture or the Notes shall have been paid in full.
Section 10.05 Benefits Acknowledged.
Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the guarantee and waivers made by it pursuant to its Guarantee are knowingly made in contemplation of such benefits.
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Section 10.06 Release of Guarantees.
A Guarantee by a Guarantor shall be automatically and unconditionally released and discharged, and no further action by such Guarantor, the Issuer or the Trustee is required for the release of such Guarantors Guarantee, upon:
(1) (A) any sale, exchange, disposition or transfer (by merger or otherwise) of (x) the Capital Stock of such Guarantor, after which the applicable Guarantor is no longer a Restricted Subsidiary, or (y) all or substantially all the assets of such Guarantor which sale, exchange, disposition or transfer in each case is made in compliance with Sections 4.10(a)(1) and (2);
(B) the release or discharge of the guarantee by such Guarantor of the Senior Credit Facilities or the guarantee which resulted in the creation of such Guarantee, except a discharge or release by or as a result of payment under such guarantee;
(C) the permitted designation of any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary; or
(D) the Issuer exercising Legal Defeasance or Covenant Defeasance in accordance with Article 8 hereof or the Issuers obligations under this Indenture being discharged in accordance with the terms of this Indenture; and
(2) the Issuer delivering to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in this Indenture relating to such transaction have been complied with.
ARTICLE 11
SATISFACTION AND DISCHARGE
Section 11.01 Satisfaction and Discharge.
This Indenture shall be discharged and shall cease to be of further effect as to all Notes, when either:
(1) all Notes theretofore authenticated and delivered, except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust, have been delivered to the Trustee for cancellation; or
(2) (A) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise, shall become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer and the Issuer or any Guarantor have irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders of the Notes, cash in U.S. dollars, Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest to pay and discharge the entire indebtedness on the Notes not theretofore delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to the date of maturity or redemption
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(provided, that if such redemption is made as provided under Section 3.07 hereof, (x) the amount of cash in U.S. dollars, Government Securities, or a combination thereof, that the Issuer must irrevocably deposit or cause to be deposited will be determined using an assumed Applicable Premium calculated as of the date of such deposit, and (y) the Issuer must irrevocably deposit or cause to be deposited additional money in trust on the redemption date as necessary to pay the Applicable Premium as determined on such date);
(B) no Default (other than that resulting from borrowing funds to be applied to make such deposit and the granting of Liens in connection therewith) with respect to this Indenture or the Notes shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under the Senior Credit Facilities or any other material agreement or instrument (other than this Indenture) to which the Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is bound;
(C) the Issuer has paid or caused to be paid all sums payable by it under this Indenture; and
(D) the Issuer has delivered irrevocable written instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be.
In addition, the Issuer must deliver an Officers Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.
Notwithstanding the satisfaction and discharge of this Indenture, if money shall have been deposited with the Trustee pursuant to subclause (A) of clause (2) of this Section 11.01, the provisions of Section 11.02 and Section 8.06 hereof shall survive such satisfaction and discharge.
Section 11.02 Application of Trust Money.
Subject to the provisions of Section 8.06 hereof, all money deposited with the Trustee pursuant to Section 11.01 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuer acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium and Additional Interest, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law.
If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 11.01 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuers and any Guarantors obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 11.01 hereof; provided that if the Issuer has made any payment of principal of, premium and Additional Interest, if any, or interest on any Notes because of the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent.
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ARTICLE 12
MISCELLANEOUS
Section 12.01 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Trust Indenture Act Section 318(c), the imposed duties shall control.
Section 12.02 Notices.
Any notice or communication by the Issuer, any Guarantor or the Trustee and Agent to the others is duly given if in writing and delivered in person or mailed by first-class mail (registered or certified, return receipt requested), fax or overnight air courier guaranteeing next day delivery, to the others address:
If to the Issuer and/or any Guarantor:
Giraffe Acquisition Corporation, c/o Bain Capital
111 Huntington Avenue
Boston, Massachusetts 02199
Attention: Joshua Bekenstein and Jordan Hitch
The Gymboree Corporation
500 Howard Street
San Francisco, CA 94105
Attention: General Counsel
with a copy to:
Ropes & Gray LLP
800 Boylston Street
Boston, Massachusetts 02199
Attention: Byung W. Cho, Esq.
Telephone: (617) 951-7000,
Facsimile: (617) 951-7050,
If to the Trustee and Agent:
Deutsche Bank Trust Company Americas
Trust and Securities Services
60 Wall Street, 27th Floor
MS: NYC60-2710
New York, New York 10005
Fax: 732-578-4635
Attention: Corporates Team/Giraffe Acquisition Corporation
Copy to:
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Deutsche Bank National Trust Company
Trust & Securities Services
100 Plaza One
6th Floor - MS JCY03-0699
Jersey City, NJ 07311-3901
Fax: 732-578-4635
Attention: Corporates Team/Giraffe Acquisition Corporation
The Issuer, any Guarantor or the Trustee, by notice to the others, may designate additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five calendar days after being deposited in the mail, postage prepaid, if mailed by first-class mail; when receipt acknowledged, if faxed; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery; and, subject to compliance with the Trust Indenture Act, on the first date on which publication is made, if given by publication; provided that any notice or communication delivered to the Trustee shall be deemed effective upon actual receipt thereof.
Any notice or communication to a Holder shall be mailed by first-class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in Trust Indenture Act Section 313(c), to the extent required by the Trust Indenture Act. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed or otherwise delivered in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.
If the Issuer mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time.
Section 12.03 Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to Trust Indenture Act Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Issuer, the Trustee, the Registrar and anyone else shall have the protection of Trust Indenture Act Section 312(c).
Section 12.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuer or any of the Guarantors to the Trustee to take any action under this Indenture, the Issuer or such Guarantor, as the case may be, shall furnish to the Trustee:
(a) An Officers Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and
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(b) An Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied.
Section 12.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to Section 4.04 hereof or Trust Indenture Act Section 314(a)(4)) shall comply with the provisions of Trust Indenture Act Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with (and, in the case of an Opinion of Counsel, may be limited to reliance on an Officers Certificate as to matters of fact); and
(d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with; provided, however, that with respect to matters of fact an Opinion of Counsel may rely on an Officers Certificate or certificates of public officials.
Section 12.06 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.
Section 12.07 No Personal Liability of Directors,
Officers, Employees and Stockholders.
No past, present or future director, officer, employee, incorporator, member, partner or stockholder of the Issuer or any Guarantor or any of their direct or indirect parent companies shall have any liability for any obligations of the Issuer or the Guarantors under the Notes, the Guarantees or this Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder by accepting Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.
Section 12.08 Governing Law.
THIS INDENTURE, THE NOTES AND ANY GUARANTEE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 12.09 Waiver of Jury Trial.
EACH OF THE ISSUER, THE GUARANTORS AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
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AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 12.10 Force Majeure.
In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations under this Indenture arising out of or caused by, directly or indirectly, forces beyond its reasonable control, including without limitation strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software or hardware) services.
Section 12.11 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Issuer or its Restricted Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.
Section 12.12 Successors.
All agreements of the Issuer in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. All agreements of each Guarantor in this Indenture shall bind its successors, except as otherwise provided in Section 10.06 hereof.
Section 12.13 Severability.
In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
Section 12.14 Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. This Indenture may be executed in multiple counterparts which, when taken together, shall constitute one instrument. The exchange of copies of this Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu of the original Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.
Section 12.15 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof.
Section 12.16 Qualification of Indenture.
The Issuer and the Guarantors shall qualify this Indenture under the Trust Indenture Act in accordance with the terms and conditions of the Registration Rights Agreement and shall pay all
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reasonable costs and expenses (including attorneys fees and expenses for the Issuer, the Guarantors and the Trustee) incurred in connection therewith, including, but not limited to, costs and expenses of qualification of this Indenture and the Notes and printing this Indenture and the Notes. The Trustee shall be entitled to receive from the Issuer and the Guarantors any such Officers Certificates, Opinions of Counsel or other documentation as it may reasonably request in connection with any such qualification of this Indenture under the Trust Indenture Act.
Section 12.17 U.S.A. Patriot Act.
The parties hereto acknowledge that in accordance with Section 326 of the U.S.A. Patriot Act, the Trustee, like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with the Trustee. The parties to this Indenture agree that they will provide the Trustee with such information as it may request in order for the Trustee to satisfy the requirements of the U.S.A. Patriot.
[Signatures on following page]
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GIRAFFE ACQUISITION CORPORATION | ||||
By: | /s/ Jordan Hitch | |||
Name: | Jordan Hitch | |||
Title: | Vice President and Secretary |
Signature Page to Senior Indenture
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee and Agent | ||||
By: | /s/ Annie Jaghatspanyan | |||
Name: | Annie Jaghatspanyan | |||
Title: | Vice President | |||
By: | /s/ Wanda Camacho | |||
Name: | Wanda Camacho | |||
Title: | Vice President |
Signature Page to Senior Indenture
EXHIBIT A
[Face of Note]
[Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture]
[Insert the Regulation S Temporary Global Note Legend, if applicable pursuant to the provisions of the Indenture]
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CUSIP [ ]
ISIN [ ]1
[[RULE 144A][REGULATION S] GLOBAL NOTE
representing up to
$ ]
9.125% Notes due 2018
No. |
[$ | ] |
GIRAFFE ACQUISITION CORPORATION
(to be merged with and into The Gymboree Corporation, with
The Gymboree Corporation as the surviving entity (the Issuer))
promises to pay to CEDE & CO. or registered assigns, the principal sum [set forth on the Schedule of Exchanges of Interests in the Global Note attached hereto] [of United States Dollars] on December 1, 2018.
Interest Payment Dates: June 1 and December 1
Record Dates: May 15 and November 15
1 | Rule 144A Note CUSIP: 37611V AA2 |
Rule 144A Note ISIN: US37611VAA26
Regulation S Note CUSIP: U37633 AA9
Regulation S Note ISIN: USU37633AA99
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IN WITNESS HEREOF, the Issuer has caused this instrument to be duly executed.
GIRAFFE ACQUISITION CORPORATION, as Issuer | ||
By: |
| |
Name: | ||
Title: |
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This is one of the Notes referred to in the within-mentioned Indenture:
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee | ||
By: |
| |
Authorized Signatory |
Dated: November 23, 2010
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[Back of Senior Note]
9.125% Notes due 2018
Capitalized terms used herein shall have the respective meanings assigned to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. The Issuer promises to pay interest on the principal amount of this Note at 9.125% per annum from November 23, 2010 until maturity and shall pay the Additional Interest, if any, payable pursuant to the Registration Rights Agreement referred to below. The Issuer will pay interest and Additional Interest, if any, semi-annually in arrears on June 1 and December 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an Interest Payment Date). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that the first Interest Payment Date shall be June 1, 2011. The Issuer will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at the interest rate on the Notes; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest, if any (without regard to any applicable grace periods), from time to time on demand at the interest rate on the Notes. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.
2. METHOD OF PAYMENT. The Issuer will pay interest on the Notes and Additional Interest, if any, to the Persons who are registered Holders of Notes at the close of business on the May 15 or November 15 (whether or not a Business Day), as the case may be, next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. Payment of interest and Additional Interest, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders, provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium and Additional Interest, if any, on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Issuer or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Deutsche Bank Trust Company Americas, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Issuer may change any Paying Agent or Registrar without notice to the Holders. The Issuer or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Issuer issued the Notes under an Indenture, dated as of November 23, 2010 (the Indenture), among Giraffe Acquisition Corporation, the Guarantors from time to time party thereto and the Trustee. This Note is one of a duly authorized issue of notes of the Issuer designated as its 9.125% Senior Notes due 2018. The Issuer shall be entitled to issue Additional Notes pursuant to Section 2.01 and 4.09 of the Indenture. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the Trust Indenture Act). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.
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5. OPTIONAL REDEMPTION.
(a) Except as described below under clauses 5(b) and 5(c) hereof, the Notes will not be redeemable at the Issuers option before December 1, 2014.
(b) At any time prior to December 1, 2014, the Issuer may redeem all or a part of the Notes at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest and Additional Interest, if any, to the date of redemption (the Redemption Date), subject to the rights of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date.
(c) Until December 1, 2013, the Issuer may, at its option, on one or more occasions redeem up to 35% of the aggregate principal amount of Notes (including the aggregate principal amount of Notes issued after the Issue Date) at a redemption price equal to 109.125% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date, with the net cash proceeds of one or more Equity Offerings; provided that at least 50% of the sum of the aggregate principal amount of Notes originally issued under the Indenture and any Additional Notes that are issued under the Indenture after the Issue Date remains outstanding immediately after the occurrence of each such redemption; provided further that each such redemption occurs within 90 days of the date of closing of each such Equity Offering. Notice of any redemption upon any Equity Offering may be given prior to such redemption, and any such redemption or notice may, at the Issuers discretion, be subject to one or more conditions precedent, including, but not limited to, completion of the related Equity Offering.
(d) On and after December 1, 2014, the Issuer may redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount of the Notes to be redeemed) set forth below, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date, if redeemed during the twelve-month period beginning on December 1 of each of the years indicated below:
Year |
Percentage | |||
2014 |
104.563 | % | ||
2015 |
102.281 | % | ||
2016 and thereafter |
100.000 | % |
(e) Any redemption pursuant to this paragraph 5 shall be made pursuant to the provisions of Sections 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION. Except as set forth below, the Issuer shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes.
7. SPECIAL MANDATORY REDEMPTIONS. If the proceeds of the offering of the Notes are deposited into the Escrow Account on the Issue Date and the Escrow Property has not been released in accordance with the Escrow Agreement on or before the Escrow Termination Date, then the Issuer shall cause the Trustee to redeem the Notes no later than 5 Business Days following the Escrow Termination Date at a redemption price equal to (x) the Initial Issue Price if the Escrow Termination Date is on or prior to December 31, 2010 or (y) the Initial Issue Price plus the Specified Premium if the Escrow
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Termination Date is after December 31, 2010, plus, in each case, accrued and unpaid interest and accretion, if any, to, but excluding, the Special Mandatory Redemption Date.
On or before the end of the first accrual period ending after the fifth anniversary of the date of issue (each within the meaning of Section 163(i)(2) of the Code) and prior to the end of each subsequent accrual period (the date of each such payment, an AHYDO Payment Date), the Issuer shall redeem a principal amount of the Notes in an amount equal to the AHYDO Amount at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, to the date of redemption. For purposes of the foregoing, AHYDO Amount means, as of each AHYDO Payment Date, the amount sufficient to ensure that the Notes will not be treated as an applicable high yield discount obligation within the meaning of Section 163(i)(1) of the Code. The AHYDO Amount shall be calculated by the Issuer. Each payment of the AHYDO Amount shall be treated for tax purposes as a payment of original issue discount on such Notes to the extent that the original issue discount has accrued as of the date such payment is due and then as a payment of principal. It is the intention of the foregoing that the Notes will not be an applicable high yield discount obligation within the meaning of Section 163(i)(1) of the Code.
8. NOTICE OF REDEMPTION. Subject to Section 3.03 of the Indenture, notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date (except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with Article 8 or Article 11 of the Indenture) to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $2,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption.
9. OFFERS TO REPURCHASE.
(a) Upon the occurrence of a Change of Control after the Effective Date, the Issuer shall make an offer (a Change of Control Offer) to each Holder to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000) of each Holders Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest thereon, if any, to the date of purchase. The Change of Control Offer shall be made in accordance with Section 4.14 of the Indenture.
(b) If the Issuer or any of its Restricted Subsidiaries consummates an Asset Sale after the Effective Date, within 10 Business Days of each date that Excess Proceeds exceed $25.0 million, the Issuer shall commence, an offer to all Holders of the Notes and, if required by the terms of any Indebtedness that is pari passu with the Notes (Pari Passu Indebtedness), to the holders of such Pari Passu Indebtedness (an Asset Sale Offer), to purchase the maximum principal amount of Notes (including any Additional Notes) and such other Pari Passu Indebtedness that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Additional Interest thereon, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes (including any Additional Notes) and such Pari Passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Issuer may use any remaining Excess Proceeds for general corporate purposes, subject to other covenants contained in the Indenture. If the aggregate principal amount of Notes and the Pari Passu Indebtedness surrendered by such holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such Pari Passu Indebtedness to be
A-7
purchased on a pro rata basis based on the accreted value or principal amount of the Notes or such Pari Passu Indebtedness tendered. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Issuer prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled Option of Holder to Elect Purchase attached to the Notes.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $2,000 and integral multiples of $1,000 in excess of $2,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Issuer may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuer need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Issuer need not exchange or register the transfer of any Notes for a period of 15 days before the mailing of a notice of redemption of Notes to be redeemed.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. The Indenture, the Guarantees or the Notes may be amended or supplemented as provided in the Indenture.
13. DEFAULTS AND REMEDIES. The Events of Default relating to the Notes are defined in Section 6.01 of the Indenture. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable immediately without further action or notice. Holders may not enforce the Indenture, the Notes or the Guarantees except as provided in the Indenture. Subject to certain limitations, Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default (except a Default relating to the payment of principal, premium, if any, Additional Interest, if any, or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or and its consequences under the Indenture except a continuing Default in payment of the principal of, premium, if any, Additional Interest, if any, or interest on, any of the Notes held by a non-consenting Holder. The Issuer and each Guarantor (to the extent that such Guarantor is so required under the Trust Indenture Act) is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Issuer is required within five (5) Business Days after becoming aware of any Default, to deliver to the Trustee a statement specifying such Default and what action the Issuer proposes to take with respect thereto.
14. AUTHENTICATION. This Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose until authenticated by the manual signature of the Trustee.
15. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under
A-8
the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement, dated as of November 23, 2010, among Giraffe Acquisition Corporation and the other parties named on the signature pages thereof (the Registration Rights Agreement), including the right to receive Additional Interest (as defined in the Registration Rights Agreement).
16. GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE NOTES AND THE GUARANTEES.
17. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuer has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.
The Issuer will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to the Issuer at the following address:
The Gymboree Corporation
500 Howard Street
San Francisco, CA 94105
Attention: General Counsel
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ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to: |
| |||
(Insert assignee legal name) | ||||
|
||||
(Insert assignees soc. sec. or tax I.D. no.)
|
||||
(Print or type assignees name, address and zip code) |
and irrevocably appoint |
| |||
to transfer this Note on the books of the Issuer. The agent may substitute another to act for him.
|
Date: | ____________ | |||||||
Your Signature: |
| |||||||
(Sign exactly as your name appears on the face of this Note) |
Signature Guarantee*: |
|
* | Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). |
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuer pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of this Note purchased by the Issuer pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased:
$
Date: | ||||||
Your Signature: |
| |||||
(Sign exactly as your name appears on the face of this Note) |
Tax Identification No.: |
| |||||
Signature Guarantee*: |
|
* | Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). |
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SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The initial outstanding principal amount of this Global Note is $ . The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global or Definitive Note for an interest in this Global Note, have been made:
Date of Exchange |
Amount of decrease in Principal Amount |
Amount of increase in Principal Amount of this Global Note |
Principal Amount of this Global Note following such decrease or increase |
Signature of authorized signatory of Trustee or Note Custodian | ||||
|
||||||||
|
||||||||
|
||||||||
|
||||||||
|
||||||||
|
* | This schedule should be included only if the Note is issued in global form. |
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EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
The Gymboree Corporation
500 Howard Street
San Francisco, CA 94105
Attention: General Counsel
DB Services Americas, Inc.
5022 Gate Parkway, Suite 200,
Jacksonville, FL 32256 USA
Attention: Transfer
Corporate Trust Services
Re: 9.125% Senior Notes due 2018
Reference is hereby made to the Indenture, dated as of November 23, 2010 (the Indenture), among Giraffe Acquisition Corporation, the Guarantors from time to time party thereto and the Trustee. Capitalized terms used but not defined herein shall have the respective meanings given to them in the Indenture.
(the Transferor) owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $ in such Note[s] or interests (the Transfer), to (the Transferee), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the Securities Act), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a qualified institutional buyer within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor
B-1
nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Issuer or a subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act.
4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the
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Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture.
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This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer.
[Insert Name of Transferor] | ||||
By: |
| |||
Name: | ||||
Title: | ||||
Dated: |
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ANNEX A TO CERTIFICATE OF TRANSFER
1. | The Transferor owns and proposes to transfer the following: | |
[CHECK ONE OF (a) OR (b)] | ||
(a) |
[ ] a beneficial interest in the: | |
(i) [ ] 144A Global Note (CUSIP 37611V AA2), or | ||
(ii) [ ] Regulation S Global Note (CUSIP U37633 AA9), or | ||
(b) | [ ] a Restricted Definitive Note. | |
2. |
After theTransfer the Transferee will hold: | |
[CHECK ONE] | ||
(a) | [ ] a beneficial interest in the: | |
(i) [ ] 144A Global Note (CUSIP 37611V AA2), or | ||
(ii) [ ] Regulation S Global Note (CUSIP U37633 AA9), or | ||
(iii) [ ] Unrestricted Global Note (CUSIP [ ]; or | ||
(b) | [ ] a Restricted Definitive Note; or | |
(c) | [ ] an Unrestricted Definitive Note, in accordance with the terms of the Indenture. |
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EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
The Gymboree Corporation
500 Howard Street
San Francisco, CA 94105
Attention: General Counsel
DB Services Americas, Inc.
5022 Gate Parkway, Suite 200,
Jacksonville, FL 32256 USA
Attention: Transfer
Corporate Trust Services
Re: 9.125% Notes due 2018
Reference is hereby made to the Indenture, dated as of November 23, 2010 (the Indenture), among Giraffe Acquisition Corporation, the Guarantors from time to time party thereto and the Trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
(the Owner) owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $ in such Note[s] or interests (the Exchange). In connection with the Exchange, the Owner hereby certifies that:
1) EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE
a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owners beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owners own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the Securities Act), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owners beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owners own account without transfer, (ii) such Exchange has been effected in compliance with the
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transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owners Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owners own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owners Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owners own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
2) EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES
a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owners beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owners own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act.
b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owners Restricted Definitive Note for a beneficial interest in the [CHECK ONE] [ ] 144A Global Note [ ] Regulation S Global Note, with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owners own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United
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States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and are dated .
[Insert Name of Transferor] | ||
By: |
| |
Name: | ||
Title: |
Dated:
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EXHIBIT D
[FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS]
Supplemental Indenture (this Supplemental Indenture), dated as of , among (the Guaranteeing Subsidiary), a subsidiary of Giraffe Acquisition Corporation, a Delaware Corporation (the Issuer), and Deutsche Bank Trust Company Americas, a national banking association, as trustee (the Trustee).
W I T N E S S E T H
WHEREAS, each Giraffe Acquisition Corporation and the Guarantors (as defined in the Indenture referred to below) has heretofore executed and delivered to the Trustee an indenture (the Indenture), dated as of November 23, 2010, providing for the issuance of an unlimited aggregate principal amount of 9.125% Notes due 2018 (the Notes);
WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Issuers Obligations under the Notes and the Indenture on the terms and conditions set forth herein and under the Indenture (the Guarantee); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:
(1) Capitalized Terms. Capitalized terms used herein without definition shall have the respective meanings assigned to them in the Indenture.
(2) Agreement to Guarantee. The Guaranteeing Subsidiary hereby agrees as follows:
(a) Along with all Guarantors named in the Indenture, to jointly and severally unconditionally guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Issuer hereunder or thereunder, that:
(i) the principal of and interest, premium and Additional Interest, if any, on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Issuer to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity,
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by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors and the Guaranteeing Subsidiary shall be jointly and severally obligated to pay the same immediately. This is a guarantee of payment and not a guarantee of collection.
(b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Issuer, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor.
(c) The following is hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest, notice and all demands whatsoever.
(d) This Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes, the Indenture and this Supplemental Indenture, and the Guaranteeing Subsidiary accepts all obligations of a Guarantor under the Indenture.
(e) If any Holder or the Trustee is required by any court or otherwise to return to the Issuer, the Guarantors (including the Guaranteeing Subsidiary), or any custodian, trustee, liquidator or other similar official acting in relation to either the Issuer or the Guarantors, any amount paid either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby.
(g) As between the Guaranteeing Subsidiary, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guaranteeing Subsidiary for the purpose of this Guarantee.
(h) The Guaranteeing Subsidiary shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under this Guarantee.
(i) Pursuant to Section 10.02 of the Indenture, after giving effect to all other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article 10 of the Indenture, this new Guarantee shall be limited to the maximum amount permissible such that the obligations of such Guaranteeing Subsidiary under this Guarantee will not constitute a fraudulent transfer or conveyance.
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(j) This Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Issuer for liquidation, reorganization, should the Issuer become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Issuers assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Notes are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Notes and Guarantee, whether as a voidable preference, fraudulent transfer or otherwise, all as though such payment or performance had not been made. In the event that any payment or any part thereof, is rescinded, reduced, restored or returned, the Note shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
(k) In case any provision of this Guarantee shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
(l) This Guarantee shall be a general unsecured senior obligation of such Guaranteeing Subsidiary, ranking pari passu with any other future senior Indebtedness of such Guaranteeing Subsidiary, if any.
(m) Each payment to be made by the Guaranteeing Subsidiary in respect of this Guarantee shall be made without set-off, counterclaim, reduction or diminution of any kind or nature.
(3) Execution and Delivery. The Guaranteeing Subsidiary agrees that the Guarantee shall remain in full force and effect notwithstanding the absence of the endorsement of any notation of such Guarantee on the Notes.
(4) Merger, Consolidation or Sale of All or Substantially All Assets.
(a) The Guaranteeing Subsidiary may not consolidate or merge with or into or wind up into (whether or not the Issuer or Guaranteeing Subsidiary is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:
(i)(A) the Guaranteeing Subsidiary is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Guaranteeing Subsidiary) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation organized or existing under the laws of the jurisdiction of organization of the Guaranteeing Subsidiary, as the case may be, or the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (the Guaranteeing Subsidiary or such Person, as the case may be, being herein called the Successor Person);
(B) the Successor Person, if other than the Guaranteeing Subsidiary, expressly assumes all the obligations of the Guaranteeing Subsidiary under the Indenture and the Guaranteeing Subsidiarys related Guarantee pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;
(C) immediately after such transaction, no Default exists; and
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(D) the Issuer shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with the Indenture; or
(ii) the transaction is made in compliance with Sections 4.10(a)(1) and (2) of the Indenture;
(b) Subject to certain limitations described in the Indenture, the Successor Person will succeed to, and be substituted for, the Guaranteeing Subsidiary under the Indenture and the Guaranteeing Subsidiarys Guarantee. Notwithstanding the foregoing, the Guaranteeing Subsidiary may merge into or transfer all or part of its properties and assets to another Guarantor or the Issuer.
(5) Releases.
The Guarantee of the Guaranteeing Subsidiary shall be automatically and unconditionally released and discharged, and no further action by the Guaranteeing Subsidiary, the Issuer or the Trustee is required for the release of the Guaranteeing Subsidiarys Guarantee, upon:
(1)(A) any sale, exchange, disposition or transfer (by merger or otherwise) of (x) the Capital Stock of the Guaranteeing Subsidiary, after which the Guaranteeing Subsidiary is no longer a Restricted Subsidiary, or (y) all or substantially all the assets of the Guaranteeing Subsidiary which sale, exchange, disposition or transfer in each case is made in compliance with Sections 4.10(a)(1) and (2) of the Indenture;
(B) the release or discharge of the guarantee by the Guaranteeing Subsidiary of the Senior Credit Facilities or the guarantee which resulted in the creation of the Guarantee, except a discharge or release by or as a result of payment under such guarantee;
(C) the proper designation of the Guaranteeing Subsidiary as an Unrestricted Subsidiary; or
(D) the Issuer exercising Legal Defeasance or Covenant Defeasance in accordance with Article 8 of the Indenture or the Issuers obligations under the Indenture being discharged in accordance with the terms of the Indenture; and
(2) the Issuer delivering to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in the Indenture relating to such transaction have been complied with.
(6) No Recourse Against Others. No past, present or future director, officer, employee, incorporator, member, partner or stockholder of the Guaranteeing Subsidiary or any of its direct or indirect parent companies shall have any liability for any obligations of the Issuer or the Guarantors (including the Guaranteeing Subsidiary) under the Notes, any Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.
(7) Governing Law. THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
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(8) Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. The exchange of copies of this Supplemental Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may be used in lieu of the original Supplemental Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.
(9) Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.
(10) The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary.
(11) Subrogation. The Guaranteeing Subsidiary shall be subrogated to all rights of Holders of Notes against the Issuer in respect of any amounts paid by the Guaranteeing Subsidiary pursuant to the provisions of Section 2 hereof and Section 10.01 of the Indenture; provided that, if an Event of Default has occurred and is continuing, the Guaranteeing Subsidiary shall not be entitled to enforce or receive any payments arising out of, or based upon, such right of subrogation until all amounts then due and payable by the Issuer under the Indenture or the Notes shall have been paid in full.
(12) Benefits Acknowledged. The Guaranteeing Subsidiarys Guarantee is subject to the terms and conditions set forth in the Indenture. The Guaranteeing Subsidiary acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Indenture and this Supplemental Indenture and that the guarantee and waivers made by it pursuant to this Guarantee are knowingly made in contemplation of such benefits.
(13) Successors. All agreements of the Guaranteeing Subsidiary in this Supplemental Indenture shall bind its Successors, except as otherwise provided in Section 2(k) hereof or elsewhere in this Supplemental Indenture. All agreements of the Trustee in this Supplemental Indenture shall bind its successors.
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IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.
[GUARANTEEING SUBSIDIARY] | ||
By: |
| |
Name: | ||
Title: | ||
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee | ||
By: |
| |
Name: | ||
Title: | ||
By: |
| |
Name: | ||
Title: |
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EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE
THIS SUPPLEMENTAL INDENTURE (this Supplemental Indenture), entered into as of as of November 23, 2010, among The Gymboree Corporation, a Delaware corporation (the Company), each of the Guarantors listed on the signature pages hereto, (each a Supplemental Guarantor and, collectively, the Supplemental Guarantors), and Deutsche Bank Trust Company Americas, as trustee (the Trustee). Capitalized terms used herein and not otherwise defined herein are used as defined in the Indenture referred to below.
RECITALS
WHEREAS, Giraffe Acquisition Corporation (MergerCo) and the Trustee entered into that certain Indenture, dated as of the date hereof (the Indenture), relating to the 9.125% Senior Notes of MergerCo due 2018 in original principal amount of $400,000,000 (the Securities);
WHEREAS, each Supplemental Guarantor is to become a Guarantor under the Indenture; and
WHEREAS, on the date hereof, MergerCo is merging with and into the Company, with the Company being the surviving Person of such merger (the Merger).
AGREEMENT
NOW, THEREFORE, the parties to this Supplemental Indenture hereby agree as follows:
Section 1. Effective upon consummation of the Merger, each Supplemental Guarantor shall be a Guarantor under the Indenture and be bound by the terms thereof applicable to Guarantors, including, but not limited to, Article 10 thereof.
Section 2. Effective upon consummation of the Merger, the Company, pursuant to Section 5.01 of the Indenture, expressly assumes all of the obligations of MergerCo under the Indenture and the Securities.
Section 3. This Supplemental Indenture is an amendment supplemental to the Indenture, and the Indenture and this Supplemental Indenture will henceforth be read together.
Section 4. This Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York.
Section 5. This Supplemental Indenture may be signed in various counterparts which together will constitute one and the same instrument.
[SIGNATURE PAGES FOLLOW]
THE GYMBOREE CORPORATION | ||
By: |
| |
Name: | ||
Title: |
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Exhibit 4.1.1
Execution Version
SUPPLEMENTAL INDENTURE
THIS SUPPLEMENTAL INDENTURE (this Supplemental Indenture), entered into as of as of November 23, 2010, among The Gymboree Corporation, a Delaware corporation (the Company), each of the Guarantors listed on the signature pages hereto, (each a Supplemental Guarantor and, collectively, the Supplemental Guarantors), and Deutsche Bank Trust Company Americas, as trustee (the Trustee). Capitalized terms used herein and not otherwise defined herein are used as defined in the Indenture referred to below.
RECITALS
WHEREAS, Giraffe Acquisition Corporation (MergerCo) and the Trustee entered into that certain Indenture, dated as of the date hereof (the Indenture), relating to the 9.125% Senior Notes of MergerCo due 2018 in original principal amount of $400,000,000 (the Securities);
WHEREAS, each Supplemental Guarantor is to become a Guarantor under the Indenture; and
WHEREAS, on the date hereof, MergerCo is merging with and into the Company, with the Company being the surviving Person of such merger (the Merger).
AGREEMENT
NOW, THEREFORE, the parties to this Supplemental Indenture hereby agree as follows:
Section 1. Effective upon consummation of the Merger, each Supplemental Guarantor shall be a Guarantor under the Indenture and be bound by the terms thereof applicable to Guarantors, including, but not limited to, Article 10 thereof.
Section 2. Effective upon consummation of the Merger, the Company, pursuant to Section 5.01 of the Indenture, expressly assumes all of the obligations of MergerCo under the Indenture and the Securities.
Section 3. This Supplemental Indenture is an amendment supplemental to the Indenture, and the Indenture and this Supplemental Indenture will henceforth be read together.
Section 4. This Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York.
Section 5. This Supplemental Indenture may be signed in various counterparts which together will constitute one and the same instrument.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Effective Date Supplemental Indenture to be duly executed as of the date first above written.
DEUTSCHE BANK TRUST COMPANY AMERICAS | ||
as Trustee | ||
By: | /s/ Annie Jaghatspanyan | |
Name: Annie Jaghatspanyan | ||
Title: Vice President | ||
By: | /s/ Wanda Camacho | |
Name: Wanda Camacho | ||
Title: Vice President |
[Supplemental Indenture]
THE GYMBOREE CORPORATION | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
GYM-CARD, LLC | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
GYM-MARK, INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
GYMBOREE MANUFACTURING, INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
GYMBOREE OPERATIONS, INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
GYMBOREE PLAY PROGRAMS, INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
GYMBOREE RETAIL STORES, INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
S.C.C. WHOLESALE, INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer |
[Supplemental Indenture]
Exhibit 4.3
REGISTRATION RIGHTS AGREEMENT
Dated: November 23, 2010
Among
GIRAFFE ACQUISITION CORPORATION
to be merged with and into
THE GYMBOREE CORPORATION
and
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE SECURITIES (USA) LLC
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this Agreement) is made and entered into as of November 23 , 2010, by and among Giraffe Acquisition Corporation, a Delaware corporation ( MergerCo) and Morgan Stanley & Co. Incorporated and Credit Suisse Securities (USA) LLC (the Initial Purchasers). Upon consummation of the acquisition of The Gymboree Corporation, a Delaware corporation (the Company), by MergerCo, the Company and each of the Companys subsidiaries who will subsequently become guarantors (the Guarantors) of the Notes pursuant to the Purchase Agreement (each as defined below) will execute and deliver a Joinder Agreement hereto substantially in the form attached as Exhibit A hereto (the Joinder Agreement) and shall thereby join this Agreement.
References herein to the Issuer refer (i) prior to consummation of the Acquisition, solely to MergerCo and (ii) following consummation of the Acquisition and upon execution of the Joinder Agreement, to the Company.
This Agreement is made pursuant to the Purchase Agreement dated November 18, 2010 (the Purchase Agreement), by and among MergerCo and the Initial Purchasers and, after giving effect to the Joinder Agreements referred to therein, the Company and the Guarantors, which provides for the sale by MergerCo to the Initial Purchasers of an aggregate of $400.0 million principal amount of MergerCos 9.125% Senior Notes due 2018 (the Notes). Following consummation of the Acquisition, the Notes will be jointly and severally guaranteed on a senior unsecured basis by the Guarantors (the Guarantees and, together with the Notes, the Securities). In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Issuer has agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions.
In addition to those terms defined elsewhere in this Agreement, as used in this Agreement, the following capitalized defined terms shall have the following meanings:
1933 Act shall mean the Securities Act of 1933, as amended from time to time.
1934 Act shall mean the Securities Exchange Act of 1934, as amended from time to time.
Additional Interest shall have the meaning set forth in Section 2(d) hereof.
Board of Directors means, with respect to any Person, the Board of Directors (or other governing body serving a similar function) of such Person, any duly authorized committee of such Board of Directors or any Person to which the Board of Directors has properly delegated authority with respect to any particular matter.
Closing Date shall mean the Closing Date as defined in the Purchase Agreement.
Company shall have the meaning set forth in the preamble and shall also include the Companys successors.
Exchange Offer shall mean the exchange offer by the Issuer of Exchange Securities for Registrable Securities pursuant to Section 2(a) hereof.
Exchange Offer Registration shall mean a registration under the 1933 Act effected pursuant to Section 2(a) hereof.
Exchange Offer Registration Statement shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form) and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.
Exchange Securities shall mean notes issued by the Issuer and Guarantees of the Guarantors under the Indenture containing terms identical to the applicable Securities (except that (i) interest thereon shall accrue from the last date on which interest was paid on the Securities or, if no such interest has been paid, from December 1, 2010, (ii) the Exchange Securities will not contain restrictions on transfer and (iii) the Exchange Securities will not be entitled to Additional Interest) to be offered to Holders of such Securities pursuant to the Exchange Offer.
FINRA shall mean the Financial Industry Regulatory Authority, Inc.
Guarantors shall have the meaning set forth in the preamble and shall also include any Guarantors successor.
Holder shall mean the Initial Purchasers, for so long as they own any Registrable Securities, and each of their successors, assigns and direct and indirect transferees who become registered beneficial owners of Registrable Securities under the Indenture; provided that for purposes of Sections 4 and 5 of this Agreement, the term Holder shall include Participating Broker-Dealers (as defined in Section 4(a)).
Indenture shall mean the indenture relating to the Securities dated as of November 23, 2010 by and between MergerCo and Deutsche Bank Trust Company Americas, as trustee, as supplemented by the Supplemental Indenture (if any) by and among the Company, the Guarantors and the Trustee, as the same may be further amended or supplemented from time to time in accordance with the terms thereof.
Initial Purchasers shall have the meaning set forth in the preamble.
Issuer shall have the meaning set forth in the preamble and shall also include the Issuers successors.
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Majority Holders shall mean the Holders of a majority of the aggregate principal amount of outstanding Registrable Securities; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Issuer or any of its affiliates (as such term is defined in Rule 405 under the 1933 Act) (other than the Initial Purchasers or subsequent Holders of Registrable Securities if such subsequent Holders are deemed to be such affiliates solely by reason of their holding of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount.
Person shall mean an individual, partnership, limited liability company, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof.
Prospectus shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to such prospectus, and in each case including all material incorporated by reference therein.
Registrable Securities shall mean the Securities; provided, however, that a Security shall cease to be a Registrable Security (i) as of the date on which such Security has been exchanged by a Person other than a broker-dealer for an Exchange Security in the Exchange Offer; (ii) following the exchange by a broker-dealer in the Exchange Offer of a Security for an Exchange Security, as of the date on which such Exchange Security is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the Prospectus contained in the Exchange Offer Registration Statement; (iii) as of the date on which such Security has been effectively registered under the 1933 Act and disposed of in accordance with the Shelf Registration Statement; (iv) as of the first date on or after the two year anniversary of the Closing Date that such Security is eligible for sale pursuant to Rule 144 under the 1933 Act; or (v) as of the date on which such Security ceases to be outstanding for purposes of the Indenture.
Registration Default shall have the meaning set forth in Section 2(d) hereof.
Registration Expenses shall mean any and all expenses incident to performance of or compliance by the Issuer and the Guarantors with this Agreement, including without limitation: (i) all SEC, stock exchange or FINRA registration and filing fees, (ii) all fees and expenses incurred by the Issuer in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of one law firm acting as counsel for any underwriters or Holders, which shall be Cahill Gordon & Reindel LLP, or such other counsel as is reasonably acceptable to the Issuer in connection with blue sky qualification of any of the Exchange Securities or Registrable Securities), (iii) all expenses of any Persons incurred by the Issuer in preparing or assisting in printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents
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relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) all fees and disbursements incurred by the Issuer relating to the qualification of the Indenture under applicable securities laws, (vi) the fees and disbursements of the Trustee and its counsel, (vii) the fees and disbursements of counsel for the Issuer and the Guarantors, and in the case of a Shelf Registration Statement, the reasonable fees and disbursements of one counsel for the Holders (which counsel shall be Cahill Gordon & Reindel LLP or such other counsel as is selected by the Majority Holders and is reasonably acceptable to the Issuer, and which counsel may also be counsel for the Initial Purchasers) and (viii) the fees and disbursements of the independent public accountants of the Issuer and the Guarantors, including the expenses of any special audits or cold comfort letters required by this Agreement or incident to the performance of this Agreement, but excluding fees and expenses of counsel to the underwriters (other than fees and expenses set forth in clause (ii) above) or the Holders and underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder.
Registration Statement shall mean any registration statement of the Issuer and the Guarantors that covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.
SEC shall mean the Securities and Exchange Commission.
Shelf Registration shall mean a registration effected pursuant to Section 2(b) hereof.
Shelf Registration Statement shall mean a shelf registration statement of the Issuer and the Guarantors pursuant to the provisions of Section 2(b) of this Agreement which covers all or a portion of the Registrable Securities on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.
Trustee shall mean the trustee with respect to the Securities under the Indenture.
Underwriter shall have the meaning set forth in Section 3(c) hereof.
Underwritten Registration or Underwritten Offering shall mean a registration in which Registrable Securities are sold to an Underwriter for reoffering to the public.
2. Registration Under the 1933 Act.
(a) To the extent not prohibited by any applicable law or applicable interpretation of the Staff of the SEC (the Staff), the Issuer and the Guarantors shall use commercially
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reasonable efforts to cause to be filed, and to be declared effective under the 1933 Act, an Exchange Offer Registration Statement on or prior to 250 days after the date (the Acquisition Date) of the consummation of the Acquisition, covering the offer by the Issuer and the Guarantors to the Holders to exchange all of the Registrable Securities for Exchange Securities and to have such Exchange Offer Registration Statement remain effective until the closing of the Exchange Offer. The Issuer and the Guarantors shall properly commence the Exchange Offer and shall use commercially reasonable efforts to issue, after the date on which the Exchange Offer Registration Statement was declared effective by the SEC but not later than 250 days after the Acquisition Date, Exchange Securities in exchange for all Registrable Securities tendered prior thereto in the Exchange Offer. The Issuer and the Guarantors shall commence the Exchange Offer by delivering the related exchange offer Prospectus and accompanying documents to each Holder, through the common depositary for the Securities or otherwise, stating in such Prospectus or accompanying documents in addition to such other disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this Agreement and that all Registrable Securities validly tendered and not withdrawn will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be a period of at least 20 business days from the date such notice is mailed) (the Exchange Dates);
(iii) that any Registrable Security not tendered will remain outstanding and continue to accrue interest (but not Additional Interest), but will not retain any rights under this Agreement;
(iv) that Holders electing to have a Registrable Security exchanged pursuant to the Exchange Offer will be required to surrender such Registrable Security, together with the enclosed letter of transmittal, to the institution and at the address specified in the notice (or through the procedures of the common depositary for the Securities) prior to the close of business on the last Exchange Date; and
(v) that Holders will be entitled to withdraw their election, not later than the close of business on the last Exchange Date, by sending to the institution at the address specified in the notice a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Securities delivered for exchange and a statement that such Holder is withdrawing his election to have such Securities exchanged (or through the procedures of the common depositary for the Securities).
As soon as reasonably practicable after the last Exchange Date, the Issuer shall:
(i) accept for exchange Registrable Securities or portions thereof tendered and not validly withdrawn pursuant to the Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Securities or portions thereof so accepted for exchange by the Issuer and issue,
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and cause the Trustee to promptly authenticate, an Exchange Security equal in principal amount to the principal amount of the Registrable Securities surrendered by such Holder.
The Issuer and the Guarantors shall use commercially reasonable efforts to complete the Exchange Offer as provided above and shall comply with the applicable requirements of the 1933 Act, the 1934 Act and other applicable laws and regulations in connection with the Exchange Offer. Other than that the Exchange Offer does not violate applicable law or any applicable interpretation of the Staff, the Exchange Offer shall not be subject to any conditions, except as otherwise provided in this Agreement. Upon the Initial Purchasers request, the Issuer and the Guarantors shall inform the Initial Purchasers of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right, subject to applicable law, to contact such Holders and otherwise facilitate the tender of Registrable Securities in the Exchange Offer.
Each Holder participating in the Exchange Offer shall be required, as a condition to participating in such Exchange Offer, to represent to the Issuer and the Guarantors that (i) it is acquiring the Exchange Securities to be received by such Holder in the ordinary course of its business, (ii) such Holder is not engaged in, and does not intend to engage in, and has no arrangements or understanding with any person to participate in, a distribution (within the meaning of the 1933 Act) of the Exchange Securities in violation of the 1933 Act, (iii) such Holder is not an affiliate, as defined in Rule 405 under the 1933 Act, of the Issuer or the Guarantors, and (iv) if such Holder is a broker-dealer registered under the 1934 Act, that it will receive Exchange Securities for its own account in exchange for Securities that were acquired as a result of market-making activities or other trading activities and that it will comply with the applicable provisions of the 1933 Act (including the prospectus delivery requirements in connection with any resale of such Exchange Securities). Each Holder hereby acknowledges and agrees that any broker-dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under SEC policy as in effect on the date of this Agreement rely on the position of the SEC enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the SECs letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters, and (2) must comply with the registration and prospectus delivery or availability, if applicable, requirements of the 1933 Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Exchange Securities obtained by such Holder in exchange for Registrable Securities acquired by such Holder directly from the Issuer.
(b) In the event that (i) the Issuer and the Guarantors determine that the Exchange Offer Registration provided for in Section 2(a) above is not available or may not be consummated as soon as practicable after the last Exchange Date because it would violate applicable law or the applicable interpretations of the Staff, (ii) the Exchange Offer is not for any other reason consummated within the time period provided for in Section 2(a) above, (iii) any Holder of Registrable Securities notifies the Issuer prior to the 20th business day following the completion of the Exchange Offer that: (A) it is prohibited by law or SEC policy from participating in the Exchange Offer, (B) it may not resell the Exchange Securities to the public
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without delivering a Prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (C) it is a broker-dealer and owns Securities acquired directly from the Issuer or an affiliate of thereof, then the Issuer and the Guarantors shall: in lieu of (or, in the case of clause (iii), in addition to) conducting the Exchange Offer contemplated by Section 2(a), file under the 1933 Act no later than 30 days after the time such obligation to file arises (but no earlier than 250 days after the Acquisition Date), a Shelf Registration Statement. The Issuer and the Guarantors agree to use commercially reasonable efforts to cause the Shelf Registration Statement to become or be declared effective no later than 90 days after such Shelf Registration Statement filing obligation arises (but no earlier than 360 days after the Closing Date); provided, that if at any time the Issuer is or becomes a well-known seasoned issuer (as defined in Rule 405 under the 1933 Act) and the Issuer and the Guarantors are eligible to file an automatic shelf registration statement (as defined in Rule 405 under the 1933 Act), then the Issuer and the Guarantors shall file the Shelf Registration Statement in the form of an automatic shelf registration statement as provided in Rule 405 under the 1933 Act. The Issuer and the Guarantors agree to use all commercially reasonable efforts to keep such Shelf Registration Statement continuously effective for a period ending on the earlier of the first anniversary of the Acquisition Date or such time as there are no longer any Registrable Securities outstanding. The Issuer and the Guarantors agree, after the effective date of the Shelf Registration Statement and promptly upon the request of any Holder of Registrable Securities that has not then returned the information regarding such Holder set forth in Section 3(a)(xvi), to use all commercially reasonable efforts to enable such Holder to use the Prospectus forming a part thereof for resales of Registrable Securities, including, without limitation, any action necessary to identify such Holder as a selling securityholder in the Shelf Registration Statement (whether by post-effective amendment thereto or by filing a prospectus pursuant to Rules 430B and 424(b) under the Securities Act identifying such Holder), provided, however, that nothing in this sentence shall relieve any such Holder of the obligation to return information regarding such Holder in accordance with Section 3(a)(xvi). Notwithstanding anything to the contrary herein, in no event will the Issuer be required to file a post-effective amendment or prospectus supplement with respect to the Shelf Registration Statement more than once during any calendar quarter.
The Issuer and the Guarantors further agree to supplement or amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Issuer and the Guarantors for such Shelf Registration Statement or by the 1933 Act or by any other rules and regulations thereunder for shelf registrations or if reasonably and timely requested by a Holder with respect to information relating to such Holder, and to use commercially reasonable efforts to cause any such amendment to become effective and such Shelf Registration Statement to become usable as soon as thereafter practicable, provided that the Issuer and the Guarantors shall not be required to amend the Shelf Registration Statement to add additional Holders more than once per calendar quarter. The Issuer and the Guarantors agree to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly after filing such supplement or amendment with the SEC, provided, that the Issuer and the Guarantors shall not be required to provide such Holder with copies of Forms 10-K, 10-Q, 8-K and other reports filed with the SEC.
(c) The Issuer and the Guarantors shall pay all Registration Expenses in connection with the registration pursuant to Section 2(a) and Section 2(b). Each Holder shall pay all
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underwriting discounts and commissions, brokerage commissions and transfer taxes, if any, relating to the sale or disposition of such Holders Registrable Securities pursuant to the Shelf Registration Statement and all fees and expenses incurred by such Holder in connection with the performance of such Holders obligations under Section 3(a)(xvi).
(d) An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that, if, after it has been declared effective, the offering of Registrable Securities pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference until the offering of Registrable Securities pursuant to such Registration Statement may legally resume.
If:
(1) the Issuers and the Guarantors fail to consummate the Exchange Offer by the 250th day after the Acquisition Date; or
(2) the Shelf Registration Statement or the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable in connection with resales of Registrable Securities during the applicable period specified in this Agreement (subject to any applicable suspension period permitted by Section 3(b)) (each such event referred to in the preceding clauses (1) and (2), a Registration Default),
then the Issuers and the Guarantors will pay interest in addition to the per annum rate then applicable to the Securities (Additional Interest) to each Holder of Registrable Securities until all Registration Defaults have been cured.
The rate of the Additional Interest will be 0.25% per annum for the first 90-day period immediately following the occurrence of a Registration Default, and such rate will increase by an additional 0.25% per annum with respect to each subsequent 90-day period until all applicable Registration Defaults have been cured, up to a maximum Additional Interest rate of 1.0% per annum. All accrued Additional Interest will be paid by the Issuer and the Guarantors on the next scheduled interest payment date to the Depository Trust Company or its nominee by wire transfer of immediately available funds or by federal funds check and to Holders of certificated notes by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified. Once (i) the Issuer and the Guarantors consummate an Exchange Offer with respect to the Exchange Offer Registration Statement (in the case of a Registration Default pursuant to clause (1) above, (ii) the applicable Registration Statement that had ceased to be effective thereafter becomes effective (in the case of a Registration Default pursuant to clause (2) above) or (iii) the second anniversary of the Closing Date, the accrual of Additional Interest, if any, shall cease.
(e) Without limiting the remedies available to the Initial Purchasers and the Holders, the Issuer acknowledges that any failure by the Issuer to comply with its obligations under Section 2(a) and Section 2(b) hereof may result in material irreparable injury to the Initial
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Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Issuers obligations under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures.
(a) In connection with the obligations of the Issuer and the Guarantors with respect to the Registration Statements pursuant to Section 2(a) and Section 2(b) hereof, the Issuer and the Guarantors shall:
(i) use commercially reasonable efforts to prepare and file with the SEC a Registration Statement on the appropriate form under the 1933 Act, which form (x) shall be selected by the Issuer and the Guarantors and (y) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof and (z) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith, and use commercially reasonable efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof;
(ii) use commercially reasonable efforts to prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period and cause each Prospectus to be supplemented by any required prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the 1933 Act; to keep each Prospectus current during the period described under Section 4(3) and Rule 174 under the 1933 Act that is applicable to transactions by brokers or dealers with respect to the Registrable Securities or Exchange Securities but in no event later than the date that is 180 days after the consummation of the Exchange Offer;
(iii) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, to counsel for the Initial Purchasers, to the one counsel for the Holders designated pursuant to this Agreement and to each Underwriter of an Underwritten Offering of Registrable Securities, if any, without charge, as many copies of each Prospectus as reasonably requested, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or Underwriter may reasonably request other than exhibits to documents incorporated by reference or exhibits thereto or documents available on the SECs Electronic Data Gathering, Analysis, and Retrieval system, in order to facilitate the public sale or other disposition of the Registrable Securities; and, subject to Sections 3(a)(ix) and 3(a)(xvi), the Issuer consents to the use of such Prospectus and any amendment or supplement thereto in accordance with applicable law by each of the selling Holders of Registrable Securities and any such Underwriters in connection with the offering and sale of the Registrable Securities covered by and in the manner described in such Prospectus or any amendment or supplement thereto in accordance with applicable law;
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(iv) use commercially reasonable efforts to register or qualify the Registrable Securities under all applicable state securities or blue sky laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement shall reasonably request in writing a reasonable time prior to the time the applicable Registration Statement is declared effective by the SEC, to cooperate with such Holders in connection with any filings required to be made with FINRA and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that neither the Issuer nor any of the Guarantors shall be required to (1) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(a)(iv), (2) file any general consent to service of process or (3) subject itself to taxation in any such jurisdiction if it is not so subject;
(v) in the case of a Shelf Registration, notify each Holder of Registrable Securities who has provided contact information to the Issuer, the one counsel for the Holders designated pursuant to this Agreement and counsel for the Initial Purchasers promptly and, if requested by any such Holder or counsel, confirm such advice in writing (1) when a Registration Statement has become effective and when any post-effective amendment thereto has been filed and becomes effective, (2) of any request by the SEC or any state securities authority for amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (3) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (4) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Issuer contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering cease to be true and correct in all material respects or if the Issuer receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, (5) of the happening of any event during the period a Shelf Registration Statement is effective which makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein (in the case of any Prospectus, in the light of the circumstances in which they were made) not misleading and (6) of any determination by the Issuer and the Guarantors that a post-effective amendment to a Registration Statement would be appropriate;
(vi) use commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement and provide prompt notice to each Holder of the withdrawal of any such order;
(vii) in the case of a Shelf Registration, if requested, furnish to each Holder of Registrable Securities, without charge, at least one conformed copy of each Registration
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Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested);
(viii) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends and enable such Registrable Securities to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders may reasonably request in writing at least one business day prior to the closing of any sale of Registrable Securities;
(ix) in the case of a Shelf Registration, upon the occurrence of any event contemplated by Section 3(a)(v)(5) hereof, use commercially reasonable efforts to prepare and file with the SEC a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Issuer and the Guarantors agree to notify the Holders to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and the Holders hereby agree to suspend use of the Prospectus until the Issuer and the Guarantors have amended or supplemented the Prospectus to correct such misstatement or omission;
(x) a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus (other than filings to be made pursuant to the 1934 Act), after initial filing of a Registration Statement, provide copies of such document to the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, the one counsel to the Holders designated pursuant to this Agreement) and make such of the representatives of the Issuer and the Guarantors as shall be reasonably requested by the Initial Purchasers or their counsel (and, in the case of a Shelf Registration Statement, the Holders or their one counsel designated pursuant to this Agreement) available for discussion of such document, and shall not at any time file or make any amendment to the Registration Statement, any Prospectus or any amendment of or supplement to a Registration Statement or a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus, of which the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, the one counsel to the Holders designated pursuant to this Agreement) shall not have previously been advised and furnished a copy and the Issuer shall give reasonable consideration to any comments received from the Initial Purchasers or their counsel (or, in the case of a Shelf Registration Statement, the one counsel to the Holders designated pursuant to this Agreement) prior to filing such Registration Statement, Prospectus, amendment, supplement or other document;
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(xi) obtain a CUSIP number for all Exchange Securities or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement;
(xii) use commercially reasonable efforts to cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended (the TIA), in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be, cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and execute, and use commercially reasonable efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner;
(xiii) in the case of a Shelf Registration, make available for inspection by a representative of the Holders of a majority in principal amount of the Registrable Securities being sold, any Underwriter participating in any disposition pursuant to such Shelf Registration Statement, and one attorney and one accountant designated by such Holders in accordance with this Agreement, at reasonable times and in a reasonable manner, all financial and other records, pertinent documents and properties of the Issuer and the Guarantors, and cause the respective officers, directors and employees of the Issuer and the Guarantor to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with a Shelf Registration Statement; provided that (1) the foregoing inspection and information gathering shall be coordinated on behalf of the selling Holders, underwriters and representatives thereof by one counsel for the Holders and one counsel for the underwriters, who shall be such counsel as may be chosen by the Holders of a majority in principal amount of the Securities or by the underwriters, as the case may be, and (2) if any such information is identified by the Issuer or any Guarantor as being confidential or proprietary, each person receiving such information shall take such actions as are reasonably necessary to protect the confidentiality of such information, including, with respect to Holders and their representatives, entering into customary confidentiality agreements;
(xiv) [Reserved];
(xv) in the case of a Shelf Registration, enter into such customary agreements and take all such other reasonable actions in connection therewith (including those reasonably requested by the Holders of a majority in principal amount of the Registrable Securities being sold) in order to expedite or facilitate the disposition of such Registrable Securities including, but not limited to, if requested by the Holders of a majority in principal amount of the Securities covered by a Shelf Registration Statement, not more than one Underwritten Offering and in such connection, (1) to the extent possible, make such representations and warranties to the Underwriters of such Registrable Securities with respect to the business of the Company and its subsidiaries, the Registration Statement, Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made
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by issuers to underwriters in underwritten offerings, (2) use commercially reasonable efforts to obtain opinions of counsel to the Issuer and the Guarantors (which counsel and opinions, in form, scope and substance, shall be reasonably satisfactory to such Underwriters and their counsel, it being agreed that Ropes & Gray LLP is reasonably satisfactory) addressed to each Underwriter of Registrable Securities, covering the matters customarily covered in opinions requested in underwritten offerings, (3) use commercially reasonable efforts to obtain cold comfort letters from the independent certified public accountants of the Issuer and the Guarantors (and, if necessary, any other certified public accountant of any subsidiary of the Issuer or the Guarantors, or of any business acquired by the Issuer or the Guarantors for which financial statements and financial data are included in the Registration Statement) addressed to each Underwriter of Registrable Securities, such letters to be in customary form and covering matters of the type customarily covered in cold comfort letters in connection with underwritten offerings, and (4) deliver such documents and certificates as may be reasonably requested by the Underwriters, and which are customarily delivered in underwritten offerings, to evidence the continued validity of the representations and warranties of the Issuer made pursuant to the underwriting agreement and to evidence compliance with any customary conditions contained in an underwriting agreement; and
(xvi) in the case of a Shelf Registration Statement, the Issuer and the Guarantors shall require each Holder of Registrable Securities, and such Holder shall be obligated upon such request, to furnish to the Issuer and the Guarantors such information regarding the Holder and the proposed distribution by such Holder of such Registrable Securities as the Issuer and the Guarantors may from time to time reasonably request in writing. In addition, each selling Holder agrees to promptly furnish additional information required under Item 507 or 508 of Regulation S-K, as applicable. So long as any Holder fails to furnish such information in a reasonably timely manner after receiving the request, the Issuer and the Guarantors shall (i) have no obligation under this Agreement to provide for the disposition of such Holders Registrable Securities in the Shelf Registration Statement in respect to which such information was requested, (ii) not be required to provide for the disposition of such Holders Registrable Securities in any post-effective amendment to such Shelf Registration Statement or any future Shelf Registration Statement that is not otherwise required to be filed and (iii) not be required to pay any Additional Interest as provided in Section 2(d) hereof. Each Holder including Registrable Securities in a Shelf Registration Statement shall agree to furnish promptly to the Issuer all information regarding such Holder and the proposed distribution by the Holder of such Registrable Securities required under Regulation S-K.
(b) Each Holder agrees that, upon receipt of any notice from the Issuer and the Guarantors of the happening of any event or the existence of any fact of the kind described in Section 3(a)(v) hereof or the existence of a Shelf Suspension Period (as defined below), such Holder will forthwith discontinue disposition of Registrable Securities pursuant to the applicable Registration Statement until such Holders receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(a)(ix) hereof or until it is advised in writing by the Issuer that the use of the Prospectus may be resumed and has received any additional or supplemental filings that are incorporated by reference into the Prospectus. If so directed by the Issuer and the
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Guarantors, such Holder will deliver to the Issuer and the Guarantors (at their expense) all copies in its possession, other than permanent file copies then in such Holders possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. Any Issuer election to suspend use of the Exchange Offer Registration Statement pursuant to this paragraph shall not be taken into account in determining whether Additional Interest is due pursuant to Section 2(d) hereof or the amount of such Additional Interest. Notwithstanding anything to the contrary in this Agreement, at any time, the Issuer may delay the filing of any Shelf Registration Statement or delay or suspend the effectiveness thereof, for up to 60 consecutive days per Shelf Suspension Period (as defined below) and up to 90 days in the aggregate in any 12-month period (each, a Shelf Suspension Period), if the Board of Directors of the Issuer determines reasonably and in good faith that the filing of any such Shelf Registration Statement or the continuing effectiveness thereof would require the disclosure of non-public material information that, in the reasonable judgment of the Board of Directors of the Issuer, would be detrimental to the Issuer if so disclosed or would otherwise materially adversely affect a financing, acquisition, disposition, merger or other material transaction or such action is required by applicable law.
(c) In the Underwritten Offering referred to in Section 3(a)(xv) above, the investment bank or investment banks and manager or managers (the Underwriters) that will administer the offering will be selected by the Majority Holders of the Registrable Securities included in such offering, subject to the approval of the Issuer, which approval shall not be unreasonably withheld or delayed.
4. Participation of Broker-Dealers in Exchange Offer.
(a) The Staff has taken the position that any broker-dealer registered under the 1934 Act that receives Exchange Securities for its own account in the Exchange Offer in exchange for Securities that were acquired by such broker-dealer as a result of market-making or other trading activities (a Participating Broker-Dealer) may be deemed to be an underwriter within the meaning of the 1933 Act and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities.
The Issuer understands that it is the Staffs position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Securities, without naming the Participating Broker-Dealers or specifying the amount of Exchange Securities owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligation under the 1933 Act in connection with resales of Exchange Securities for their own accounts, so long as the Prospectus otherwise meets the requirements of the 1933 Act.
(b) In light of the above, notwithstanding the other provisions of this Agreement, the Issuer and the Guarantors agree that the provisions of Section 3 of this Agreement as they relate to a Shelf Registration shall also apply to an Exchange Offer Registration to the extent reasonably requested by the Initial Purchasers or by one or more Participating Broker-Dealers, in each case as provided in clause (ii) below (but with such reasonable modifications thereto as determined by the Issuer), in order to expedite or facilitate the disposition of any Exchange
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Securities by Participating Broker-Dealers consistent with the positions of the Staff recited in Section 4(a) above; provided that:
(i) the Issuer and the Guarantors shall not be required to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement, as would otherwise be contemplated by Section 3(a)(ix), (A) after the Participating Broker-Dealers shall have disposed of the Registrable Securities or (B) for a period exceeding the period specified in Section 3(a)(ii) and Participating Broker-Dealers shall not be authorized by the Issuer to deliver and shall not deliver such Prospectus after such date or such period in connection with the resales contemplated by this Section 4; and
(ii) the application of the Shelf Registration procedures set forth in Section 3 of this Agreement to an Exchange Offer Registration, to the extent not required by the positions of the Staff or the 1933 Act and the rules and regulations thereunder, will be in conformity with the reasonable request to the Issuer and the Guarantors by the Initial Purchasers or with the reasonable request in writing to the Issuer by one or more Participating Broker-Dealers; and provided further that, in connection with such application of the Shelf Registration procedures set forth in Section 3 to an Exchange Offer Registration, the Issuer and the Guarantors shall be obligated to deal only with one entity representing the Participating Broker-Dealers, which shall be Morgan Stanley & Co. Incorporated or such other representative as is designated by a majority in interest of the Participating Broker-Dealers if Morgan Stanley & Co. Incorporated elects not to act as such representative, and shall not be obligated to pay the fees and expenses of any counsel representing the Participating Broker-Dealers.
5. Indemnification and Contribution.
(a) The Issuer and the Guarantors agree, jointly and severally, to indemnify and hold harmless each Holder and each Person, if any, who controls any Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, from and against all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by Holder or any such controlling Person in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to which Exchange Securities or Registrable Securities were registered under the 1933 Act, including all documents incorporated therein by reference, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or caused by any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (including any issuer free writing prospectus as defined in Rule 433 under the 1933 Act or any amendment or supplement thereto), or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Holder furnished to the Issuer in writing by or on behalf of any Holder expressly for use therein.
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(b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Issuer, the Guarantors and the other selling Holders, and each of their respective directors, officers who sign the Registration Statement and each Person, if any, who controls the Issuer, the Guarantors, or any other selling Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as the foregoing indemnity from the Issuer and the Guarantors to the Holders, but only with reference to information relating to such Holder furnished to the Issuer in writing by or on behalf of such Holder expressly for use in any Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto).
(c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above, such Person (the indemnified party) shall promptly notify the Person against whom such indemnity may be sought (the indemnifying party) in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the reasonable fees and disbursements of such counsel related to such proceeding. The indemnifying party may take the primary responsibility for supervising any such defense (with counsel reasonably satisfactory to the indemnified party), provided, however, that the indemnified party shall be promptly informed of all material developments with respect to such proceeding by the indemnifying party, the indemnified party shall have the right to ask reasonable questions of such counsel and the indemnifying party and, with respect to any matters that relate directly to such indemnified party in such proceedings, shall be consulted by the indemnifying party. Notwithstanding the foregoing, in any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all of the indemnified parties who are party to such action, and that all such fees and expenses shall be reimbursed as they are incurred. In such case involving the Holders and such Persons who control Holders, such firm shall be designated in writing by the Majority Holders. In all other cases, such firm shall be designated by the Issuer. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but, if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which such indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding.
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(d) If the indemnification provided for in paragraph (a) or paragraph (b) of this Section 5 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities (other than by reason of the exceptions provided in these paragraphs), then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Issuer, the Guarantors and the Holders shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuer, the Guarantors or by the Holders and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Holders respective obligations to contribute pursuant to this Section 5(d) are several in proportion to the respective principal amount of Registrable Securities of such Holder that were registered pursuant to a Registration Statement.
(e) The Issuer, the Guarantors and each Holder agree that it would not be just or equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 5, no Holder shall be required to indemnify or contribute any amount in excess of the amount by which the dollar amount of the gross proceeds (before deducting any commissions or other fees or expenses) received by such Holder from the sale of the Registrable Securities by such Holder exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 5 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this Section 5 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Holder or any Person controlling any Holder, or by or on behalf of the Issuer, the Guarantors, their respective officers or directors or any Person controlling the Issuer or the Guarantors, (iii) acceptance of any of the Exchange Securities and (iv) any sale of Registrable Securities pursuant to a Shelf Registration Statement.
6. Miscellaneous.
(a) No Inconsistent Agreements. The Issuer and the Guarantors have not entered into, and on or after the date of this Agreement will not enter into, any agreement which is
17
inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Issuers or the Guarantors other issued and outstanding securities under any agreement in effect on the date hereof.
(b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Issuer and the Guarantors have obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or consent; provided, however, that no amendment, modification, supplement, waiver or consent to any departure from the provisions of Section 5 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder. Notwithstanding the foregoing, (i) a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer or registered pursuant to a Shelf Registration Statement and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer or registered pursuant to a Shelf Registration Statement may be given by the Holders of a majority of the outstanding principal amount of Registrable Securities being so tendered or registered and (ii) no consent is necessary from any Holder in the event that this Agreement is amended, modified or supplemented for the purpose of curing any ambiguity, defect or inconsistency that does not adversely affect the rights of any Holder.
(c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most current address given by such Holder to the Issuer or the Guarantors by means of a notice given in accordance with the provisions of this Section 6(c), which address initially is, with respect to the Initial Purchasers, the address set forth in the Purchase Agreement and, with respect to any other Holder, the address set forth on the records of the registrar under the Indenture; and (ii) if to the Issuer and the Guarantors, at the Issuers address set forth in the Purchase Agreement, notice of which is given in accordance with the provisions of this Section 6(c), with a copy to Ropes & Gray LLP, 800 Boylston Street, Boston, Massachusetts 02199, Phone: (617) 951-7000, Fax: (617) 951-7050, Attention: Joel F. Freedman, Esq.
All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to a courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall be concurrently delivered by the Person giving the same to the Trustee, at the address specified in the Indenture.
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(d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders of Registrable Securities; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement. If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. The Initial Purchasers (in their capacity as Initial Purchasers) shall have no liability or obligation to the Issuer or the Guarantors with respect to any failure by a Holder to comply with, or any breach by any Holder of, any of the obligations of such Holder under this Agreement.
(e) Purchases and Sales of Securities. The Issuer and the Guarantors shall not purchase and then resell or otherwise transfer any Securities in violation of the 1933 Act.
(f) Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder between the Issuer and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. This Agreement shall be governed by the laws of the State of New York.
(j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Issuer and the Guarantors with respect to the Registrable Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
Very truly yours, | ||
Issuer: | ||
GIRAFFE ACQUISITION CORPORATION | ||
By: | /s/ Jordan Hitch | |
Name: Jordan Hitch | ||
Title: Vice President and Secretary |
Signature Page to Registration Rights Agreement
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Credit Suisse Securities (USA) LLC
Acting severally on behalf of themselves and the several Initial Purchasers named in Schedule I to the Purchase Agreement.
By: | Morgan Stanley & Co. Incorporated | |
By: | /s/ Fred Stupart | |
Name: Fred Stupart | ||
Title: | ||
By: | Credit Suisse Securities (USA) LLC | |
By: | /s/ Mark W. Filipski | |
Name: Mark W. Filipski | ||
Title: Managing Director |
Signature Page to Registration Rights Agreement
EXHIBIT A
JOINDER AGREEMENT TO REGISTRATION RIGHTS AGREEMENT
Reference is hereby made to the Registration Rights Agreement, dated November 23, 2010 (the Registration Rights Agreement), by and among Giraffe Acquisition Corporation (MergerCo), the Initial Purchasers named therein and the other parties thereto. Unless otherwise defined herein, terms defined in the Registration Rights Agreement and used herein shall have the meanings given them in the Registration Rights Agreement.
Each of the undersigned parties hereby unconditionally and irrevocably expressly assumes, confirms and agrees to perform and observe as the Issuer or a Guarantor (as applicable) each and any of the covenants, agreements, terms, conditions, obligations, appointments, duties, promises and liabilities of the Issuer or a Guarantor (as applicable) under the Registration Rights Agreement as if it were an original signatory thereto.
Each of the undersigned hereby agrees to promptly execute and deliver any and all further documents and take such further action as any other undersigned party or the Initial Purchasers may reasonably require to effect the purpose of this Joinder Agreement.
This Joinder Agreement shall be governed by and construed in accordance with the laws of the State of New York.
[Signature Page Follows]
IN WITNESS WHEREOF, the undersigned have executed this Joinder Agreement this [ ] day of November, 2010.
The Gymboree Corporation
By: |
| |
Name: | ||
Title: | ||
[Guarantor] | ||
By: |
| |
Name: | ||
Title: |
[Registration Rights Joinder Agreement]
Exhibit 4.3.1
JOINDER AGREEMENT TO REGISTRATION RIGHTS AGREEMENT
Reference is hereby made to the Registration Rights Agreement, dated November 23, 2010 (the Registration Rights Agreement), by and among Giraffe Acquisition Corporation (MergerCo), the Initial Purchasers named therein and the other parties thereto. Unless otherwise defined herein, terms defined in the Registration Rights Agreement and used herein shall have the meanings given them in the Registration Rights Agreement.
Each of the undersigned parties hereby unconditionally and irrevocably expressly assumes, confirms and agrees to perform and observe as the Issuer or a Guarantor (as applicable) each and any of the covenants, agreements, terms, conditions, obligations, appointments, duties, promises and liabilities of the Issuer or a Guarantor (as applicable) under the Registration Rights Agreement as if it were an original signatory thereto.
Each of the undersigned hereby agrees to promptly execute and deliver any and all further documents and take such further action as any other undersigned party or the Initial Purchasers may reasonably require to effect the purpose of this Joinder Agreement.
This Joinder Agreement shall be governed by and construed in accordance with the laws of the State of New York.
[Signature Page Follows]
IN WITNESS WHEREOF, the undersigned have executed this Joinder Agreement this 23rd day of November, 2010.
THE GYMBOREE CORPORATION | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
GYM-CARD, LLC | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
GYM-MARK, INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
GYMBOREE MANUFACTURING, INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
GYMBOREE OPERATIONS, INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
GYMBOREE PLAY PROGRAMS, INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
GYMBOREE RETAIL STORES, INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
S.C.C. WHOLESALE, INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer |
Exhibit 5.1
May 16, 2011
The Gymboree Corporation
500 Howard Street
San Francisco, California 94105
Ladies and Gentlemen:
We have acted as counsel to The Gymboree Corporation, a Delaware corporation (the Issuer), each of the subsidiaries of the Company listed on Schedule I hereto (such listed subsidiaries, the California Guarantors), and the other subsidiary listed on Schedule II hereto (such listed subsidiary, the Other Guarantor and, together with the California Guarantors, collectively, the Guarantors) in connection with the registration statement on Form S-4 (the Registration Statement) filed by the Issuer and the Guarantors with the Securities and Exchange Commission (the Commission) under the Securities Act of 1933, as amended (the Securities Act). The Registration Statement includes a prospectus (the Prospectus) which provides for the issuance by the Issuer in an exchange offer (the Exchange Offer) of $400,000,000 aggregate principal amount of 9.125% Senior Notes due 2018 (the Exchange Notes). The Exchange Notes will be offered by the Issuer in exchange for a like principal amount of the Issuers outstanding 9.125% Senior Notes due 2018 (the Outstanding Notes). The Exchange Notes are to be issued pursuant to an Indenture, dated as of November 23, 2010 (the Base Indenture), by and between the Issuer (as successor to Giraffe Acquisition Corporation) and Deutsche Bank Trust Company Americas, as trustee (the Trustee), as supplemented by the Supplemental Indenture, dated as of November 23, 2010 (the Supplemental Indenture), by and among the Issuer, the Guarantors party thereto from time to time and the Trustee (the Base Indenture, as supplemented by the Supplemental Indenture, the Indenture). Payment of the Exchange Notes will be guaranteed by the Guarantors pursuant to Article 10 of the Indenture (the Guarantees).
In connection with this opinion, we have examined the Registration Statement and the Indenture, which is being filed with the Commission as an exhibit to the Registration Statement. We have also examined such certificates, documents and records and have made such investigation of fact and such examination of law as we have deemed appropriate in order to enable us to render the opinions set forth herein. In conducting our investigation, we have relied, without independent verification, on the accuracy of
The Gymboree Corporation | May 16, 2011 |
certificates of public officials, officers and representatives of the Issuer, the Guarantors and other appropriate persons.
In rendering the opinions set forth below, we have assumed that the Indenture is the valid and binding obligation of the Trustee.
The opinions expressed herein are limited to matters governed by the laws of the State of New York, the California Corporations Code, the General Corporation Law of the State of Delaware and the federal laws of the United States of America. Insofar as the opinions expressed below relate to or are dependent upon matters governed by the laws of the State of Virginia, we have relied, without independent investigation, upon the opinion to you dated the date hereof of Holland & Knight LLP.
Based upon the foregoing and subject to the additional qualifications set forth below, we are of the opinion that:
1. When the Exchange Notes have been duly executed, authenticated and issued in accordance with the provisions of the Indenture and have been delivered against receipt of the Outstanding Notes surrendered in exchange therefor upon completion of the Exchange Offer, the Exchange Notes will constitute valid and binding obligations of the Issuer, enforceable against the Issuer in accordance with their terms.
2. When the Exchange Notes have been duly executed, authenticated and issued in accordance with the provisions of the Indenture and have been delivered against receipt of the Outstanding Notes surrendered in exchange therefor upon completion of the Exchange Offer, the Guarantees will constitute valid and binding obligations of the Guarantors, enforceable against the Guarantors in accordance with their terms.
Our opinions set forth above are subject to (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other laws of general application affecting the rights and remedies of creditors and secured parties and (ii) general principles of equity.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and the use of our name under the caption Legal Matters in the Prospectus. By giving the foregoing consent, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act.
Very truly yours,
/s/ Ropes & Gray LLP
Ropes & Gray LLP
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SCHEDULE I
California Guarantors
1. Gymboree Manufacturing, Inc., a California corporation.
2. Gym-Mark, Inc., a California corporation.
3. Gymboree Retail Stores, Inc., a California corporation.
4. Gymboree Play Programs, Inc., a California corporation.
5. Gymboree Operations, Inc., a California corporation.
6. S.C.C. Wholesale, Inc., a California corporation.
SCHEDULE II
Other Guarantor
1. Gym-Card, LLC, a Virginia limited liability company.
Exhibit 5.2
May 16, 2011
The Gymboree Corporation
500 Howard Street
San Francisco, California 94105
Ladies and Gentlemen:
This opinion is furnished to you in connection with the registration statement on Form S-4 (the Registration Statement) filed by The Gymboree Corporation, a Delaware corporation (the Issuer), and certain subsidiaries of the Issuer (the Guarantors) with the Securities and Exchange Commission (the Commission) under the Securities Act of 1933, as amended (the Securities Act). The Registration Statement includes a prospectus (the Prospectus) which provides for the issuance by the Issuer in an exchange offer (the Exchange Offer) of $400,000,000 aggregate principal amount of 9.125% Senior Notes due 2018 (the Exchange Notes). The Exchange Notes will be offered by the Issuer in exchange for a like principal amount of the Issuers outstanding 9.125% Senior Notes due 2018 (the Outstanding Notes). The Exchange Notes are to be issued pursuant to an Indenture, dated as of November 23, 2010 (the Base Indenture), by and between the Issuer (as successor to Giraffe Acquisition Corporation) and Deutsche Bank Trust Company Americas, as trustee (the Trustee), as supplemented by the Supplemental Indenture, dated as of November 23, 2010 (the Supplemental Indenture), by and among the Issuer, the Guarantors party thereto from time to time and the Trustee (the Base Indenture, as supplemented by the Supplemental Indenture, the Indenture). Payment of the Exchange Notes will be guaranteed by the Guarantors pursuant to Article 10 of the Indenture (the Guarantees).
We have acted as counsel to the Issuer with respect to its subsidiary, Gym-Card, LLC, a Virginia limited liability company (the Company) and one of the Guarantors, in connection with the Indenture.
In connection with this opinion, we have examined the Indenture, which is being filed with the Commission as an exhibit to the Registration Statement. We have also examined such certificates, documents and records as we have deemed appropriate in order to enable us to render the opinions set forth herein. In such examination, we have assumed, without inquiry or investigation, (i) the legal capacity of each natural person, (ii) the authenticity of original documents and the genuineness of all signatures, (iii) the conformity to the originals of all documents submitted to us as copies, (iv) the truth, accuracy and completeness of the information, representations and warranties contained in the records, documents, instruments and certificates we have reviewed, (v) that there has been no undisclosed waiver of any right, remedy or provision contained in any such documents and (vi) that each transaction complies with all tests of good faith, fairness and conscionability required by law.
The Gymboree Corporation
May 16, 2011
Page 2
Based upon the foregoing and subject to the additional qualifications set forth below, we are of the opinion that the Company has been formed and is existing and in good standing under the laws of the Commonwealth of Virginia, has the limited liability company power to perform its obligations under the Guarantees, and has taken all limited liability company action to authorize its performance of the Guarantees.
With respect to our opinion that the Company has been formed and is existing and in good standing under the laws of the Commonwealth of Virginia, we have relied exclusively on a certificate of the Virginia State Corporation Commission dated May 9, 2011, which with your permission we assume remains accurate as of the date hereof.
Our opinions set forth above are subject to (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other laws of general application affecting the rights and remedies of creditors and secured parties and (ii) general principles of equity. This opinion letter is based, as to matters of law, solely on such internal law of the Commonwealth of Virginia (but not including any statutes, ordinances, administrative decisions, rules or regulations of any political subdivision of such jurisdiction) that, in our experience, is normally applicable to a transaction of the type contemplated by the Indenture and to the parties thereto; we are expressing no opinion as to the effect of the laws of any other jurisdiction.
This opinion is given as of the date hereof, and we assume no obligation to update or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in laws that may hereafter occur.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and the use of our name under the caption Legal Matters in the Prospectus. By giving the foregoing consent, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission thereunder. Ropes & Gray LLP may rely on this opinion in connection with delivering an opinion regarding the Exchange Offer.
Very truly yours,
/s/ Holland & Knight LLP
Holland & Knight LLP
Exhibit 10.5
THE GYMBOREE CORPORATION
EXECUTIVE BONUS PLAN
The purpose of this Executive Bonus Plan (the Plan) is to provide incentives for certain executives and other key employees of The Gymboree Corporation (the Company) to achieve a sustained, high level of financial success and other measures of success for the Company.
I. ADMINISTRATION
The Plan will be administered by the Compensation Committee of the Board of Directors of the Company. The Compensation Committee or subcommittee administering the Plan is referred to herein as the Committee. The Committee may delegate to other persons administrative functions that do not involve discretion. The Committee shall have the authority to interpret this Plan, and any interpretation or decision by the Committee with regard to any questions arising under the Plan shall be final and conclusive on all participants in the Plan.
II. ELIGIBILITY; PARTICIPANTS
The Committee shall select, from among those eligible employees (including executive officers and other key employees of the Company), the persons who shall from time to time participate in the Plan. Participation by an individual with respect to one award under the Plan shall not entitle the individual to participate with respect to subsequent awards, if any.
III. GRANT OF AWARDS
The term Award as used in the Plan means a cash award opportunity that is granted to a Participant with respect to the performance period (the Performance Period) to which the Award relates. A Participant who is granted an Award shall be entitled to a payment, if any, under the Award only if all conditions to payment have been satisfied in accordance with the Plan and the terms of the Award. Except as otherwise specified by the Committee in connection with the grant of an Award, the Performance Period applicable to Awards under the Plan shall be the fiscal year of the Company. The Committee shall select the Participants, if any, who are to receive Awards for such Performance Period and, in the case of each Award, shall establish the Performance Goals (as defined in Section IV below) applicable to the Award; the amount or amounts that will be payable (subject to adjustment in accordance with Section V) if the Performance Goals are achieved; and such other terms and conditions as the Committee deems appropriate with respect to the Award.
IV. PERFORMANCE GOALS
As used in the Plan, the term Performance Goal means any financial or other measure of performance (including individual performance) established by the Committee. An Award may specify more than one Performance Goal and, with respect to any Performance Goal, may specify levels of achievement at which different levels of payment may be earned.
V. AMOUNT PAYABLE UNDER AWARDS
Following the close of a Performance Period, the Committee shall determine whether and to what extent, if at all, the Performance Goal or Goals applicable to each Award granted for the Performance Period have been satisfied. The Committee shall then determine the actual payment, if any, under each Award. The Committee may, in its sole and absolute discretion and with or without specifying its reasons for doing so, adjust the amount payable under an Award for a Performance Period, including, without limitation, by reducing the actual payment to be made under such Award to zero. The Committee may exercise the discretion described in the immediately preceding sentence either in individual cases or in ways that affect more than one Participant.
VI. PAYMENT UNDER AWARDS
Except as otherwise provided in this Section VI, all payments under the Plan will be made after the right to payment vests and in all events by March 15 of the calendar year following the calendar year in which the right to payment vests (or, if later, by the 15th day of the third month following the end of the Companys taxable year in which the right to payment vests). For purposes of the foregoing sentence, a right to payment will be treated as having vested when it is no longer subject to a substantial risk of forfeiture. Payments hereunder are intended to fall under the short-term deferral exception to Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (Section 409A), and shall be construed and administered accordingly. Notwithstanding the foregoing, (i) if the documentation establishing the Award provides a specified and objectively determinable payment date or schedule that satisfies the requirements of Section 409A, payment under an award may be made in accordance with such date or schedule, and (ii) the Committee may, but need not, permit a participant to defer payment of an Award beyond the date that the Award would otherwise be payable, provided that any such deferral shall be made in accordance with and subject to the applicable requirements of Section 409A.
VII. MISCELLANEOUS
(a) All payments under the Plan shall be subject to reduction for applicable tax and other legally or contractually required withholdings.
(b) The Committee may amend the Plan at any time and from time to time. The Committee may at any time terminate the Plan.
(c) Except as otherwise determined by the Committee, no payment shall be made under an Award unless the Participant is employed by the Company on the last day of the Performance Period applicable to the Award.
(d) No person shall have any claim or right to be granted an Award, nor shall the selection for participation in the Plan for any Performance Period be construed as giving a Participant the right to be retained in the employ of the Company for that Performance Period or for any other period.
Exhibit 10.8
Execution Version
REFINANCING AMENDMENT, AGREEMENT AND JOINDER
REFINANCING AMENDMENT, AGREEMENT AND JOINDER, dated as of February 11, 2011 (this Refinancing Amendment and Agreement), in respect of the Credit Agreement, dated as of November 23, 2010, among Giraffe Acquisition Corporation (which on the Closing Date was merged with and into The Gymboree Corporation, with The Gymboree Corporation surviving such merger), The Gymboree Corporation, Giraffe Intermediate B, Inc., the other Guarantors party thereto, the Lenders party thereto and Credit Suisse AG, Cayman Islands Branch, as Administrative Agent and Collateral Agent (as in effect immediately prior to giving effect to the Amendment and Restatement (as defined below), the Existing Credit Agreement).
WHEREAS, the Borrower desires, pursuant to Section 2.20 of the Existing Credit Agreement), to obtain Credit Agreement Refinancing Indebtedness in respect of all of the Term Loans outstanding under the Existing Credit Agreement as of the Restatement Effective Date (the Existing Term Loans), and to prepay in full such Existing Term Loans and all other Obligations in respect thereof on the Restatement Effective Date (as defined below) (the Refinancing); and
WHEREAS, the New Lenders (as defined below) have agreed to provide such Credit Agreement Refinancing Indebtedness in the form of Other Term Loans (as defined in the Existing Credit Agreement), in accordance with the terms and conditions set forth herein and in the Existing Credit Agreement; and
WHEREAS, the Refinancing constitutes a Repricing Transaction (as defined in the Existing Credit Agreement) in respect of the Existing Term Loans; and
WHEREAS, the Borrower, Holdings and the New Lenders have agreed to amend and restate the Existing Credit Agreement in its entirety in the form attached hereto as Exhibit A;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Defined Terms; References. (a) Unless otherwise specifically defined herein, each term used herein which is defined in the Restated Credit Agreement (as defined below) has the meaning assigned to such term in the Restated Credit Agreement. Each reference to hereof, hereunder, herein and hereby and each other similar reference and each reference to this Agreement and each other similar reference contained in the Existing Credit Agreement shall, after the Restatement Effective Date, refer to the Existing Credit Agreement as amended and restated hereby.
(b) As used in this Refinancing Amendment and Agreement, the following terms have the meanings specified below:
Amendment and Restatement shall mean the amendment and restatement of the Existing Credit Agreement on the Restatement Effective Date, in accordance with Section 3 of
this Refinancing Amendment and Agreement and subject to the conditions set forth in Section 8 of this Refinancing Amendment and Agreement.
Existing Lender shall mean a Lender with an Existing Term Loan on the Restatement Effective Date, immediately prior to giving effect to the Refinancing Amendment and Agreement and the Amendment and Restatement.
Existing Term Loan Prepayment Amount shall mean, for each Existing Lender, the sum of (i) the aggregate principal amount of Existing Term Loans owing to such Existing Lender on the Restatement Effective Date plus (ii) all accrued and unpaid interest on such Existing Lenders Existing Term Loans plus (iii) the amounts payable to such Existing Lender in respect of its Existing Term Loans pursuant to Section 2.12(d) of the Existing Credit Agreement plus (iv) any other amounts owing to such Existing Lender under the Loan Documents as of the Restatement Effective Date, including any amounts owing pursuant to Section 3.05 of the Existing Credit Agreement.
Restated Credit Agreement shall mean the Amended and Restated Credit Agreement, in the form attached hereto as Exhibit A.
Restatement Effective Date shall have the meaning assigned to such term in Section 8 hereof.
Section 2. Restatement Effective Date Transactions.
(a) With effect from and including the Restatement Effective Date, each Person identified on the signature pages hereof as a New Lender (each, a New Lender) shall become party to the Restated Credit Agreement as a Lender, shall have an Other Term Loan Commitment in the amount set forth on Schedule 1 hereto and shall have all of the rights and obligations of a Lender and a Term Lender under the Restated Credit Agreement and the other Loan Documents.
(b) On the Restatement Effective Date, each Existing Lender shall cease to be a Lender party to the Existing Credit Agreement (and, for the avoidance of doubt, shall not be a party to the Restated Credit Agreement (except to the extent that it shall subsequently become party thereto pursuant to an assignment and assumption entered into with any Lender in accordance with the terms of the Restated Credit Agreement or otherwise)), and all accrued fees and other amounts payable under the Existing Credit Agreement for the account of each Existing Lender shall be due and payable on such date; provided that the provisions of Sections 3.01, 3.04, 3.05 and 10.05 of the Existing Credit Agreement shall continue to inure to the benefit of each Existing Lender after the Restatement Effective Date.
(c) On the Restatement Effective Date:
(i) Each New Lender, severally and not jointly, shall make an Other Term Loan to the Borrower in accordance with this Section 2(c) and Section 2.02 of the Existing Credit Agreement by delivering to the Administrative Agent immediately available funds in an amount equal to its Other Term Loan Commitment;
(ii) the Borrower shall prepay in full the Existing Term Loans by:
(A) delivering to the Administrative Agent an amount equal to the excess of (1) the aggregate of the Existing Term Loan Prepayment Amounts for all of the Existing Lenders over (2) the aggregate amount of the Other Term Loan Commitments (such excess, the Borrowers Payment); and
(B) directing the Administrative Agent to apply the funds made available to the Administrative Agent pursuant to Section 2(c)(i) hereof (the Lender Funding Amount), along with the Borrowers Payment, to prepay in full the Existing Term Loans; and
(iii) the Administrative Agent shall apply the Lender Funding Amount and the Borrowers Payment to pay to each Existing Lender an amount equal to such Existing Lenders Existing Term Loan Prepayment Amount;
(iv) The transactions described in the preceding clauses (i), (ii) and (iii) shall be deemed to occur immediately prior to the effectiveness of the amendment and restatement of the Existing Credit Agreement pursuant to Section 3(a) hereof.
(d) Each Other Term Loan made on the Restatement Effective Date pursuant to Section 2(c) shall constitute a Eurodollar Term Loan having an initial Interest Period of one month.
Section 3. Amendment and Restatement; Borrowings on Restatement Effective Date. (a) Each of the parties hereto irrevocably agrees that on the Restatement Effective Date, but subject to the proviso to Section 8 hereof, the Existing Credit Agreement (but excluding the Schedules (other than a new Schedule 2.01) and Exhibits thereto) shall be amended and restated to read as set forth in Exhibit A attached hereto (the Amendment and Restatement).
(b) With effect from the effectiveness of the Amendment and Restatement, each Other Term Loan made on the Restatement Effective Date in accordance with Section 2(c) hereof shall constitute, for all purposes of the Restated Credit Agreement, a Term Loan made pursuant to the Restated Credit Agreement and this Refinancing Amendment and Agreement; provided, that pursuant to the Amendment and Restatement, each such Other Term Loan shall constitute an Initial Term Loan for all purposes of the Restated Credit Agreement, and all provisions of the Restated Credit Agreement applicable to Initial Term Loans shall be applicable to such Other Term Loans.
(c) The Other Term Loan Commitments provided for hereunder shall terminate on the Restatement Effective Date immediately upon the borrowing of the Other Term Loans pursuant to Section 2(c).
Section 4. Effect of Amendment and Restatement; Reaffirmation; Etc. (a) Except as expressly set forth herein or in the Restated Credit Agreement, this Refinancing Amendment and Agreement shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Lenders or the Agents under the Existing Credit Agreement or under any other Loan Document and shall not alter, modify, amend or in any way affect any
of the terms, conditions, obligations, covenants or agreements contained in the Existing Credit Agreement or any other provision of the Existing Credit Agreement or of any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Without limiting the foregoing, (i) each Loan Party acknowledges and agrees that (A) each Loan Document to which it is a party is hereby confirmed and ratified and shall remain in full force and effect according to its respective terms (in the case of the Existing Credit Agreement, as amended pursuant to the Amendment and Restatement) and (B) the Collateral Documents do, and all of the Collateral does, and in each case shall continue to, secure the payment of all Secured Obligations (as defined in the Security Agreement) (including, for the avoidance of doubt, the Other Term Loans made on the Restatement Effective Date) on the terms and conditions set forth in the Collateral Documents, and hereby ratifies the security interests granted by it pursuant to the Collateral Documents and (ii) each Guarantor hereby confirms and ratifies its continuing unconditional obligations as Guarantor under Article 11 of the Existing Credit Agreement and the Restated Credit Agreement with respect to all of the Guaranteed Obligations (including, for the avoidance of doubt, the Other Term Loans made on the Restatement Effective Date).
(b) This Refinancing Amendment and Agreement constitutes a Refinancing Amendment (as defined in the Existing Credit Agreement).
Section 5. Representations of Borrower. Each of the Loan Parties hereby represents and warrants that, immediately prior to and immediately after giving effect to the transactions contemplated by this Refinancing Amendment and Agreement, including the borrowing of Other Term Loans provided for herein and the Amendment and Restatement:
(a) the representations and warranties set forth in Article 5 of the Restated Credit Agreement and in each other Loan Document shall be true and correct in all material respects on and as of the Restatement Effective Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date; provided, that any such representation and warranty that is qualified by materiality, material adverse effect or similar language shall be true and correct in all respects (after giving effect to such qualification therein) on and as of the Restatement Effective Date with the same effect as though made on and as of such date or such earlier date, as applicable; and
(b) no Default shall exist or would result from the transactions contemplated by this Refinancing Amendment and Agreement, including the borrowing of Other Term Loans and the Amendment and Restatement.
Section 6. Governing Law. THIS REFINANCING AMENDMENT AND AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
Section 7. Counterparts. This Refinancing Amendment and 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 signature page to this Refinancing Amendment and Agreement by facsimile or electronic transmission shall be as effective as delivery of a manually signed counterpart of this Refinancing Amendment and Agreement.
Section 8. Effectiveness. This Refinancing Amendment and Agreement shall become effective on the date (the Restatement Effective Date) when each of the following conditions shall have been satisfied:
(a) the Administrative Agent shall have received from each Loan Party, the Administrative Agent and each New Lender either (i) a counterpart of the Refinancing Amendment and Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy or electronic transmission of a signed signature page of the Amendment) that such party has signed a counterpart of the Amendment;
(b) the Borrower shall have paid all fees due and payable to Credit Suisse Securities (USA) LLC (CS Securities) pursuant to that certain engagement letter, dated as of February 2, 2011, between the Borrower and CS Securities;
(c) the Administrative Agent shall have received all fees and expenses due and payable on or prior to the Restatement Effective Date under the Existing Credit Agreement or any other Loan Document, including, to the extent invoiced at least two Business Days prior to the Restatement Effective Date (except as otherwise reasonably agreed by the Borrower), reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower under the Existing Credit Agreement or any other Loan Document;
(d) the aggregate amount of Other Term Loan Commitments shall be equal to $820,000,000;
(e) the Administrative Agent shall have received from the Borrower the Borrowers Payment;
(f) the Administrative Agent and each New Lender shall have received on or prior to the Restatement Effective Date, all documentation and other information about the Borrower and the Guarantors required under applicable know your customer and anti-money laundering rules and regulations, including without limitation the USA PATRIOT Act, that has been requested in writing at least 3 days prior to the Restatement Effective Date; and
(g) the representations and warranties set forth in Section 5 of this Refinancing Amendment shall be true and correct; and
(h) the Administrative Agent shall have received:
(i) a certificate as to the good standing (where relevant) of each Loan Party as of a recent date, from such Secretary of State of the state of its organization or similar Governmental Authority;
(ii) a true and complete copy of resolutions duly adopted by the board of directors (or equivalent governing body) of such Loan Party authorizing the execution, delivery and performance of this Refinancing Amendment and Agreement and the Restated Credit Agreement, including (in the case of the Borrower), the borrowing of the Other Term Loans contemplated under this Refinancing Amendment and Agreement; and
(iii) an opinion of Ropes & Gray LLP, counsel for the Loan Parties, in form and substance reasonably satisfactory to the Administrative Agent, as to such matters as the Administrative Agent shall reasonably request,
in each of cases (i) (iii) (to the extent applicable), consistent with those delivered on the Closing Date pursuant to Section 4.02 of the Existing Credit Agreement (other than changes to such legal opinion resulting from a change in law, change in fact or change to counsels form of opinion reasonably satisfactory to the Administrative Agent),
provided, that (x) it shall be a further condition precedent to the effectiveness of this Refinancing Amendment and Agreement and to the obligation of each New Lender to make the Other Term Loan to be made by it pursuant to Section 2(c)(i) that the conditions set forth in Section 4.01 of the Existing Credit Agreement shall be satisfied and (y) it shall be a further condition precedent to the effectiveness of the Amendment and Restatement that the Lender Funding Amount shall have been received and all payments contemplated by Section 2(c)(iii) shall have been made.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Refinancing Amendment and Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
Borrower: | ||
THE GYMBOREE CORPORATION | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer |
SIGNATURE PAGE TO AMENDMENT
Guarantors: | ||
GIRAFFE INTERMEDIATE B, INC. | ||
By: | /s/ Jordan Hitch | |
Name: Jordan Hitch | ||
Title: Secretary and Vice President | ||
GYMBOREE RETAIL STORES, INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
GYMBOREE MANUFACTURING, INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
GYMBOREE OPERATIONS, INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
GYM-MARK, INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer |
GYMBOREE PLAY PROGRAMS, INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
S.C.C. WHOLESALE INC. | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer | ||
GYM-CARD, LLC | ||
By: | /s/ Jeffrey P. Harris | |
Name: Jeffrey P. Harris | ||
Title: Chief Financial Officer |
SIGNATURE PAGE TO AMENDMENT
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Administrative Agent | ||
By | /s/ John D. Toronto | |
Name: John D. Toronto | ||
Title: Managing Director | ||
By | /s/ Vipul Dhadda | |
Name: Vipul Dhadda | ||
Title: Associate |
New Lender:
By executing this signature page, the institution referred to below hereby consents to the terms of the Restated Credit Agreement and elects to become a New Lender with an Other Term Loan Commitment in the amount set out in Schedule 1 on the Restatement Effective Date.
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Lender | ||
By | /s/ John D. Toronto | |
Name: John D. Toronto | ||
Title: Managing Director | ||
By | /s/ Vipul Dhadda | |
Name: Vipul Dhadda | ||
Title: Associate | ||
Credit Suisse AG, Cayman Islands Branch | ||
Att: Sean Portrait | ||
Eleven Madison Avenue | ||
New York, NY 10010 | ||
919 994 6369 (telephone) | ||
212-322-2291 (fax) | ||
agency.loanops@credit-suisse.com |
SIGNATURE PAGE TO AMENDMENT
Exhibit 10.9
Execution Version
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
February 11, 2011
among
THE GYMBOREE CORPORATION,
GIRAFFE INTERMEDIATE B, INC.,
THE OTHER GUARANTORS PARTY HERETO FROM TIME TO TIME,
THE LENDERS PARTY HERETO
and
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH,
as Administrative Agent and Collateral Agent
CREDIT SUISSE SECURITIES (USA) LLC,
as Sole Lead Arranger and Sole Bookrunner
TABLE OF CONTENTS
PAGE | ||||
ARTICLE 1 | ||||
DEFINITIONS | ||||
Section 1.01. Defined Terms |
2 | |||
Section 1.02. Other Interpretive Provisions |
58 | |||
Section 1.03. Accounting Terms |
59 | |||
Section 1.04. Rounding |
59 | |||
Section 1.05. References to Agreements, Laws, Etc. |
59 | |||
Section 1.06. Times of Day |
60 | |||
Section 1.07. Timing of Payment of Performance |
60 | |||
Section 1.08. Cumulative Credit Transactions |
60 | |||
Section 1.09. Pro Forma Calculations |
60 | |||
Section 1.10. Certain Accounting Matters |
62 | |||
Section 1.11. Classification of Loans and Borrowings |
62 | |||
Section 1.12. Currency Equivalents Generally |
62 | |||
ARTICLE 2 | ||||
THE CREDITS | ||||
Section 2.01. Commitments |
62 | |||
Section 2.02. Loans |
63 | |||
Section 2.03. Borrowing Procedure |
64 | |||
Section 2.04. Evidence of Debt; Repayment of Loans |
64 | |||
Section 2.05. Fees |
65 | |||
Section 2.06. Interest on Loans |
65 | |||
Section 2.07. Default Interest |
66 | |||
Section 2.08. Alternate Rate of Interest |
66 | |||
Section 2.09. Termination and Reduction of Commitments |
66 | |||
Section 2.10. Conversion and Continuation of Borrowings |
66 | |||
Section 2.11. Repayment of Term Borrowings |
68 | |||
Section 2.12. Voluntary Prepayment |
68 | |||
Section 2.13. Mandatory Prepayments |
69 | |||
Section 2.14. Pro Rata Treatment |
72 | |||
Section 2.15. Sharing of Setoffs |
73 | |||
Section 2.16. Payments |
73 | |||
Section 2.17. [Reserved] |
74 | |||
Section 2.18. [Reserved] |
74 | |||
Section 2.19. Incremental Credit Extensions |
74 | |||
Section 2.20. Refinancing Amendments |
76 | |||
Section 2.21. Extensions of Term Loans |
78 |
i
ARTICLE 3 | ||||
TAXES, INCREASED COSTS PROTECTION AND ILLEGALITY | ||||
Section 3.01. Taxes |
80 | |||
Section 3.02. Illegality |
84 | |||
Section 3.03. [Reserved] |
84 | |||
Section 3.04. Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurodollar Loans |
84 | |||
Section 3.05. Funding Losses |
86 | |||
Section 3.06. Matters Applicable to all Requests for Compensation |
86 | |||
Section 3.07. Replacement of Lenders under Certain Circumstances |
87 | |||
Section 3.08. Survival |
89 | |||
ARTICLE 4 | ||||
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS | ||||
Section 4.01. All Credit Extensions After The Closing Date |
89 | |||
Section 4.02. First Credit Extension |
90 | |||
Section 4.03. Conditions Precedent to the Effectiveness of the Amended Agreement |
94 | |||
ARTICLE 5 | ||||
REPRESENTATIONS AND WARRANTIES | ||||
Section 5.01. Existence, Qualification and Power; Compliance with Laws |
94 | |||
Section 5.02. Authorization; No Contravention |
95 | |||
Section 5.03. Governmental Authorization; Other Consents |
95 | |||
Section 5.04. Binding Effect |
95 | |||
Section 5.05. Financial Statements; No Material Adverse Effect |
95 | |||
Section 5.06. Litigation |
96 | |||
Section 5.07. Compliance With Laws; No Default |
97 | |||
Section 5.08. Ownership of Property; Liens; Casualty Events |
97 | |||
Section 5.09. Environmental Matters |
97 | |||
Section 5.10. Taxes |
98 | |||
Section 5.11. ERISA Compliance, Etc. |
98 | |||
Section 5.12. Subsidiaries |
99 | |||
Section 5.13. Margin Regulations; Investment Company Act |
99 | |||
Section 5.14. Disclosure |
100 | |||
Section 5.15. Labor Matters |
100 | |||
Section 5.16. Intellectual Property; Licenses, Etc. |
100 | |||
Section 5.17. Solvency |
101 | |||
Section 5.18. Subordination of Junior Financing |
101 | |||
Section 5.19. Collateral Documents |
101 |
ii
ARTICLE 6 | ||||
AFFIRMATIVE COVENANTS | ||||
Section 6.01. Financial Statements, Reports, Etc. |
103 | |||
Section 6.02. Certificates; Other Information |
105 | |||
Section 6.03. Notices |
106 | |||
Section 6.04. Payment of Obligations |
107 | |||
Section 6.05. Preservation of Existence, Etc. |
107 | |||
Section 6.06. Maintenance of Properties |
107 | |||
Section 6.07. Maintenance of Insurance |
107 | |||
Section 6.08. Compliance with Laws |
109 | |||
Section 6.09. Books and Records |
109 | |||
Section 6.10. Inspection Rights |
109 | |||
Section 6.11. Additional Collateral; Additional Guarantors |
110 | |||
Section 6.12. Compliance with Environmental Laws |
112 | |||
Section 6.13. Further Assurances and Post-Closing Conditions |
112 | |||
Section 6.14. Designation of Subsidiaries |
112 | |||
Section 6.15. Maintenance of Ratings |
113 | |||
ARTICLE 7 | ||||
NEGATIVE COVENANTS | ||||
Section 7.01. Liens |
113 | |||
Section 7.02. Investments |
118 | |||
Section 7.03. Indebtedness |
120 | |||
Section 7.04. Fundamental Changes |
124 | |||
Section 7.05. Dispositions |
125 | |||
Section 7.06. Restricted Payments |
128 | |||
Section 7.07. Change in Nature of Business |
131 | |||
Section 7.08. Transactions with Affiliates |
131 | |||
Section 7.09. Burdensome Agreements |
132 | |||
Section 7.10. Use of Proceeds |
133 | |||
Section 7.11. [Reserved] |
134 | |||
Section 7.12. Fiscal Year |
134 | |||
Section 7.13. Prepayments, Etc. of Indebtedness |
134 | |||
Section 7.14. Permitted Activities |
135 | |||
ARTICLE 8 | ||||
EVENTS OF DEFAULT AND REMEDIES | ||||
Section 8.01. Events of Default |
135 | |||
Section 8.02. Remedies Upon Event of Default |
138 | |||
Section 8.03. Exclusion of Immaterial Subsidiaries |
138 | |||
Section 8.04. Application of Funds |
139 |
iii
ARTICLE 9 | ||||
THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT | ||||
ARTICLE 10 | ||||
MISCELLANEOUS | ||||
Section 10.01. Notices; Electronic Communications |
142 | |||
Section 10.02. Survival of Agreement |
145 | |||
Section 10.03. Binding Effect |
146 | |||
Section 10.04. Successors and Assigns |
146 | |||
Section 10.05. Expenses; Indemnity |
152 | |||
Section 10.06. Right of Setoff |
154 | |||
Section 10.07. Applicable Law |
154 | |||
Section 10.08. Waivers; Amendment |
155 | |||
Section 10.09. Interest Rate Limitation |
157 | |||
Section 10.10. Entire Agreement |
157 | |||
Section 10.11. WAIVER OF JURY TRIAL |
157 | |||
Section 10.12. Severability |
158 | |||
Section 10.13. Counterparts |
158 | |||
Section 10.14. Headings |
158 | |||
Section 10.15. Jurisdiction; Consent to Service of Process |
158 | |||
Section 10.16. Confidentiality |
159 | |||
Section 10.17. Lender Action |
159 | |||
Section 10.18. USA PATRIOT Act Notice |
160 | |||
Section 10.19. Collateral And Guaranty Matters |
160 | |||
Section 10.20. Secured Hedge Agreements |
161 | |||
Section 10.21. Payments Set Aside |
161 | |||
Section 10.22. No Advisory or Fiduciary Responsibility |
161 | |||
Section 10.23. ABL Intercreditor Agreement |
162 | |||
ARTICLE 11 | ||||
GUARANTEE | ||||
Section 11.01. The Guarantee |
163 | |||
Section 11.02. Obligations Unconditional |
163 | |||
Section 11.03. Certain Waivers. Etc. |
164 | |||
Section 11.04. Reinstatement |
165 | |||
Section 11.05. Subrogation; Subordination |
165 | |||
Section 11.06. Remedies |
165 | |||
Section 11.07. Instrument for the Payment of Money |
166 | |||
Section 11.08. Continuing Guarantee |
166 | |||
Section 11.09. General Limitation on Guarantee Obligations |
166 | |||
Section 11.10. Release of Guarantors |
166 | |||
Section 11.11. Right of Contribution |
167 |
iv
Section 11.12. Additional Guarantor Waivers and Agreements |
167 |
v
SCHEDULES
1.01(a) |
Subsidiary Guarantors | |
1.01(b) |
Unrestricted Subsidiaries | |
2.01 |
Lenders and Commitments | |
4.02(c) |
Local Counsel Opinions | |
5.05 |
Certain Liabilities | |
5.12 |
Subsidiaries and Other Equity Interests | |
6.13(a) |
Certain Collateral Documents | |
6.13(c) |
Certain Liens | |
7.01(b) |
Existing Liens | |
7.02(f) |
Existing Investments | |
7.03(b) |
Existing Indebtedness | |
7.05(k) |
Dispositions | |
7.08 |
Transactions with Affiliates | |
7.09 |
Certain Contractual Obligations |
EXHIBITS
Exhibit A |
Form of Administrative Questionnaire | |
Exhibit B |
Form of Assignment and Acceptance | |
Exhibit C |
Form of Borrowing Request | |
Exhibit D |
Form of Security Agreement | |
Exhibit E |
[Reserved] | |
Exhibit F |
Form of Intercompany Note | |
Exhibit G-1 |
Form of Opinion of Ropes & Gray LLP | |
Exhibit G-2 |
Form of Local Counsel Opinion | |
Exhibit H |
Form of Compliance Certificate | |
Exhibit I-1 |
Form of United States Tax Compliance Certificate (For Non-U.S. Lenders that are not Partnerships) | |
Exhibit I-2 |
Form of United States Tax Compliance Certificate | |
(For Non-U.S. Lenders that are Partnerships) | ||
Exhibit I-3 |
Form of United States Tax Compliance Certificate | |
(For Non-U.S. Participants that are not Partnerships) | ||
Exhibit I-4 |
Form of United States Tax Compliance Certificate | |
(For Non-U.S. Participants that are Partnerships) | ||
Exhibit J |
Form of Solvency Certificate | |
Exhibit K |
Form of ABL Intercreditor Agreement | |
Exhibit L |
Form of Term Note | |
Exhibit M |
Auction Procedures |
vi
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of February 11, 2011, among THE GYMBOREE CORPORATION, a Delaware corporation (the Borrower or the Company), GIRAFFE INTERMEDIATE B, INC., a Delaware corporation (Holdings), the other Guarantors party hereto from time to time, the Lenders (such term and each other capitalized term used but not defined in this introductory statement having the meaning given it in Article 1), and CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as administrative agent (in such capacity, including any successor thereto, the Administrative Agent) and as collateral agent (in such capacity, including any successor thereto, the Collateral Agent) for the Lenders.
Pursuant to the Merger Agreement, Giraffe Acquisition Corporation, a Delaware corporation (Merger Sub) organized by the Sponsor and a wholly owned direct subsidiary of Holdings, acquired all of the Shares pursuant to a series of transactions in which, on the Closing Date (i) Merger Sub acquired, for a purchase price of $65.40 per share in cash (the Tender Consideration), those Shares that had been validly tendered and not withdrawn and accepted for payment (the Tendered Shares) pursuant to the Offer (as defined in the Merger Agreement), (ii) to effect a short-form merger under the Delaware General Corporation Law, Merger Sub acquired from the Company pursuant to the Top-Up Option (as defined in the Merger Agreement), for a purchase price of $65.40 per share paid in the manner specified in the Merger Agreement (the Top-Up Consideration), the lowest number of Shares that, when combined with the Tendered Shares and any other Shares then owned directly or indirectly by Holdings and Merger Sub, constituted one share more than 90% of the total Shares outstanding after giving effect to the Top-Up Option and (iii) Merger Sub merged with and into the Company with the Company being the surviving corporation (the Merger), and pursuant to the Merger each Share not acquired in the Tender Offer (other than Dissenting Shares (as defined in the Merger Agreement), Shares held by the Company in treasury and Shares held by subsidiaries of the Company) was converted into the right to receive $65.40 in cash (the Merger Consideration and, together with the Tender Consideration and the Top-Up Consideration, the Share Consideration).
The total cash required to finance the Share Consideration, to refinance or repay, redeem, defease or otherwise discharge the existing third party indebtedness of the Company and its subsidiaries under the BANA Credit Agreement (the Refinancing) and to pay related fees and expenses and other amounts contemplated under the Merger Agreement was approximately $1,745,000,000 (the Aggregate Consideration). In order to fund the Aggregate Consideration, (i) the Investors directly or indirectly made cash contributions in the form of common equity (the Equity Contribution) to Merger Sub (through Holdings) in an aggregate amount equal to, when combined with the fair market value of any equity of the Management Stockholders rolled over or invested in connection with the Transactions (such rollover amount, however, not exceeding $25,000,000), at least 30% of the Aggregate Consideration (after giving effect to the contribution of equity capital after the Closing Date contemplated by clause (iv)(A) below), (ii) Merger Sub issued $400,000,000 of its Senior Notes due 2018 (the Senior Notes) on the Closing Date (and, pursuant to the Merger and a supplemental indenture, the obligations of Merger Sub in respect of the Senior Notes were assumed by the Borrower on the Closing Date), (iii) the Borrower requested the Lenders to extend credit in the form of Term Loans on the
Closing Date, in an aggregate principal amount of $820,000,000 and (iv) the Borrower entered into the ABL Credit Agreement and made borrowings thereunder on the Closing Date (A) in an amount not exceeding $15,000,000, such amount to be repaid by the Borrower on or before the six (6) month anniversary of the Closing Date with cash proceeds of additional equity contributed after the Closing Date by the Management Stockholders or the Sponsor (such additional equity contribution, the Additional Post-Closing Equity Contribution) and (B) for working capital purposes of the Borrower and the Restricted Subsidiaries in an amount not exceeding $20,000,000, and had letters of credit issued thereunder on the Closing Date.
Simultaneously with the consummation of the Merger, the Company and Holdings entered into that certain Credit Agreement, dated as of November 23, 2010 (as in effect immediately prior to the Restatement Effective Date, the Existing Credit Agreement), with, inter alia, the lenders party thereto from time to time (the Existing Lenders), pursuant to which the Existing Lenders extended credit in the form of Term Loans on the Closing Date in an aggregate principal amount of $820,000,000 (the Existing Term Loans). The proceeds of the Existing Term Loans were used solely to finance a portion of the Aggregate Consideration payable on the Closing Date. Immediately prior to the Restatement Effective Date, Existing Term Loans in the aggregate principal amount of $820,000,000 were outstanding under the Existing Credit Agreement.
The Borrower desires to refinance the Existing Term Loans in full with Credit Agreement Refinancing Indebtedness pursuant to a Refinancing Amendment, and, in connection therewith, to amend and restate the Existing Credit Agreement in its entirety to, among other things, provide for such Credit Agreement Refinancing Indebtedness, which will take the form of a new tranche of senior secured term loans under this Agreement in an aggregate principal amount of $820,000,000, the proceeds of which shall be used to repay in full the Existing Term Loans.
The Borrower has requested that the Lenders amend and restate the Existing Credit Agreement in its entirety and make available the Initial Term Loans to the Company, in each case, as set forth in this Agreement.
The Lenders providing the Credit Agreement Refinancing Indebtedness referred to above are willing to amend and restate the Existing Credit Agreement on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Defined Terms. As used in this Agreement, the following terms shall have the meanings specified below:
ABL Agent shall mean Bank of America, N.A., in its capacity as administrative agent and collateral agent under the ABL Facility Documentation, or any successor administrative agent or collateral agent under the ABL Facility Documentation.
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ABL Credit Agreement shall mean that certain asset-based revolving credit agreement dated as of the Closing Date, among Holdings, the Borrower, the subsidiaries of the Borrower party thereto, the lenders party thereto and the ABL Agent, 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 and the ABL Intercreditor Agreement.
ABL Facility shall mean the asset-based revolving credit facility made available to the Borrower and certain of its Subsidiaries pursuant to the ABL Credit Agreement.
ABL Facility Documentation shall mean the ABL Credit Agreement and all security agreements, guarantees, pledge agreements and other agreements or instruments executed in connection therewith.
ABL Facility Indebtedness shall mean Indebtedness of Holdings, the Borrower or any Restricted Subsidiary outstanding under the ABL Facility Documentation.
ABL Intercreditor Agreement shall mean the intercreditor agreement dated as of the Closing Date among the Collateral Agent, the ABL Agent and the Loan Parties, substantially in the form attached as Exhibit K or any other intercreditor agreement among the ABL Agent, one or more Senior Representatives of Permitted First Priority Refinancing Debt or Permitted Second Priority Refinancing Debt and the Collateral Agent on terms that are no less favorable in any material respect to the Secured Parties as those contained in the form attached as Exhibit K.
ABL Priority Collateral shall have the meaning assigned to such term in the ABL Intercreditor Agreement.
ABL Secured Parties shall have the meaning assigned to such term in the ABL Intercreditor Agreement.
ABL Specified Equity Contribution shall have the meaning assigned to the term Specified Equity Contribution (or comparable term) in the ABL Credit Agreement.
ABR, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.
Additional Lender shall have the meaning assigned to such term in Section 2.19(c).
Additional Post-Closing Equity Contribution shall have the meaning assigned to such term in the introductory statement to this Agreement.
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Adjusted LIBO Rate shall mean, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum equal to the greater of (a) 1.50% per annum and (b) the product of (i) the LIBO Rate in effect for such Interest Period and (ii) Statutory Reserves.
Administrative Agent shall have the meaning assigned to such term in the introductory statement to this Agreement.
Administrative Questionnaire shall mean an Administrative Questionnaire in the form of Exhibit A, or such other form as may be supplied from time to time by the Administrative Agent.
Affiliate shall mean, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. Control shall mean 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.
Affiliated Lender shall mean, at any time, any Lender that is the Sponsor at such time; provided, that notwithstanding the foregoing, Affiliated Lender shall not include Holdings, the Borrower, any Subsidiary of Holdings or the Borrower, any Specified Debt Fund or any natural person.
Agents shall have the meaning assigned to such term in Article 9.
Aggregate Consideration shall have the meaning assigned to such term in the introductory statement to this Agreement.
Agreement or this Agreement shall mean the Existing Credit Agreement, as amended and restated on the Restatement Effective Date by this Amended Agreement, and as the same may be amended, supplemented or otherwise modified from time to time.
Alternate Base Rate shall mean, 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 Effective Rate in effect on such day plus 1/2 of 1% and (c) the Adjusted 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 1.00%; provided that, for the avoidance of doubt, the Adjusted LIBO Rate for any day shall be based on the rate determined on such day at approximately 11 a.m. (London time) by reference to the British Bankers Association Interest Settlement Rates for deposits in Dollars (as set forth by any service selected by the Administrative Agent that has been nominated by the British Bankers Association as an authorized vendor for the purpose of displaying such rates). If the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the Alternate Base Rate shall be determined
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without regard to clause (b) of the preceding sentence until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective on the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate, as the case may be.
Amended Agreement shall mean this Amended and Restated Credit Agreement.
Amendment Expenses shall mean any fees or expenses incurred or paid by Holdings or any of its Subsidiaries in connection with the Amendment Agreement and the refinancing of the Existing Term Loans.
Amendment Agreement shall mean the Refinancing Amendment, Agreement and Joinder in respect of the Existing Credit Agreement, dated as of the Restatement Effective Date, among the Loan Parties, the Lenders party thereto and the Administrative Agent.
Applicable ECF Percentage shall mean, for any fiscal year, (a) 50% if the Total Leverage Ratio as of the last day of such fiscal year is greater than 4.00:1.00, (b) 25% if the Total Leverage Ratio as of the last day of such fiscal year is less than or equal to 4.00:1.00 but is greater than 3.25:1.00, and (c) 0% if the Total Leverage Ratio as of the last day of such fiscal year is less than or equal to 3.25:1:00.
Applicable Margin shall mean, for any day (a) with respect to any Eurodollar Term Loan, 3.50% per annum and (b) with respect to any ABR Term Loan, 2.50% per annum.
Arrangers shall mean, (a) until the Restatement Effective Date, each of Credit Suisse Securities (USA) LLC and Morgan Stanley Senior Funding, Inc., in their capacity as joint bookrunners and joint lead arrangers in respect of the Existing Credit Agreement, and (b) on and after the Restatement Effective Date, Credit Suisse Securities (USA) LLC, in its capacity as sole bookrunner and sole lead arranger in respect of this Agreement.
Assignment and Acceptance shall mean an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in the form of Exhibit B or such other form as shall be approved by the Administrative Agent.
Attorney Costs shall mean and shall include all reasonable fees, expenses and disbursements of any law firm or other external legal counsel.
Attributable Indebtedness shall mean, on any date, in respect of any Capitalized Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP as in effect on the Closing Date.
Auction Manager shall mean Credit Suisse Securities (USA) LLC (CS Securities) (or, if CS Securities declines to act as Auction Manager, an investment bank of recognized
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standing selected by the Borrower), which shall be engaged to act in such capacity on terms and conditions reasonably satisfactory to CS Securities (or such other investment bank).
Auction Procedures shall mean the auction procedures with respect to non-pro rata assignments of Term Loans pursuant to Sections 10.04(k) and 10.04(m) set forth in Exhibit M hereto.
Audited Financial Statements shall mean the audited consolidated balance sheet of the Company and its consolidated subsidiaries for the fiscal years ending January 30, 2010, January 31, 2009 and February 2, 2008 and the related consolidated statements of income, changes in stockholders equity and cash flows of the Company and its consolidated subsidiaries.
Australian Dollars shall mean lawful money of Australia.
Average Monthly Balance means, as of any date of determination, with respect to any Indebtedness under the ABL Facility or any other revolving credit facility, the quotient of (x) the sum of each Individual Monthly Balance for each fiscal month ended during the most recently completed Test Period divided by (y) 12; provided that (i) if any Indebtedness under the ABL Facility or any other revolving credit facility is incurred during such Test Period to finance a Permitted Acquisition, an Investment or a Restricted Payment, the Individual Monthly Balance for each fiscal month included in such Test Period and ended prior to the date of the incurrence of such Indebtedness shall be increased by the aggregate principal amount of all such Indebtedness incurred to finance such Acquisition, Investment or Restricted Payment, as the case may be, and the Average Monthly Balance shall be calculated using each such Individual Monthly Balance as so increased and (ii) if any Indebtedness under the ABL Facility or any other revolving credit facility is repaid with the net cash proceeds of a Disposition during such Test Period, each Individual Monthly Balance for a fiscal month included in such Test Period and ended prior to the date of the repayment of such Indebtedness shall be decreased by the aggregate principal amount of such Indebtedness so repaid; provided further, that any adjustments required to be made pursuant to the preceding proviso shall be set forth in reasonable detail in the Compliance Certificate with respect to the applicable Test Period delivered pursuant to Section 6.02(a) (and, to the extent any other certificate setting forth the Total Leverage Ratio is required to be delivered hereunder, in such other certificate). Notwithstanding the foregoing, the Individual Monthly Balance for each of the fiscal months set forth in the table below shall be deemed to be the amount set forth in such table opposite such fiscal month:
Fiscal Month Ended |
Individual Monthly Balance |
|||
November 27, 2010 |
$ | 0 | ||
October 30, 2010 |
$ | 0 | ||
October 2, 2010 |
$ | 0 | ||
August 28, 2010 |
$ | 0 | ||
July 31, 2010 |
$ | 0 | ||
July 3, 2010 |
$ | 0 |
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May 29, 2010 |
$ | 0 | ||
May 1, 2010 |
$ | 0 | ||
April 3, 2010 |
$ | 0 | ||
February 27, 2010 |
$ | 0 | ||
January 30, 2010 |
$ | 0 | ||
January 2, 2009 |
$ | 0 |
BANA Credit Agreement shall mean that certain Credit Agreement, dated as of August 11, 2003, by and among the Company, the Subsidiaries of the Company party thereto, and Bank of America, N.A.
Board shall mean the Board of Governors of the Federal Reserve System of the United States of America.
Borrower shall have the meaning assigned to such term in the introductory statement to this Agreement.
Borrower Materials shall have the meaning assigned to such term in Section 10.01(c).
Borrowing shall mean Loans of the same Class and Type made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.
Borrowing Request shall mean a request by the Borrower in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C, or such other form as shall be approved by the Administrative Agent.
Business Day shall mean any day other than a Saturday, Sunday or day on which banks in New York City are authorized or required by law to close; provided, however, that when used in connection with a Eurodollar Loan, the term Business Day shall also exclude any day on which banks are not open for dealings in Dollar deposits in the London interbank market.
Canadian Dollars shall mean lawful money of Canada.
Canadian Subsidiary shall mean a Subsidiary of the Borrower organized under the laws of Canada or any province thereof, including Gymboree Canada/Delaware.
Capital Expenditures shall mean, for any period, the aggregate of (a) all amounts that would be reflected as additions to property, plant or equipment on a consolidated statement of cash flows of Holdings, the Borrower and its Restricted Subsidiaries in accordance with GAAP and (b) the value of all assets under Capitalized Leases incurred by Holdings, the Borrower and its Restricted Subsidiaries during such period; provided that the term Capital Expenditures shall not include (i) expenditures made in connection with the replacement, substitution, restoration or repair of assets to the extent financed with (x) insurance proceeds paid on account
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of the loss of or damage to the assets being replaced, substituted, restored or repaired or (y) awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced, (ii) the purchase price of equipment that is purchased substantially concurrently with the trade-in of existing equipment to the extent that the gross amount of such purchase price is reduced by the credit granted by the seller of such equipment for the equipment being traded in at such time, (iii) the purchase of plant, property or equipment to the extent financed with the proceeds of Dispositions that are not required to be applied to prepay Term Loans pursuant to Section 2.13, (iv) expenditures that are accounted for as capital expenditures by Holdings, the Borrower or any Restricted Subsidiary and that actually are paid for by a Person other than Holdings, the Borrower or any Restricted Subsidiary and for which none of Holdings, the Borrower or any Restricted Subsidiary has provided or is required to provide or incur, directly or indirectly, any consideration or obligation to such Person or any other Person (whether before, during or after such period) other than rent and similar or related obligations or (v) expenditures that constitute Permitted Acquisitions or other Investments permitted hereunder (but the term Capital Expenditures shall include all expenditures made with the proceeds of such Investments by the recipient thereof that would otherwise constitute Capital Expenditures).
Capitalized Leases shall mean all leases that have been or are required to be, in accordance with GAAP as in effect on the Closing Date, recorded as capitalized leases; provided that for all purposes hereunder the amount of obligations under any Capitalized Lease shall be the amount thereof accounted for as a liability in accordance with GAAP as in effect on the Closing Date.
Cash Collateral Account shall mean a blocked account at a commercial bank reasonably satisfactory to the Administrative Agent, in the name of the Administrative Agent and under the sole dominion and control of the Administrative Agent, and otherwise established in a manner satisfactory to the Administrative Agent.
Cash Equivalents shall mean any of the following types of Investments, to the extent owned by Holdings, the Borrower or any Restricted Subsidiary:
(a) Dollars, Australian Dollars, Canadian Dollars and euros;
(b) in the case of any Foreign Subsidiary, such local currencies held by them from time to time in the ordinary course of business and not for speculation;
(c) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of issuance thereof;
(d) investments in commercial paper maturing within 270 days from the date of issuance thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moodys;
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(e) investments in demand deposits, certificates of deposit, bankers acceptances and time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, the Administrative Agent or any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000 and that issues (or the parent of which issues) commercial paper rated at least Prime 1 (or the then equivalent grade) by Moodys or A 1 (or the then equivalent grade) by S&P;
(f) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (c) above and entered into with a financial institution satisfying the criteria of clause (e) above;
(g) investments in money market funds within the meaning of Rule 2a-7 of the Investment Company Act of 1940, as amended, substantially all of whose assets are invested in investments of the type described in clauses (a) through (e) above; and
(h) other short-term investments utilized by Foreign Subsidiaries in accordance with normal investment practices for cash management in investments of a type analogous to the foregoing.
Casualty Event shall mean any event that gives rise to the receipt by the Borrower or any Restricted Subsidiary of any insurance proceeds or condemnation awards in respect of any equipment, fixed assets or Real Property (including any improvements thereon) to replace or repair such equipment, fixed assets or Real Property or as compensation for such condemnation event.
Change of Control shall be deemed to occur if:
(a) at any time prior to a Qualified IPO, one or more Permitted Holders (taken collectively) shall fail to own beneficially (within the meaning of Rule 13d-5 of the Exchange Act as in effect on the Closing Date), directly or indirectly, in the aggregate Equity Interests representing at least a majority of the aggregate voting power represented by the issued and outstanding Equity Interests of Holdings;
(b) at any time after a Qualified IPO, (i) (x) any Person (other than a Permitted Holder) or (y) any Persons (other than one or more Permitted Holders) constituting a group (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the Closing Date) shall have, directly or indirectly, acquired beneficial ownership of Equity Interests representing 35% or more of the aggregate voting power represented by the issued and outstanding Equity Interests of Holdings and the Permitted Holders shall own, directly or indirectly, less than such Person or group of the aggregate voting power represented by the issued and outstanding Equity Interests of Holdings or (ii) during each period of twelve consecutive months, the board of directors of Holdings shall not consist of a majority of the Continuing Directors;
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(c) a change of control (or similar event) shall occur under (i) the Senior Notes, (ii) the ABL Facility Documentation or any Permitted Refinancing thereof or (iii) any other Indebtedness for borrowed money with an aggregate principal amount (in the case of this clause (iii)) in excess of the Threshold Amount; or
(d) Holdings shall cease to own, directly, 100% of the Equity Interests of the Borrower.
Charges shall have the meaning assigned to such term in Section 10.09.
Class when used in reference to (a) any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Initial Term Loans, Incremental Term Loans, Other Term Loans or Extended Term Loans, (b) any Commitment, refers to whether such Commitment is a Term Loan Commitment, Other Term Loan Commitment (and, in the case of an Other Term Loan Commitment, the Class of Term Loans to which such commitment relates), or a commitment in respect of Term Loans to be made pursuant to an Incremental Amendment or an Extension Offer and (c) any Lender, refers to whether such Lender has a Loan or Commitment with respect to a particular Class of Loans or Commitments. Other Term Loan Commitments, Other Term Loans, Incremental Term Loans and Extended Term Loans that have different terms and conditions, and each tranche of Extended Term Loans, shall be construed to be in different Classes.
Closing Date shall mean November 23, 2010.
Code shall mean the Internal Revenue Code of 1986, as amended from time to time.
Collateral shall mean all the Collateral as defined in any Collateral Document and shall also include the Mortgaged Properties.
Collateral Agent shall have the meaning assigned to such term in the introductory statement to this Agreement.
Collateral and Guarantee Requirement shall mean, at any time, the requirement that:
(a) on the Closing Date the Administrative Agent and the Collateral Agent shall have received each Collateral Document to the extent required to be delivered on the Closing Date pursuant to Section 4.02(e), subject to the limitations and exceptions of this Agreement, duly executed by each Loan Party party thereto;
(b) the Obligations shall have been secured by a first-priority perfected security interest in (i) all Equity Interests of (x) the Borrower and (y) each Subsidiary of Holdings directly owned by any Loan Party and (ii) all intercompany debt directly owned by any Loan Party, in each case subject to exceptions and limitations otherwise set forth in this Agreement and the Collateral Documents (to the extent appropriate in the applicable jurisdiction);
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(c) the Obligations shall have been secured by a perfected security interest in, and mortgage lien on, substantially all tangible and intangible assets of the Borrower and each Guarantor (including Equity Interests and intercompany debt, accounts, inventory, equipment, investment property, contract rights, IP Rights, other general intangibles, Material Real Property and proceeds of the foregoing), in each case, subject to exceptions and limitations otherwise set forth in this Agreement and the Collateral Documents (to the extent appropriate in the applicable jurisdiction);
(d) subject to limitations and exceptions of this Agreement (for the avoidance of doubt, including the limitations and exceptions set forth in the proviso to Section 4.02(e)) and the Collateral Documents, to the extent a security interest in and mortgage lien on any Material Real Property is required under Section 4.02, 6.11 or 6.13 (together with any Material Real Property that is subject to a Mortgage on the Closing Date, each, a Mortgaged Property), the Collateral Agent shall have received (i) counterparts of a Mortgage with respect to such Mortgaged Property duly executed and delivered by the record owner of such property in form suitable for filing or recording in all filing or recording offices that the Collateral Agent may reasonably deem necessary or desirable in order to create a valid and subsisting perfected Lien on the property and/or rights described therein in favor of the Collateral Agent for the benefit of the Secured Parties, and evidence that all filing and recording taxes and fees have been paid or otherwise provided for in a manner reasonably satisfactory to the Collateral Agent (it being understood that if a mortgage tax will be owed on the entire amount of the indebtedness evidenced hereby, then the amount secured by the Mortgage shall be limited to 100% of the fair market value of the property at the time the Mortgage is entered into if such limitation results in such mortgage tax being calculated based upon such fair market value), (ii) fully paid policies of title insurance (or marked-up title insurance commitments having the effect of policies of title insurance) on the Mortgaged Property (the Mortgage Policies) issued by a nationally recognized title insurance company reasonably acceptable to the Collateral Agent in form and substance and in an amount reasonably acceptable to the Collateral Agent (not to exceed 100% of the fair market value of the Real Property (or interest therein, as applicable) covered thereby), insuring the Mortgages to be valid subsisting Liens on the property described therein, free and clear of all Liens other than Liens permitted pursuant to Section 7.01 each of which shall (A) to the extent reasonably necessary, include such reinsurance arrangements (with provisions for direct access, if reasonably necessary) as shall be reasonably acceptable to the Collateral Agent, (B) contain a tie-in or cluster endorsement, if available under applicable law (i.e., policies which insure against losses regardless of location or allocated value of the insured property up to a stated maximum coverage amount), (C) have been supplemented by such endorsements (or where such endorsements are not available, opinions of special counsel, architects or other professionals reasonably acceptable to the Collateral Agent) as shall be reasonably requested by the Collateral Agent (including endorsements on matters relating to usury, first loss, last dollar, zoning, contiguity, revolving credit (if available after the applicable Loan Party uses commercially reasonable efforts), doing business, non-imputation, public road access, variable rate, environmental lien, subdivision, mortgage recording tax, separate tax lot and so-called comprehensive coverage over covenants and restrictions), (iii) either (1) an American Land Title Association/American Congress of Surveying and Mapping (ALTA/ACSM) form of survey for
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which all charges have been paid, dated a date, containing a certification and otherwise being in form and substance reasonably satisfactory to the Collateral Agent or (2) such documentation as is sufficient to omit the standard survey exception to coverage under the Mortgage Policy with respect to such Mortgaged Property and affirmative endorsements reasonably requested by the Collateral Agent, including same as survey and comprehensive endorsements, (iv) legal opinions, addressed to the Collateral Agent and the Secured Parties, reasonably acceptable to the Collateral Agent as to such matters as the Collateral Agent may reasonably request, and (v) in order to comply with the Flood Laws, the following documents (the Pre-Close Flood Documents): (A) a completed standard life of loan flood hazard determination form (a Flood Determination Form); (B) if any of the material improvement(s) to the improved Material Real Property is located in a special flood hazard area, a notification thereof to the Borrower (Borrower Notice) and (if applicable) notification to the Borrower that flood insurance coverage under the National Flood Insurance Program (NFIP) is not available because the community in which the property is located does not participate in the NFIP; (C) documentation evidencing the Borrowers receipt of the Borrower Notice (e.g., countersigned Borrower Notice, return receipt of certified U.S. Mail, or overnight delivery); and (D) if the Borrower Notice is required to be given and flood insurance is available in the community in which the property is located, a copy of one of the following: the flood insurance policy, the Borrowers application for a flood insurance policy plus proof of premium payment, a declaration page confirming that flood insurance has been issued, or such other evidence of flood insurance reasonably satisfactory to the Collateral Agent (any of the foregoing being Evidence of Flood Insurance); and
(e) after the Closing Date, each Restricted Subsidiary of the Borrower that is not an Excluded Subsidiary shall become a Guarantor and signatory to this Agreement pursuant to a joinder agreement in accordance with Section 6.11 or 6.13; provided that notwithstanding the foregoing provisions, any Subsidiary of the Borrower that Guarantees the Senior Notes, any ABL Facility Indebtedness, any Junior Financing, Permitted Unsecured Refinancing Debt, Permitted First Priority Refinancing Debt, Permitted Second Priority Refinancing Debt or any Permitted Refinancing of any thereof, or that is a borrower under the ABL Facility (or any Permitted Refinancing thereof) shall be a Guarantor hereunder for so long as it Guarantees such Indebtedness (or is a borrower with respect thereto); provided further that, the preceding proviso shall not apply to any Canadian Subsidiary of the Borrower that (x) is a borrower with respect to ABL Facility Indebtedness (or any Permitted Refinancing thereof) or that Guarantees ABL Facility Indebtedness (or any Permitted Refinancing thereof), in each case to the extent such Indebtedness or Guarantee constitutes ABL Facility Indebtedness and is incurred pursuant to Section 7.03(w) and (y) does not Guarantee any other Indebtedness described in the preceding proviso or is not otherwise an obligor with respect thereto.
Notwithstanding the foregoing provisions of this definition or anything in this Agreement or any other Loan Document to the contrary:
(A) the foregoing definition shall not require, unless otherwise stated in this clause (A), the creation or perfection of pledges of, security interests in, Mortgages on, or the obtaining of title insurance or taking other actions with respect to, (i) any fee owned Real Property that is
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not a Material Owned Real Property, (ii) any Leasehold Property that is not a Material Leased Real Property, provided, that if the grant of a security interest in or Mortgage on any Material Leased Real Property requires the consent of a landlord, the grant of such security interest or Mortgage shall not be required if such consent shall not have been obtained notwithstanding the use by the Borrower and its Restricted Subsidiaries of commercially reasonable efforts (which shall not include the provision of any economic or other material concession to such landlord to secure such consent) (nor shall there be any requirement to obtain any landlord waivers, estoppels, collateral access agreements or the like), (iii) motor vehicles and other assets subject to certificates of title, commercial tort claims where the amount of damages claimed by the applicable Loan Party is less than $5,000,000 and letter of credit rights (it being understood that all such assets and proceeds thereof shall constitute Collateral, even though perfection beyond a UCC filing is not required hereunder, to the extent a security interest can be created therein without a specific description thereof, without delivery of a supplement to a Collateral Document or without the taking of any action or obtaining the consent of any Person, including any Governmental Authority), (iv) any particular asset, if the pledge thereof or the security interest therein is prohibited by Law other than to the extent such prohibition is deemed ineffective under the Uniform Commercial Code or other applicable Law notwithstanding such prohibition, (v) Equity Interests in any joint venture or any Subsidiary that is not a wholly owned Subsidiary, other than proceeds thereof, but only to the extent that the creation of a security interest in such Equity Interests is prohibited or restricted by the Organization Documents of such joint venture or Subsidiary or by any contractual restriction contained in any agreement with third party holders of the other Equity Interests in such joint venture or Subsidiary which holders are not Affiliates of the Borrower (except to the extent the extent any such prohibition or restriction is deemed ineffective under the UCC or other applicable Law), (vi) any rights of a Loan Party arising under or evidenced by any contract, lease, instrument, license or other agreement to the extent the pledges thereof and security interests therein are prohibited or restricted by such contract, lease, instrument, license or other agreement, other than proceeds and receivables thereof, except to the extent the pledge of such rights is deemed effective under the Uniform Commercial Code or other applicable Law or principle of equity notwithstanding such prohibition or restriction or such prohibition or restriction is deemed ineffective under the Uniform Commercial Code or other applicable Law or principle of equity, (vii) licenses and any other property and assets to the extent that the Collateral Agent may not validly possess a security interest therein under applicable laws (including, without limitation, rules and regulations of any Governmental Authority) or the pledge or creation of a security interest in which would require governmental consent, approval, license or authorization (except that cash proceeds of dispositions thereof in accordance with applicable Law (including, without limitation, rules and regulations of any Governmental Authority) shall constitute Collateral), provided that Collateral shall include to the maximum extent permitted by law all rights incident or appurtenant to such licenses, property and assets (except to the extent any Lien on such asset in favor of the Collateral Agent requires consent, approval or authorization from any Governmental Authority) and the right to receive all proceeds realized from the sale, assignment or transfer of such licenses, property and assets, (viii) IP Rights to the extent a security interest therein may not be perfected by filing of a UCC financing statement and/or a filing in the United States Patent and Trademark Office or the United States Copyright Office and (ix) any particular assets if, in
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the reasonable judgment of the Administrative Agent or the Collateral Agent evidenced in writing, determined in consultation with the Borrower, the burden, cost or consequences of creating or perfecting such pledges or security interests in such assets is excessive in relation to the practical benefits to be obtained therefrom by the Lenders under the Loan Documents;
(B)(i) the foregoing definition shall not require control agreements or, except with respect to Equity Interests or Indebtedness represented or evidenced by certificates or instruments, perfection by control with respect to any Collateral (including deposit accounts, securities accounts, etc.); (ii) no actions in any non-U.S. jurisdiction or required by the laws of any non-U.S. jurisdiction shall be required in order to create any security interests in assets located or titled outside of the U.S. or to perfect such security interests (it being understood that there shall be no security agreements or pledge agreements governed under the laws of any non-U.S. jurisdiction); and (iii) except to the extent that perfection and priority may be achieved (x) by the filing of a financing statement under the Uniform Commercial Code with respect to the Borrower or a Guarantor, (y) with respect to Real Property and the recordation of Mortgages in respect thereof, as contemplated by clauses (c) and (d) above or (z) with respect to Equity Interests or Indebtedness, by the delivery of certificates or instruments representing or evidencing such Equity Interests or Indebtedness along with appropriate undated instruments of transfer executed in blank, the Loan Documents shall not contain any requirements as to perfection or priority with respect to any assets or property described in clause (A) above and this clause (B);
(C) the Collateral Agent in its discretion may grant extensions of time for the creation or perfection of security interests in, and Mortgages on, or obtaining of title insurance or taking other actions with respect to, particular assets (including extensions beyond the Closing Date) or any other compliance with the requirements of this definition where it reasonably determines in writing, in consultation with the Borrower, that the creation or perfection of security interests and Mortgages on, or obtaining of title insurance or taking other actions, or any other compliance with the requirements of this definition cannot be accomplished without undue delay, burden or expense by the time or times at which it would otherwise be required by this Agreement, or the Collateral Documents; provided that the Collateral Agent shall have received on or prior to the Closing Date, (i) UCC financing statements in appropriate form for filing under the UCC in the jurisdiction of incorporation or organization of each Loan Party, and (ii) any certificates or instruments representing or evidencing Equity Interests of (x) the Borrower and (y) each wholly owned Domestic Subsidiary of the Borrower or any Subsidiary Guarantor that is not excluded from the Collateral, in each case accompanied by instruments of transfer and stock powers undated and endorsed in blank; and
(D) Liens required to be granted from time to time pursuant to the Collateral and Guarantee Requirement shall be subject to exceptions and limitations set forth in this Agreement and the Collateral Documents.
Collateral Documents shall mean, collectively, the Security Agreement, each of the Mortgages, collateral assignments, security agreements, pledge agreements, intellectual property security agreements or other similar agreements delivered to the Administrative Agent or the
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Collateral Agent pursuant to Section 4.02, Section 6.11 or Section 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 Secured Parties.
Commitment shall mean, with respect to any Lender, such Lenders Term Loan Commitment (including pursuant to any Incremental Amendment or Refinancing Amendment).
Communications shall have the meaning assigned to such term in Section 10.01(c).
Company shall have the meaning assigned to such term in the introductory statement to this Agreement.
Company Material Adverse Effect shall have the meaning assigned to such term in Section 4.02(m).
Compliance Certificate shall mean a certificate substantially in the form of Exhibit H.
Consolidated EBITDA shall mean, for any period, the Consolidated Net Income for such period, plus:
(a) without duplication and, except with respect to clauses (viii) and (x) below, to the extent deducted (and not added back or excluded) in arriving at such Consolidated Net Income, the sum of the following amounts for such period with respect to Borrower and its Restricted Subsidiaries:
(i) total interest expense determined in accordance with GAAP and, to the extent not reflected in such total interest expense, any losses on hedging obligations or other derivative instruments entered into for the purpose of hedging interest rate risk, net of interest income and gains on such hedging obligations or other derivative obligations, letter of credit fees and bank fees and costs of surety bonds in connection with financing activities (whether amortized or immediately expensed),
(ii) provision for taxes based on income, profits or capital gains of the Borrower and the Restricted Subsidiaries, including, without limitation, federal, state, franchise and similar taxes and foreign withholding taxes paid or accrued during such period including penalties and interest related to such taxes or arising from any tax examinations,
(iii) depreciation and amortization,
(iv) non-recurring items or unusual charges or expenses, duplicative running costs, severance, relocation costs or expenses, Transaction Expenses, integration costs, transition costs, pre-opening, opening, consolidation and closing costs for stores and facilities, signing, retention and completion bonuses, costs incurred in connection with any non-recurring strategic initiatives, costs incurred in connection with Permitted Acquisitions and non-recurring product and intellectual property development after the
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Closing Date, other business optimization expenses (including costs and expenses relating to business optimization programs), and new systems design and implementation costs, project start-up costs and restructuring charges or reserves (including restructuring costs related to acquisitions after the Closing Date and to closure/consolidation of stores and facilities, retention charges, systems establishment costs and excess pension charges) in an aggregate amount for all items added pursuant to this clause (iv) (other than Amendment Expenses and Transaction Expenses incurred, accrued or paid no later than December 31, 2011) not to exceed (I) with respect to the Transactions, $50 million and (II) otherwise, $25 million in any period of four-consecutive fiscal quarters (it being understood that unused amounts of the cap under this clause (II) in any fiscal year (without giving effect to any amount carried over from a prior fiscal year) may be carried over to the next succeeding fiscal year (but not any other fiscal year) (provided that amounts deducted in any fiscal year shall first be deemed to be allocated against the cap for such fiscal year before giving effect to any carry over)),
(v) the amount of any minority interest expense attributable to minority interests of third parties in the positive income of any non-wholly owned Restricted Subsidiary,
(vi) the amount of management, monitoring, consulting and advisory fees (including termination fees) and related indemnities and expenses paid or accrued (without duplication among periods) to the Sponsor under the Sponsor Management Agreement,
(vii) any costs or expenses incurred pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such costs or expenses are funded with cash proceeds contributed to the capital of the Borrower or net cash proceeds of an issuance of Equity Interests of the Borrower (other than Disqualified Equity Interests), which cash proceeds are in each case Not Otherwise Applied,
(viii) the amount of net cost savings, operating expense reductions and synergies (other than any of the foregoing relating to Specified Transactions) projected by the Borrower in good faith to be realized as a result of specified actions (x) taken during the period for which Consolidated EBITDA is being determined (the EBITDA Determination Period) (but in any event taken no later than 24 months after the Closing Date) or (y) committed or expected, prior to or during the EBITDA Determination Period, to be taken during the EBITDA Determination Period or thereafter (but in any event no later than 24 months after the Closing Date) (calculated on a pro forma basis as though such cost savings, operating expense reductions and synergies had been realized on the first day of the EBITDA Determination Period and as if such cost savings, operating expense reductions and synergies were realized during the entirety of the EBITDA Determination Period), net of the amount of actual benefits realized during the EBITDA Determination Period from such actions; provided that (A) such cost savings, operating expense reductions and synergies are reasonably identifiable,
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quantifiable and factually supportable in the good faith judgment of the Borrower, (B) no cost savings, operating expense reductions and synergies shall be added pursuant to this clause (viii) to the extent duplicative of any expenses or charges otherwise added to Consolidated EBITDA, whether through a pro forma adjustment or otherwise, for the EBITDA Determination Period and (C) the aggregate amount of cost savings, operating expense reductions and synergies added pursuant to this clause (viii) shall not exceed the greater of (x) $30,000,000 and (y) 10% of Consolidated EBITDA for any period of four-consecutive fiscal quarters; provided that projected amounts (and not yet realized) may no longer be added in calculating Consolidated EBITDA pursuant to this clause (a)(viii) to the extent occurring more than four full fiscal quarters after the specified action taken in order to realize such projected cost savings, operating expense reductions and synergies,
(ix) any net loss from discontinued operations,
(x) cash receipts (or any netting arrangements resulting in reduced cash expenditures) not representing Consolidated EBITDA or Consolidated Net Income in any period to the extent non-cash gains relating to such income were deducted in the calculation of Consolidated EBITDA pursuant to paragraph (b) below for any previous period and not added back,
(xi) non-cash expenses, charges and losses (including impairment charges or asset write-offs, losses from investments recorded using the equity method and stock-based awards compensation expense), in each case other than (A) any non-cash charge representing amortization of a prepaid cash item that was paid and not expensed in a prior period and (B) any non-cash charge relating to write-offs, write-downs or reserves with respect to accounts receivable in the normal course or inventory; provided that if any of the non-cash charges referred to in this clause (xi) represents an accrual or reserve for potential cash items in any future period, (1) the Borrower may determine not to add back such non-cash charge in the current period and (2) to the extent the Borrower does decide to add back such non-cash charge, the cash payment in respect thereof in such future period shall be subtracted from Consolidated EBITDA in such future period to the extent paid,
less (b) without duplication and to the extent included in arriving at such Consolidated Net Income, (i) non-cash gains (excluding any non-cash gain to the extent it represents the reversal of an accrual or reserve for a potential cash item that reduced Consolidated EBITDA in any prior period), (ii) any net gain from discontinued operations, (iii) any non-recurring or unusual gains, (iv) all gains and income from investments recorded using the equity method and (v) the amount of any minority interest income attributable to minority interests of third parties in the losses of any non-wholly owned Restricted Subsidiary; provided that, for the avoidance of doubt, any gain representing the reversal of any non-cash charge referred to in clause (a)(xi)(B) above for a prior period shall be added (together with, without duplication, any amounts received in respect thereof to the extent not increasing Consolidated Net Income) to Consolidated EBITDA in any subsequent period to such extent so reversed (or received);
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provided that:
(A) to the extent included in Consolidated Net Income, there shall be excluded in determining Consolidated EBITDA (x) currency translation gains and losses related to currency remeasurements of Indebtedness (including the net loss or gain (i) resulting from Swap Contracts for currency exchange risk and (ii) resulting from intercompany indebtedness) and (y) all other foreign currency translation gains or losses to the extent such gain or losses are non-cash items,
(B) to the extent included in Consolidated Net Income, there shall be excluded in determining Consolidated EBITDA for any period any adjustments resulting from the application of Statement of Financial Accounting Standards No. 133 and International Accounting Standard No. 39 and their respective related pronouncements and interpretations and
(C) to the extent included in Consolidated Net Income, there shall be excluded in determining Consolidated EBITDA for any period any income (loss) for such period attributable to the early extinguishment of (i) Indebtedness, (ii) obligations under any Swap Contracts or (iii) other derivative instruments.
Notwithstanding anything to the contrary contained herein, for purposes of determining Consolidated EBITDA under this Agreement for any period that includes any of the fiscal quarters ended October 30, 2010, July 31, 2010 and May 1, 2010, Consolidated EBITDA for such fiscal quarters shall be $74,400,000, $33,386,000 and $63,250,000, respectively.
Consolidated Interest Expense shall mean, for any period, the sum, without duplication, of (i) the cash interest expense (including that attributable to Capitalized Leases), net of cash interest income, of the Borrower and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, with respect to all outstanding Indebtedness of the Borrower and its Restricted Subsidiaries, including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers acceptance financing and net cash payments, if any, made (less net cash payments, if any, received) under interest rate Swap Contracts with respect to Indebtedness permitted hereunder, and (ii) any cash payments made during such period in respect of obligations referred to in clause (b) below relating to Funded Debt that were amortized or accrued in a previous period, but excluding, however, without duplication (a) amortization of deferred financing costs and any other amounts of non-cash interest, (b) the accretion or accrual of discounted liabilities during such period, (c) non-cash interest expense attributable to the movement of the mark-to-market valuation of obligations under Swap Contracts or other derivative instruments pursuant to Statement of Financial Accounting Standards No. 133, (d) any one-time cash costs associated with breakage in respect of hedging agreements for interest rates, (e) all non-recurring cash interest expense consisting of liquidated damages for failure to timely comply with registration rights obligations, (f) fees and expenses associated with the consummation of the Transactions or with the Amendment Agreement and the refinancing of the Existing Term Loans on the Restatement Effective Date, (g) annual agency fees paid to (X) the Administrative Agent and/or Collateral Agent and (Y) the
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administrative agent and/or collateral agent with respect to the ABL Facility and (h) non-recurring costs associated with obtaining Swap Contracts, all as calculated on a consolidated basis in accordance with GAAP; provided that there shall be excluded from Consolidated Interest Expense for any period the cash interest expense (or income) of all Unrestricted Subsidiaries for such period to the extent otherwise included in Consolidated Interest Expense. Notwithstanding anything to the contrary contained herein, for purposes of determining Consolidated Interest Expense (i) for any period ending prior to the first anniversary of the Closing Date, Consolidated Interest Expense shall be an amount equal to actual Consolidated Interest Expense from the Closing Date through the date of determination multiplied by a fraction the numerator of which is 365 and the denominator of which is the number of days from the Closing Date through the date of determination and (ii) shall exclude the purchase accounting effects described in the last sentence of the definition of Consolidated Net Income.
Consolidated Net Income shall mean, for any period, the net income (loss) of the Borrower and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided, however, that, without duplication,
(a) any after-tax effect of extraordinary items (including gains or losses and all fees and expenses relating thereto) for such period shall be excluded,
(b) the cumulative effect of a change in accounting principles during such period to the extent included in Consolidated Net Income shall be excluded,
(c) any fees and expenses incurred during such period, or any amortization thereof for such period, in connection with any acquisition, investment, asset disposition, issuance or repayment of debt, issuance of equity securities, refinancing transaction or amendment or other modification of any debt instrument, in each case permitted hereunder (in each case, including any such transaction consummated on or prior to the Closing Date and any such transaction undertaken but not completed) and any charges or non-recurring merger costs incurred during such period as a result of any such transaction, in each case whether or not successful (including, for the avoidance of doubt the effects of expensing all transaction related expenses in accordance with Financial Accounting Standards No. 141(R) and gains or losses associated with FASB Interpretation No. 45) shall be excluded,
(d) accruals and reserves that are established or adjusted within twelve months after the Closing Date that are so required to be established as a result of the Transactions in accordance with GAAP or changes as a result of adoption or modification of accounting policies in accordance with GAAP shall be excluded,
(e) any net after-tax gains or losses on disposal of disposed or discontinued operations shall be excluded,
(f) any net after-tax effect of gains or losses (less all fees, expenses and charges) attributable to asset dispositions or the sale or other disposition of any Equity Interests of any
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Person in each case other than in the ordinary course of business, as determined in good faith by the Borrower, shall be excluded,
(g) the net income (loss) for such period of any Person that is not a Subsidiary of the Borrower, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be excluded; provided that, unless already included, Consolidated Net Income of the Borrower shall be increased by the amount of dividends or distributions that are actually paid in cash or Cash Equivalents (or to the extent subsequently converted into cash or Cash Equivalents) by such Person to the Borrower or a Restricted Subsidiary thereof in respect of such period,
(h) any impairment charge or asset write-off or write-down, including impairment charges or asset write-offs or write-downs related to intangible assets, long-lived assets, investments in debt and equity securities or as a result of a change in law or regulation, in each case, pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP shall be excluded; provided that (x) any non-cash charge of the type referred to in clause (a)(xi)(B) of the definition of Consolidated EBITDA shall not be excluded and (y) if any non-cash charges referred to in this clause (h) represent an accrual or reserve for potential cash items in any future period, (1) the Borrower may determine not to exclude such non-cash charge in the current period and (2) to the extent the Borrower does decide to exclude such non-cash charge, the cash payment in respect thereof in such future period shall be subtracted from Consolidated Net Income in such future period to the extent paid,
(i) any non-cash (for such period and all other periods) compensation charge or expense, including any such charge or expense arising from the grants of stock appreciation or similar rights, stock options, restricted stock or other rights or equity incentive programs shall be excluded, and any cash charges associated with the rollover, acceleration or payout of Equity Interests by management of the Borrower or any of its Restricted Subsidiaries in connection with the Transactions, shall be excluded,
(j) any expenses, charges or losses that are covered by indemnification or other reimbursement provisions in connection with any Investment, Permitted Acquisition or any sale, conveyance, transfer or other disposition of assets permitted under this Agreement, to the extent actually reimbursed, or, so long as the Borrower has made a determination that a reasonable basis exists for indemnification or reimbursement and only to the extent that such amount is in fact indemnified or reimbursed within 365 days of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so indemnified or reimbursed within such 365 days), shall be excluded,
(k) to the extent covered by insurance and actually reimbursed, or, so long as the Borrower has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer and only to the extent that such amount is in fact reimbursed within 365 days of the date of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so reimbursed within such 365 days),
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expenses, charges or losses with respect to liability or casualty events or business interruption shall be excluded,
(l) the income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary of Borrower or is merged into or consolidated with Borrower or any of its Restricted Subsidiaries or that Persons assets are acquired by Borrower or any of its Restricted Subsidiaries shall be excluded (except to the extent required for any calculation of Consolidated EBITDA on a Pro Forma Basis in accordance with Section 1.09), and
(m) solely for the purpose of determining the Cumulative Credit pursuant to clause (a) of the definition thereof, the income of any Restricted Subsidiary of the Borrower that is not a Guarantor to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that income is not at the time permitted without government approval or by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its equity holders (which has not been waived) shall be excluded, except (solely to the extent permitted to be paid) to the extent of the amount of dividends or other distributions actually paid in cash to the Borrower or any of its Restricted Subsidiaries that are Guarantors by such Person during such period in accordance with such documents and regulations.
There shall be excluded from (or, in the case of lost revenue, included in) Consolidated Net Income for any period the effects of fair value adjustments (including the effects of such adjustments pushed down to the Borrower and the Restricted Subsidiaries) in the merchandise inventory, property and equipment, goodwill, intangible assets, deferred revenue and debt line items in such Persons consolidated financial statements pursuant to GAAP resulting solely from the application of purchase accounting in relation to the Transactions or any consummated acquisition permitted hereunder (and the amortization or write-off of any amounts thereof (or the loss of revenue otherwise recognizable), in each case net of taxes, shall be excluded from (or, in the case of lost revenue, included in) the determination of Consolidated Net Income).
Consolidated Total Net Debt shall mean, as of any date of determination, the aggregate principal amount of Indebtedness of the Borrower and its Restricted Subsidiaries outstanding on such date, in an amount that would be reflected on a balance sheet prepared as of such date on a consolidated basis in accordance with GAAP (but excluding the effects of any discounting of Indebtedness resulting from the application of purchase accounting in connection with the Transactions, any Permitted Acquisition or any other Investment permitted hereunder), consisting of Indebtedness for borrowed money, Attributable Indebtedness or purchase money Indebtedness, and debt obligations evidenced by bonds, debentures, promissory notes, loan agreements or similar instruments, minus the lesser of (x) the aggregate amount of cash and Cash Equivalents (other than Restricted Cash), in each case held free and clear of all Liens, other than nonconsensual Liens permitted by Section 7.01 and Liens permitted by Section 7.01(a), Section 7.01(k), Section 7.01(p), Section 7.01(q), clauses (i) and (ii) of Section 7.01(r), Section 7.01(cc) and Section 7.01(dd) and (y) $75,000,000; provided that (i) Consolidated Total Net Debt shall not include Indebtedness in respect of letters of credit, except to the extent of unreimbursed amounts thereunder (provided that any unreimbursed amount under commercial letters of credit
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shall not be counted as Consolidated Total Net Debt until 3 Business Days after such amount is drawn), (ii) Consolidated Total Net Debt shall not include obligations under Swap Contracts permitted hereunder and (iii) Indebtedness of the Borrower and Restricted Subsidiaries under the ABL Facility and any other revolving credit facility as at any date of determination shall be determined using the Average Monthly Balance of such Indebtedness for the most recent Test Period.
Consolidated Working Capital shall mean, with respect to the Borrower and its Restricted Subsidiaries on a consolidated basis at any date of determination, Current Assets at such date of determination minus Current Liabilities at such date of determination; provided, that, increases or decreases in Consolidated Working Capital shall be calculated without regard to any changes in Current Assets or Current Liabilities as a result of (a) any reclassification in accordance with GAAP of assets or liabilities, as applicable, between current and noncurrent or (b) the effects of purchase accounting.
Continuing Directors shall mean the directors of Holdings on the Closing Date, as elected or appointed after giving effect to the Transactions, and each other director, if, in each case, such other directors nomination for election to the board of directors of Holdings is recommended by a majority of the then Continuing Directors or such other director receives the vote of the Sponsor in his or her election by the stockholders of Holdings.
Contract Consideration shall have the meaning specified in the definition of Excess Cash Flow.
Contractual Obligation shall mean, 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 shall have the meaning specified in the definition of Affiliate.
Credit Agreement Refinancing Indebtedness shall mean (a) Permitted First Priority Refinancing Debt, (b) Permitted Second Priority Refinancing Debt, (c) Permitted Unsecured Refinancing Debt or (d) Indebtedness incurred pursuant to a Refinancing Amendment, in each case, issued, incurred or otherwise obtained (including by means of the extension or renewal of existing Indebtedness) in exchange for, or to extend, renew, replace or refinance, in whole or part, existing Term Loans (including any successive Credit Agreement Refinancing Indebtedness) (Refinanced Debt); provided that (i) such extending, renewing, replacing or refinancing Indebtedness is in an original aggregate principal amount (or accreted value, if applicable) not greater than the aggregate principal amount (or accreted value, if applicable) of the Refinanced Debt except by an amount equal to unpaid accrued interest and premium thereon plus other reasonable and customary fees and expenses (including upfront fees and original issue discount) in connection with such exchange, modification, refinancing, refunding, renewal, replacement or extension, (ii) such Indebtedness has a later maturity and a Weighted Average Life to Maturity equal to or greater than the Refinanced Debt, and (iii) such Refinanced Debt shall be repaid, defeased or satisfied and discharged with 100% of the Net Proceeds of the applicable Credit
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Agreement Refinancing Indebtedness and all accrued interest, fees and premiums (if any) in connection therewith shall be paid, on the date such Credit Agreement Refinancing Indebtedness is issued, incurred or obtained.
Credit Extension shall mean a Borrowing.
Cumulative Credit shall mean, at any date, an amount, not less than zero in the aggregate, determined on a cumulative basis equal to, without duplication:
(a) the Cumulative Retained Excess Cash Flow Amount at such time, plus
(b)(i) the cumulative amount of cash and Cash Equivalent proceeds from the sale of Equity Interests of the Borrower or of any direct or indirect parent of the Borrower after the Closing Date and on or prior to such time (including upon exercise of warrants or options) which proceeds have been received in the form of common equity by, or contributed as common equity to the capital of, the Borrower and (ii) the principal amount of Indebtedness (other than Indebtedness that is contractually subordinated to the Obligations) of the Borrower or any Restricted Subsidiary owed to a Person other than a Loan Party or a Restricted Subsidiary of a Loan Party incurred after the Closing Date that is converted to common Equity Interests (other than Disqualified Equity Interests) of the Borrower (or of Holdings or of any direct or indirect parent of Holdings), in each case to the extent Not Otherwise Applied; plus
(c) 100% of the aggregate amount of contributions to the common capital of the Borrower received in cash and Cash Equivalents after the Closing Date Not Otherwise Applied; plus
(d) to the extent not applied, or required to be applied, to the prepayment of Loans pursuant to Section 2.13, 100% of the aggregate after-tax amount received by the Borrower or any Restricted Subsidiary of the Borrower after the Closing Date in cash and Cash Equivalents from:
(A) the sale (other than to the Borrower or any such Restricted Subsidiary) of the Equity Interests of an Unrestricted Subsidiary, or
(B) any dividend or other distribution made by an Unrestricted Subsidiary, plus
(e) in the event any Unrestricted Subsidiary has been redesignated as a Restricted Subsidiary or has been merged, consolidated or amalgamated with or into, or transfers or conveys its assets to, or is liquidated into, the Borrower or a Restricted Subsidiary, the fair market value of the Investments of the Borrower and the Restricted Subsidiaries in such Unrestricted Subsidiary at the time of such redesignation, combination or transfer (or of the assets transferred or conveyed, as applicable) so long as such Investments were originally made pursuant to Section 7.02(n)(y), and provided in each case that such amount does not exceed the amount of such Investment made pursuant to Section 7.02(n)(y), plus
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(f) an amount equal to any after-tax returns in cash and Cash Equivalents (including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) actually received by the Borrower or any Restricted Subsidiary after the Closing Date in respect of any Investments made pursuant to Section 7.02(n)(y), and provided in each case that such amount does not exceed the amount of such Investment made pursuant to Section 7.02(n)(y), minus
(g) any amount of the Cumulative Credit used to make Investments pursuant to Section 7.02(n)(y) after the Closing Date and prior to such time, minus
(h) any amount of the Cumulative Credit used to pay dividends or make distributions or other Restricted Payments pursuant to Section 7.06(h)(y) after the Closing Date and prior to such time, minus
(i) any amount of the Cumulative Credit used to make payments or distributions in respect of Permitted Second Priority Refinancing Debt (or any Permitted Refinancing thereof) or Junior Financing pursuant to Section 7.13(a)(iv)(B) after the Closing Date and prior to such time.
Cumulative Retained Excess Cash Flow Amount shall mean, at any date, an amount, not less than zero in any fiscal year, determined on a cumulative basis equal to the aggregate cumulative sum of the Retained Percentage of Excess Cash Flow for all Excess Cash Flow Periods ending after the Closing Date and prior to such date; provided, that for purposes of Section 7.06(h)(y) and Section 7.13(a)(iv)(B) (including the determination of the amount of the Cumulative Credit), the Cumulative Retained Excess Cash Flow Amount shall only be available if the Total Leverage Ratio at the time of the making of the applicable Restricted Payment or prepayment, redemption, purchase, defeasance or other payment, as the case may be, calculated on a Pro Forma Basis, is less than or equal to 4.00 to 1.00.
Current Assets shall mean, with respect to the Borrower and the Restricted Subsidiaries on a consolidated basis at any date of determination, all assets (other than cash and Cash Equivalents) that would, in accordance with GAAP, be classified on a consolidated balance sheet of the Borrower and its Restricted Subsidiaries as current assets at such date of determination, other than amounts related to current or deferred Taxes based on income or profits (but excluding assets held for sale, loans (permitted) to third parties, pension assets, deferred bank fees and derivative financial instruments).
Current Liabilities shall mean, with respect to the Borrower and the Restricted Subsidiaries on a consolidated basis at any date of determination, all liabilities that would, in accordance with GAAP, be classified on a consolidated balance sheet of the Borrower and its Restricted Subsidiaries as current liabilities at such date of determination, other than, without duplication (and to the extent otherwise included therein) (a) the current portion of any Indebtedness, (b) accruals of Consolidated Interest Expense (excluding Consolidated Interest Expense that is past due and unpaid), (c) accruals for current or deferred Taxes based on income or profits, (d) accruals of any costs or expenses related to restructuring reserves and (e) revolving
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loans, swing line loans and letter of credit obligations under the ABL Facility or any other revolving credit facility.
Debtor Relief Laws shall mean the Bankruptcy Code of the United States and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
Declined Proceeds shall have the meaning assigned to such term in Section 2.13(d).
Default shall mean 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.
Designation Date shall have the meaning assigned to such term in Section 6.14.
Disposition or Dispose shall mean the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction and any sale or issuance of Equity Interests in a Restricted Subsidiary) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.
Disqualified Equity Interests shall mean any Equity Interest that, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Commitments), (b) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part, (c) provides for the scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is ninety-one (91) days after the then Latest Maturity Date; provided that if such Equity Interests are issued pursuant to a plan for the benefit of employees of Holdings (or any direct or indirect parent thereof), the Borrower or the Restricted Subsidiaries or by any such plan to such employees, such Equity Interests shall not constitute Disqualified Equity Interests solely because it may be required to be repurchased by the Borrower or if its Restricted Subsidiaries in order to satisfy applicable statutory or regulatory obligations.
Dollars or $ shall mean lawful money of the United States of America.
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Domestic Subsidiary shall mean any Subsidiary that is organized under the Laws of the United States, any state thereof or the District of Columbia; provided, that Gymboree Canada/Delaware shall be deemed not to be a Domestic Subsidiary.
Dutch Auction shall mean an auction conducted by Holdings, the Borrower or an Affiliated Lender in order to purchase Term Loans as contemplated by Section 10.04(k) or 10.04(m), as applicable, in accordance with the procedures set forth in Exhibit M.
Eligible Assignee shall mean (i) a Lender, (ii) an Affiliate of a Lender, (iii) a Related Fund of a Lender, and (iv) any other Person (other than a natural person) approved by the Administrative Agent and, unless an Event of Default under Section 8.01(a), 8.01(f) (with respect to the Borrower) or 8.01(g) (with respect to the Borrower) has occurred and is continuing and except during the primary syndication of the Commitments to those institutions disclosed by the Arrangers to the Borrower prior to the Closing Date or the Restatement Effective Date in connection with the Refinancing Amendment, the Borrower (each such approval not to be unreasonably withheld or delayed); provided, that notwithstanding the foregoing, Eligible Assignee shall not include Holdings, the Borrower, any other Affiliate of Holdings or the Sponsor (it being understood that assignments to Holdings, the Borrower or an Affiliated Lender may only be made pursuant to Section 10.04(k) or 10.04(m), as applicable). For the avoidance of doubt, no Specified Debt Fund shall be deemed to be an Affiliate of Holdings or the Sponsor for purposes of the definition of Eligible Assignee.
Environmental Laws shall mean all former, current and future federal, state, local and foreign laws (including common law), treaties, regulations, rules, ordinances, codes, decrees, judgments, directives, orders (including consent orders), and agreements in each case, relating to the environment, natural resources, human health and safety or the presence, Release of, or exposure to, hazardous materials, or the generation, manufacture, processing, distribution, use, treatment, storage, transport, recycling or handling of, or the arrangement for such activities with respect to, hazardous materials.
Environmental Liability shall mean all liabilities, obligations, damages, losses, claims, actions, suits, judgments, orders, fines, penalties, fees, expenses and costs (including administrative oversight costs, natural resource damages and investigation or remediation costs), whether contingent or otherwise, arising out of or relating to (a) compliance or non-compliance with 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 of any Hazardous Materials 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 Contribution shall have the meaning assigned to such term in the introductory statement to this Agreement.
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Equity Interests shall mean, with respect to any Person, all of the shares, interests, rights, participations or other equivalents (however designated) of capital stock of (or other ownership or profit interests or units in) such Person and all of the warrants, options or other rights for the purchase, acquisition or exchange from such Person of any of the foregoing (including through convertible securities).
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.
ERISA Affiliate shall mean any trade or business (whether or not incorporated) that, together with a Loan Party or any Restricted Subsidiary, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
ERISA Event shall mean (a) a Reportable Event; (b) the failure to satisfy the minimum funding standard with respect to a Plan within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA, whether or not waived (unless such failure is corrected by the final due date for the plan year for which such failure occurred), (c) a determination that a Plan is or will be in at risk status (as defined in Section 303(i)(4) of ERISA or Section 430(i)(4) of the Code); (d) the receipt by a Loan Party, any Restricted Subsidiary or any of their respective ERISA Affiliates of notice pursuant to Section 305(b)(3)(D) of ERISA that a Multiemployer Plan is or will be in endangered status or critical status (as defined in Section 305(b) of ERISA); (e) the filing pursuant to Section 431 of the Code or Section 304 of ERISA of an application for the extension of any amortization period; (f) the failure to timely make a contribution required to be made with respect to any Plan; (g) the filing of a notice to terminate any Plan if such termination would require material additional contributions in order to be considered a standard termination within the meaning of Section 4041(b) of ERISA; (h) the filing under Section 4041(c) of ERISA of a notice of intent to terminate any Plan or the termination of any Plan under Section 4041(c) of ERISA; (i) the filing pursuant to Section 412(c) of the Code of an application for a waiver of the minimum funding standard with respect to any Plan; (j) the incurrence by a Loan Party, any Restricted Subsidiary or any of their respective ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan, other than for the payment of Plan contributions or of premiums to the PBGC; (k) the receipt by a Loan Party, any Restricted Subsidiary or any of their respective ERISA Affiliates from the PBGC of any notice of an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan under Section 4042 of ERISA; (l) the receipt by a Loan Party, any Restricted Subsidiary or any of their respective ERISA Affiliates of any notice, or the receipt by any Multiemployer Plan from a Loan Party, any Restricted Subsidiary or any of their respective ERISA Affiliates of any notice, concerning the imposition of Withdrawal Liability; (m) the occurrence of any event or condition that constitutes grounds under ERISA for the termination of a Plan or the appointment of a trustee to administer a Plan; (n) any Foreign Benefit Event or (o) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan which could reasonably be expected to result in liability to a Loan Party, any Restricted Subsidiary or any of their respective ERISA Affiliates.
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Eurodollar, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate (other than the Alternate Base Rate) determined by reference to the Adjusted LIBO Rate.
Event of Default shall have the meaning assigned to such term in Article 8.
Excess Cash Flow shall mean, for any period, an amount equal to (a) the sum, without duplication, of (i) Consolidated Net Income for such period, (ii) an amount equal to the amount of all non-cash charges to the extent deducted in arriving at such Consolidated Net Income and cash gains (if any) included in clauses (a) through (l) of the definition of Consolidated Net Income, (iii) decreases in Consolidated Working Capital for such period (other than any such decreases arising from acquisitions or dispositions by the Borrower and its Restricted Subsidiaries completed during such period) and (iv) an amount equal to the aggregate net non-cash loss on Dispositions by the Borrower and its Restricted Subsidiaries during such period (other than Dispositions in the ordinary course of business) to the extent deducted in arriving at such Consolidated Net Income minus (b) the sum, without duplication, of (i) an amount equal to the amount of all non-cash credits included in arriving at such Consolidated Net Income and cash charges (if any) in respect of such period included in clauses (a) through (l) of the definition of Consolidated Net Income, (ii) without duplication of amounts deducted pursuant to clause (xi) below in prior fiscal years, the amount of Capital Expenditures made in cash during such period to the extent financed with internally generated funds and not made by utilizing the Cumulative Retained Excess Cash Flow Amount, (iii) the aggregate amount of all principal payments of Indebtedness of the Borrower and its Restricted Subsidiaries during such period, in each case to the extent financed with internally generated funds and not by utilizing the Cumulative Retained Excess Cash Flow Amount (including (A) the principal component of payments in respect of Capitalized Leases, (B) the amount of any scheduled repayment of Term Loans pursuant to Section 2.11 (to the extent actually made), (C) any mandatory prepayment of Term Loans made pursuant to Section 2.13(a)(ii) to the extent required due to a Disposition that resulted in an increase to Consolidated Net Income and not in excess of the amount of such increase and (D) voluntary prepayments or buybacks of Term Loans made pursuant to Section 10.04(m) (in an amount equal to the discounted amount actually paid in respect of the principal amount of such Term Loans), but excluding (W) all voluntary prepayments of Term Loans (other than voluntary prepayments made pursuant to Section 10.04(m)), (X) all prepayments of Term Loans on the Restatement Effective Date, (Y) all prepayments, redemptions or repurchases in respect of (i) Permitted Second Priority Refinancing Debt (or any Permitted Refinancing thereof), except to the extent permitted under Section 7.13(a) and (ii) Junior Financing, except to the extent permitted under Section 7.13(a) and (Z) all prepayments of loans under the ABL Facility or any other revolving credit facility made during such period (it being agreed that any amount excluded pursuant to clause (W), (X), (Y) or (Z) may not be deducted under any other clause of this definition), (iv) an amount equal to the aggregate net non-cash gain on Dispositions by the Borrower and its Restricted Subsidiaries during such period (other than Dispositions in the ordinary course of business) to the extent included in arriving at such Consolidated Net Income, (v) increases in Consolidated Working Capital for such period (other than any such increases arising from acquisitions or dispositions by the Borrower and its Restricted Subsidiaries during such period), (vi) cash payments by the Borrower and its Restricted Subsidiaries during such
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period in respect of long-term liabilities of the Borrower and its Restricted Subsidiaries other than Indebtedness and that were made with internally generated funds and were not deducted or were excluded in calculating Consolidated Net Income, (vii) without duplication of amounts deducted pursuant to clause (xi) below in prior fiscal years, the amount of Investments and acquisitions made during such period in cash pursuant to Section 7.02 (other than Section 7.02(a), (c) or (e)) (net of the return on any such Investments received during such period, except to the extent such return was included in the determination of Consolidated Net Income) to the extent that such Investments and acquisitions were not expensed and were financed with internally generated funds and were not made by utilizing the Cumulative Retained Excess Cash Flow Amount, (viii) the amount of Restricted Payments paid during such period pursuant to Section 7.06(i) (but in the case of clauses (iv) through (vii), only to the extent such amounts were not deducted or were excluded in calculating Consolidated Net Income) or Section 7.06(g) in cash (in the case of Section 7.06(g), in an amount not to exceed the amount permitted thereunder in any fiscal year) to the extent such Restricted Payments were financed with internally generated funds, (ix) the aggregate amount of expenditures actually made by the Borrower and its Restricted Subsidiaries in cash during such period (including expenditures for the payment of financing fees) to the extent that such expenditures are not expensed during such period or any previous period and were financed with internally generated funds and not by utilizing the Cumulative Retained Excess Cash Flow Amount, (x) the aggregate amount of any premium, make-whole or penalty payments actually paid in cash by the Borrower and its Restricted Subsidiaries during such period that are required to be made in connection with any prepayment of Indebtedness to the extent that such expenditures are not expensed during such period or any previous period and were financed with internally generated funds and not by utilizing the Cumulative Retained Excess Cash Flow Amount, (xi) without duplication of amounts deducted from Excess Cash Flow in prior periods, the aggregate consideration required to be paid in cash by the Borrower and its Restricted Subsidiaries pursuant to binding contracts with a third party that is not an Affiliate (the Contract Consideration) entered into prior to or during such period relating to Permitted Acquisitions or Capital Expenditures or acquisitions of IP Rights to the extent not expensed to be consummated or made, in each case during the period of four consecutive fiscal quarters of the Borrower following the end of such period, provided that to the extent the aggregate amount of internally generated funds not utilizing the Cumulative Retained Excess Cash Flow Amount actually utilized to finance such Permitted Acquisitions, Capital Expenditures or acquisitions of IP Rights during such period of four consecutive fiscal quarters is less than the Contract Consideration, the amount of such shortfall shall be added to the calculation of Excess Cash Flow at the end of such period of four consecutive fiscal quarters, (xii) the amount of cash taxes paid in such period to the extent they exceed the amount of tax expense deducted in determining Consolidated Net Income for such period (which amounts shall be included in the calculation of Excess Cash Flow for the period in which they are expensed) and (xiii) cash expenditures in respect of Swap Contracts during such fiscal year to the extent such expenditures were not deducted or were excluded in arriving at such Consolidated Net Income. Notwithstanding anything in the definition of any term used in the definition of Excess Cash Flow to the contrary, all components of Excess Cash Flow shall be computed for the Borrower and its Restricted Subsidiaries on a consolidated basis.
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Excess Cash Flow Period shall mean each fiscal year of the Borrower commencing with the fiscal year ending January 28, 2012 but in all cases for purposes of calculating the Cumulative Retained Excess Cash Flow Amount shall only include such fiscal years for which financial statements and a Compliance Certificate have been delivered in accordance with Sections 6.01(a) and 6.02(a), respectively, and for which any prepayments required by Section 2.13(a)(i) (if any) have been made (it being understood that the Retained Percentage of Excess Cash Flow for any Excess Cash Flow Period shall be included in the Cumulative Retained Excess Cash Flow Amount regardless of whether a prepayment is required by Section 2.13(a)(i)).
Exchange Act means the Securities Exchange Act of 1934, as amended.
Excluded Subsidiary shall mean (a) any Subsidiary that is not a wholly owned Subsidiary of the Borrower or a Guarantor, (b) any Subsidiary of the Borrower that does not have total assets or annual revenues in excess of $20,000,000 individually; provided that the aggregate amount of assets or annual revenues of subsidiaries constituting Excluded Subsidiaries pursuant to this clause (b) shall not at any time exceed $20,000,000, (c) any Subsidiary that is prohibited by applicable Law or Contractual Obligations existing on the Closing Date (or, in the case of any newly acquired Subsidiary, in existence at the time of acquisition but not entered into in contemplation thereof) from Guaranteeing the Obligations or if Guaranteeing the Obligations would require governmental (including regulatory) consent, approval, license or authorization, (d) any other Subsidiary with respect to which, in the reasonable judgment of the Administrative Agent, in consultation with the Borrower, the burden or cost or other consequences (including any material adverse tax consequences) of providing a Guarantee of the Obligations shall be excessive in view of the benefits to be obtained by the Lenders therefrom, (e) any Foreign Subsidiary of the Borrower or of any other direct or indirect Domestic Subsidiary or Foreign Subsidiary, (f) any Unrestricted Subsidiary, (g) any special purpose securitization vehicle (or similar entity), (h) any direct or indirect Domestic Subsidiary (x) that is treated as a disregarded entity for federal income tax purposes and (y) substantially all of the assets of which are the Equity Interests of a Foreign Subsidiary and (i) any Domestic Subsidiary that is a Subsidiary of a Foreign Subsidiary that is a controlled foreign corporation within the meaning of Section 957 of the Code.
Existing Credit Agreement shall have the meaning assigned to such term in the introductory statement to this Agreement.
Existing Lenders shall have the meaning assigned to such term in the introductory statement to this Agreement.
Existing Term Loans shall have the meaning assigned to such term in the introductory statement to this Agreement.
Extended Term Loans shall have the meaning assigned to such term in Section 2.21(a).
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Extending Term Lender shall have the meaning assigned to such term in Section 2.21(a).
Extension shall have the meaning assigned to such term in Section 2.21(a).
Extension Offer shall have the meaning assigned to such term in Section 2.21(a).
Facility shall mean the Initial Term Loans, the Extended Term Loans, the Incremental Term Loans or the Other Term Loans, as the context may require.
FATCA shall mean Sections 1471 through 1474 of the Code, as in effect on the Closing Date, and any applicable Treasury regulation promulgated thereunder or published administrative guidance implementing such Sections whether in existence on the Closing Date or promulgated or published thereafter.
Federal Funds Effective Rate shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.
Fee Letter shall mean the Amended and Restated Fee Letter dated October 22, 2010, among Merger Sub, Credit Suisse Securities (USA) LLC, Credit Suisse AG, Morgan Stanley Senior Funding, Inc., Banc of America Securities LLC and Bank of America, N.A.
Fees shall have the meaning assigned to such term in Section 2.05.
First Lien Intercreditor Agreement shall mean a pari passu intercreditor agreement among the Collateral Agent, the ABL Agent and one or more Senior Representatives for holders of Permitted First Priority Refinancing Debt in form and substance reasonably satisfactory to the Collateral Agent.
Flood Laws shall mean the National Flood Insurance Reform Act of 1994 and related legislation (including the regulations of the Board).
Foreign Benefit Event shall mean, with respect to any Foreign Pension Plan, (a) the existence of unfunded liabilities in excess of the amount permitted under any applicable law or in excess of the amount that would be permitted absent a waiver from applicable governmental authority, (b) the failure to make the required contributions or payments, under any applicable law, on or before the due date for such contributions or payments (including any applicable grace period), (c) the receipt of a notice by applicable Governmental Authority relating to the intention to terminate any such Foreign Pension Plan or to appoint a trustee or similar official to administer any such Foreign Pension Plan, in either case to protect the interests of the participants or to avoid any unreasonable deterioration of the financial condition of the Foreign Pension Plan or any unreasonable increase in liability with respect to the Foreign Pension Plan or
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alleging the insolvency of any such Foreign Pension Plan, (d) the incurrence by a Loan Party, any Restricted Subsidiary or any Affiliate of any liability under applicable law on account of the complete or partial termination of such Foreign Pension Plan or the complete or partial withdrawal of any participating employer therein or (e) the occurrence of any transaction that is prohibited under any applicable law and that could reasonably be expected to result in the incurrence of any liability by a Loan Party, any Restricted Subsidiary or any Affiliate, other than for the payment of Foreign Pension Plan contributions or of premiums to the applicable Governmental Authority.
Foreign Disposition shall have the meaning set forth in Section 2.13(f).
Foreign Lender shall mean any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.
Foreign Pension Plan shall mean any defined benefit plan described in Section 4(b)(4) of ERISA that under applicable law is required to be funded through a trust or other funding vehicle other than a trust or funding vehicle maintained exclusively by a Governmental Authority.
Foreign Subsidiary shall mean any direct or indirect Subsidiary of the Borrower which is not a Domestic Subsidiary; provided, that Gymboree Canada/Delaware shall be deemed to be a Foreign Subsidiary.
Funded Debt shall mean all Indebtedness of the Borrower and the Restricted Subsidiaries for borrowed money that matures more than one year from the date of its creation or matures within one year from such date that is renewable or extendable, at the option of such Person, to a date more than one year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year from such date, including Indebtedness in respect of the Loans.
GAAP shall mean generally accepted accounting principles in the United States of America, 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 on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, 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; provided, further that GAAP as applied herein with respect to Attributable Indebtedness and Capitalized Leases shall be GAAP as in effect on the Closing Date.
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Governmental Authority shall mean any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
Granting Lender shall have the meaning assigned to such term in Section 10.04(i).
Guarantee shall mean, as to any Person, without duplication, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other monetary obligation payable or performable by another Person (the primary obligor) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other monetary obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance of such Indebtedness or other monetary obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other monetary obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other monetary obligation of any other Person, whether or not such Indebtedness or other monetary obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien); provided that the term Guarantee shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or customary and reasonable indemnity obligations in effect on the Closing Date or entered into in connection with any acquisition or disposition of assets permitted under this Agreement (other than such obligations with respect to Indebtedness). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term Guarantee as a verb has a corresponding meaning.
Guaranteed Obligations shall have the meaning specified in Section 11.01.
Guarantors shall mean (i) Holdings, (ii) each wholly owned Domestic Subsidiary of Borrower as of the Closing Date (other than an Excluded Subsidiary) and (iii) each wholly owned Subsidiary that issues a Guarantee of the Obligations after the Closing Date pursuant to Section 6.11 (which Section 6.11, for the avoidance of doubt, does not require that any Excluded Subsidiary provide such a Guarantee) or otherwise. For avoidance of doubt, the Borrower may cause any Restricted Subsidiary that is not a Guarantor to Guarantee the Obligations by causing such Restricted Subsidiary to execute a joinder to this Agreement in form and substance reasonably satisfactory to the Administrative Agent, and any such Restricted Subsidiary shall be treated as a Guarantor hereunder for all purposes.
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Guaranty shall mean, collectively, the guaranty of the Obligations by the Guarantors pursuant to this Agreement.
Gymboree Canada/Delaware shall mean that certain Subsidiary of the Borrower that is organized under the Laws of the State of Delaware as Gymboree Canada, Inc. and under the Laws of the province of New Brunswick, Canada as Gymboree, Inc..
Hazardous Materials shall mean (a) any petroleum products, distillates or byproducts and all other hydrocarbons, coal ash, radon gas, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, chlorofluorocarbons and all other ozone-depleting substances and (b) any chemical, material, substance or waste that is prohibited, limited or regulated by or pursuant to any Environmental Law.
Hedge Bank shall mean any Person that is an Arranger, an Agent, a Lender or an Affiliate of any of the foregoing at the time it enters into a Secured Hedge Agreement or at the time it becomes party to a Secured Hedge Agreement in its capacity as a party thereto and that is designated a Hedge Bank with respect to such Secured Hedge Agreement in a writing from the Borrower to the Administrative Agent, and (other than a Person already party hereto as a Lender) that delivers to the Administrative Agent a letter agreement reasonably satisfactory to it (i) appointing the Collateral Agent as its agent under the applicable Loan Documents and (ii) agreeing to be bound by Article 9 and Sections 10.07, 10.11 and 10.23 as if it were a Lender, and Section 10.20.
Holdings shall have the meaning assigned to such term in the introductory statement to this Agreement.
Immaterial Subsidiary shall have the meaning set forth in Section 8.03.
Incremental Amendment shall have the meaning assigned to such term in Section 2.19(c).
Incremental Facility shall have the meaning assigned to such term in Section 2.19(b).
Incremental Lenders shall have the meaning assigned to such term in Section 2.19(c).
Incremental Term Loans shall have the meaning assigned to such term in Section 2.19(a).
Indebtedness shall mean, as to any Person at a particular time, without duplication, all of the following:
(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 which may have been reimbursed) of all outstanding letters of credit (including standby and
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commercial), bankers acceptances, bank guaranties, surety bonds, performance bonds and similar instruments issued or created by or for the account of such Person;
(c) net obligations of such Person under any Swap Contract;
(d) all obligations of such Person to pay the deferred purchase price of property or services (other than (i) trade accounts payable in the ordinary course of business, (ii) any earn-out obligation until such earn-out obligation is not paid after becoming due and payable and (iii) liabilities accrued in the ordinary course);
(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 and mortgage, industrial revenue bond, industrial development bond and similar financings), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;
(f) all Attributable Indebtedness; and
(g) all obligations of such Person in respect of Disqualified Equity Interests;
whether or not the foregoing would constitute indebtedness or a liability in accordance with GAAP; and
(h) to the extent not otherwise included above, 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 joint venturer, except to the extent such Persons liability for such Indebtedness is otherwise limited and only to the extent such Indebtedness would be included in the calculation of Consolidated Total Net Debt. 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 Indebtedness of any Person for purposes of clause (e) that is limited in recourse to the property encumbered thereby shall be deemed to be equal to the lesser of (i) the aggregate unpaid amount of such Indebtedness and (ii) the fair market value of the property encumbered thereby as determined by such Person in good faith.
Indemnified Liabilities shall have the meaning assigned to such term in Section 10.05(b).
Indemnified Taxes shall have the meaning assigned to such term in Section 3.01(a).
Indemnitee shall have the meaning assigned to such term in Section 10.05(b).
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Individual Monthly Balance shall mean, with respect to any Indebtedness under the ABL Facility or any other revolving credit facility during any fiscal month of the Borrower, the quotient of (x) the sum of the aggregate outstanding principal amount of all such Indebtedness at the end of each day of such fiscal month divided by (y) the number of days in such fiscal month.
Information shall have the meaning assigned to such term in Section 10.16.
Initial Term Loans shall mean the term loans made by the Lenders on the Restatement Effective Date to the Borrower pursuant to the Amendment Agreement.
Intellectual Property Security Agreement shall have the meaning given to the term Grant of Security Interest in the Security Agreement.
Intercompany Note shall mean a promissory note substantially in the form of Exhibit F.
Interest Coverage Ratio shall mean, with respect to the Borrower and the Restricted Subsidiaries on a consolidated basis, as of the end of any fiscal quarter of the Borrower for the Test Period ending on such date, the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Expense.
Interest Payment Date shall mean (a) with respect to any ABR Loan, the last Business Day of each March, June, September and December, and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months duration been applicable to such Borrowing.
Interest Period shall mean, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last Business Day) in the calendar month that is 1, 2, 3 or 6 (or, if agreed by all applicable Lenders, 9 or 12) months thereafter (or any shorter period agreed by all applicable Lenders), as the Borrower may elect; provided, however, that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next 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 for any Loan shall extend beyond the maturity date of such Loan. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.
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Investment shall mean, 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 or debt or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of Indebtedness of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person, (c) the purchase or other acquisition (in one transaction or a series of transactions) of all or substantially all of the property and assets or business of another Person or assets constituting a business unit, line of business or division of such Person or (d) the purchase or other acquisition of a Store. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.
Investors mean the Sponsor and the Management Stockholders.
IP Rights has the meaning set forth in Section 5.16.
Junior Financing shall mean any Subordinated Indebtedness and any other Indebtedness that is required to be subordinated to the Obligations. For avoidance of doubt, Permitted Subordinated Debt constitutes Junior Financing.
Junior Financing Documentation shall mean any documentation governing any Junior Financing.
Latest Maturity Date shall mean, at any date of determination, the latest maturity or expiration date applicable to any Loan hereunder at such time, including the latest maturity or expiration date of any Incremental Term Loan, any Other Term Loan or any Extended Term Loan, in each case as extended in accordance with this Agreement from time to time.
Laws shall mean, collectively, all international, foreign, federal, state and local laws (including common law), statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, requirements, and agreements with, any Governmental Authority.
Leasehold Property shall mean any leasehold interest of any Loan Party as lessee under any lease of Real Property.
Lender shall mean each lender from time to time party hereto. For avoidance of doubt, each Additional Lender and each Incremental Lender is a Lender to the extent any such Person has executed and delivered a Refinancing Amendment or an Incremental Amendment, as the case may be, and to the extent such Refinancing Amendment or Incremental Amendment shall have become effective in accordance with the terms hereof and thereof. As of the Restatement Effective Date, Schedule 2.01 sets forth the name of each Lender.
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LIBO Rate shall mean, with respect to any Eurodollar Borrowing for any Interest Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the commencement of such Interest Period by reference to the British Bankers Association Interest Settlement Rates for deposits in Dollars (as set forth by any service selected by the Administrative Agent that has been nominated by the British Bankers Association as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the LIBO Rate shall be the interest rate per annum determined by the Administrative Agent to be the average of the rates per annum at which deposits in Dollars are offered for such relevant Interest Period to major banks in the London interbank market in London, England by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the beginning of such Interest Period.
Lien shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement 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 Property, and any Capitalized Lease or financing lease having substantially the same economic effect as any of the foregoing).
Loan shall mean any Term Loan.
Loan Documents shall mean this Agreement (including, without limitation, any amendments to this Agreement), the Collateral Documents, each Incremental Amendment, each Refinancing Amendment, each Extension Offer, the Term Notes, if any, executed and delivered pursuant to Section 2.04(e), the ABL Intercreditor Agreement, the First Lien Intercreditor Agreement (if any) and the Second Lien Intercreditor Agreement (if any).
Loan Parties shall mean, collectively, the Borrower and each Guarantor.
Management Stockholders shall mean the members of management of Holdings, the Borrower or any of its Subsidiaries who are investors in Holdings or any direct or indirect parent thereof.
Margin Stock shall have the meaning assigned to such term in Regulation U.
Master Agreement shall have the meaning specified in the definition of Swap Contract.
Material Adverse Effect shall mean a (a) material adverse effect on the business, operations, assets, liabilities (actual or contingent), operating results or financial condition of the Borrower and its Restricted Subsidiaries, taken as a whole; (b) material adverse effect on the ability of the Loan Parties (taken as a whole) to fully and timely perform any of their payment obligations under any Loan Document to which the Borrower or any of the Loan Parties is a
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party; or (c) material adverse effect on the rights and remedies available to the Lenders, the Administrative Agent or the Collateral Agent under any Loan Document.
Material Leased Real Property shall mean each Leasehold Property (i) that is leased by a Loan Party, (ii) that is located in the United States, (iii) that is used as a distribution center in connection with the business of the Borrower and the Restricted Subsidiaries and (iv) the failure of which to operate could reasonably be expected to materially and adversely affect the ordinary conduct of the business of the Borrower and the Restricted Subsidiaries, taken as a whole.
Material Owned Real Property shall mean each Real Property that (i) is owned in fee by a Loan Party, (ii) is located in the United States and (iii) has a fair market value in excess of $5,000,000 (at the Closing Date or, with respect to any such Real Property acquired after (or held by a Person that becomes a Loan Party after) the Closing Date as described in Section 6.11 or 6.13, as applicable, at the time of acquisition (or at the time such Person becomes a Loan Party)), in each case, as reasonably estimated by the Borrower in good faith.
Material Real Property shall mean any Material Owned Real Property or Material Leased Real Property.
Maturity Date shall mean (i) with respect to the Initial Term Loans borrowed on the Restatement Effective Date that have not been extended pursuant to Section 2.21, February 23, 2018 (the Original Term Loan Maturity Date), (ii) with respect to any tranche of Extended Term Loans, the final maturity date as specified in the applicable Extension Offer accepted by the respective Lender or Lenders, (iii) with respect to any Other Term Loans, the final maturity date as specified in the applicable Refinancing Amendment and (iv) with respect to any Incremental Term Loans, the final maturity date as specified in the applicable Incremental Amendment; provided that if any such day is not a Business Day, the applicable Maturity Date shall be the Business Day immediately preceding such day.
Maximum Rate shall have the meaning assigned to such term in Section 10.09.
Merger shall have the meaning assigned to such term in the introductory statement to this Agreement.
Merger Agreement shall mean that certain Agreement and Plan of Merger, dated as of October 11, 2010, by and among Giraffe Holding, Inc., Merger Sub and the Company.
Merger Consideration shall have the meaning assigned to such term in the introductory statement to this Agreement.
Merger Sub shall have the meaning assigned to such term in the introductory statement to this Agreement.
Minimum Extension Condition shall have the meaning assigned to such term in Section 2.21(c).
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Moodys shall mean Moodys Investors Service, Inc., or any successor thereto.
Mortgage Policies shall have the meaning specified in the definition of Collateral and Guarantee Requirement.
Mortgaged Property shall have the meaning specified in the definition of Collateral and Guarantee Requirement.
Mortgages shall mean, collectively, the deeds of trust, trust deeds, hypothecs and mortgages made by the Loan Parties in favor or for the benefit of the Collateral Agent on behalf of the Secured Parties creating and evidencing a Lien on a Mortgaged Property in form and substance reasonably satisfactory to the Collateral Agent, and any other mortgages executed and delivered pursuant to Section 4.02, 6.11 or 6.13.
Multiemployer Plan shall mean any multiemployer plan as defined in Section 4001(a)(3) of ERISA subject to the provisions of Title IV of ERISA to which a Loan Party, any Restricted Subsidiary or any of their respective ERISA Affiliates is an employer as defined in Section 3(5) of ERISA.
Net Proceeds shall mean:
(a) 100% of the cash proceeds actually received by the Borrower or any of the Restricted Subsidiaries (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise and including casualty insurance settlements and condemnation and similar awards, but in each case only as and when received) from any Disposition or Casualty Event, net of (i) attorneys fees, accountants fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, required debt payments and required payments of other obligations that are secured by the applicable asset or property (including without limitation principal amount, premium or penalty, if any, interest and other amounts) (other than pursuant to the Loan Documents, the ABL Facility Documentation, any Permitted First Priority Refinancing Debt or any Permitted Second Priority Refinancing Debt), other expenses and brokerage, consultant and other fees actually incurred in connection therewith, (ii) in the case of any Disposition or Casualty Event by a non-wholly owned Restricted Subsidiary, the pro rata portion of the Net Proceeds thereof (calculated without regard to this clause (ii)) attributable to minority interests and not available for distribution to or for the account of the Borrower or a wholly owned Restricted Subsidiary as a result thereof, (iii) taxes paid or reasonably estimated to be payable as a result thereof (provided, that if the amount of any such estimated taxes exceeds the amount of taxes actually required to be paid in cash in respect of such Disposition or Casualty Event, the aggregate amount of such excess shall constitute Net Proceeds at the time such taxes are actually paid), and (iv) the amount of any reasonable reserve established in accordance with GAAP against any adjustment to the sale price or any liabilities (other than any taxes deducted pursuant to clause (i) above) (x) related to any of the applicable assets and (y) retained by the Borrower or any of the Restricted Subsidiaries including, without limitation, pension and other post-employment benefit liabilities and liabilities
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related to environmental matters or against any indemnification obligations (however, the amount of any subsequent reduction of such reserve (other than in connection with a payment in respect of any such liability) shall be deemed to be Net Proceeds of such Disposition or Casualty Event occurring on the date of such reduction); provided, that if no Default exists and the Borrower shall deliver a certificate of a Responsible Officer of the Borrower to the Administrative Agent promptly following receipt of any such proceeds setting forth the Borrowers good faith intention to use any portion of such proceeds to acquire, maintain, develop, construct, improve, upgrade or repair assets useful in the business of the Borrower or its Restricted Subsidiaries or to make Permitted Acquisitions or any acquisition permitted hereunder of all or substantially all the assets of, or all the Equity Interests (other than directors qualifying shares) in, a Person or division or line of business of a Person (or any subsequent investment made in a Person, division or line of business previously acquired) (and provided that if the assets subject to the Disposition or Casualty Event constitute Term Priority Collateral, then the assets to be acquired shall constitute Term Priority Collateral), in each case within 12 months of such receipt, such portion of such proceeds shall not constitute Net Proceeds except to the extent not, within 12 months of such receipt, so used or contractually committed with a third party that is not an Affiliate to be so used (it being understood that if any portion of such proceeds are not so used within such 12 month period but within such 12-month period are contractually committed with a third party that is not an Affiliate to be used, then upon the termination of such contract or if such Net Proceeds are not so used within the later of such 12-month period and 180 days from the entry into such contractual commitment, such remaining portion shall constitute Net Proceeds as of the date of such termination or expiry without giving effect to this proviso; it being understood that such proceeds shall constitute Net Proceeds notwithstanding any investment notice if there is a Specified Default at the time of a proposed reinvestment unless such proposed reinvestment is made pursuant to a binding commitment with a third party that is not an Affiliate entered into at a time when no Specified Default was continuing); provided, further, that no proceeds realized in a single transaction or series of related transactions shall constitute Net Proceeds unless (x) such proceeds shall exceed $5,000,000 and (y) the aggregate net proceeds exceeds $15,000,000 in any fiscal year (and thereafter only net cash proceeds in excess of such amount shall constitute Net Proceeds under this clause (a)), and
(b) 100% of the cash proceeds from the incurrence, issuance or sale by the Borrower or any of the Restricted Subsidiaries of any Indebtedness, net of all taxes paid or reasonably estimated to be payable as a result thereof and fees (including investment banking fees and discounts), commissions, costs and other expenses, in each case incurred in connection with such issuance or sale, provided, that, if the amount of any estimated taxes exceeds the amount of taxes actually required to be paid in cash, the aggregate amount of such excess shall constitute Net Proceeds at the time such taxes are actually paid.
For purposes of calculating the amount of Net Proceeds, fees, commissions and other costs and expenses payable to Holdings, the Borrower or the Restricted Subsidiaries shall be disregarded.
Non-Consenting Lender has the meaning set forth in Section 3.07(b).
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Non-Extended Term Loans shall have the meaning assigned to such term in Section 2.21(b).
Not Otherwise Applied shall mean, with reference to any amount of net proceeds of any transaction or event, that such amount (a) was not required to be applied to prepay the Loans pursuant to Section 2.13(a), (b) was not previously applied in determining the permissibility of a transaction under the Loan Documents where such permissibility was (or may have been) contingent on receipt of such amount or utilization of such amount for a specified purpose, including, without limitation, pursuant to Section 7.06(h), 7.06(k) or 7.13(a), (c) was not previously applied to effect a transaction or make a payment under any Loan Document and (d) did not constitute (i) the proceeds of a Specified Equity Contribution made to effectuate the Additional Post-Closing Equity Contribution or (ii) the proceeds of an ABL Specified Equity Contribution that were applied to increase Consolidated EBITDA in accordance with the ABL Facility Documentation. The Borrower shall promptly notify the Administrative Agent of any application of such amount as contemplated by (b), (c) or (d) above.
Obligations shall mean all (x) advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party and its Restricted Subsidiaries arising under any Loan Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or Restricted Subsidiary of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding (or would accrue but for the operation of applicable Debtor Relief Laws), regardless of whether such interest and fees are allowed or allowable claims in such proceeding and (y) obligations of any Loan Party (other than Holdings) arising under any Secured Hedge Agreement. Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents (and of their Restricted Subsidiaries to the extent they have obligations under the Loan Documents) include (a) the obligation (including guarantee obligations) to pay principal, interest, reimbursement obligations, charges, expenses, fees, Attorney Costs, indemnities and other amounts payable by any Loan Party under any Loan Document and (b) the obligation of any Loan Party to reimburse any amount in respect of any of the foregoing that any Agent or Lender, in its sole discretion, may elect to pay or advance on behalf of such Loan Party.
OID shall have the meaning assigned to such term in Section 2.19(b).
Organization Documents shall mean (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or
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organization and, if applicable, any certificate or articles of formation or organization of such entity.
Original Term Loan Maturity Date shall have the meaning assigned to such term in the definition of Maturity Date.
Other Taxes shall have the meaning assigned to such term in Section 3.01(b).
Other Term Loan Commitments shall mean one or more Classes of term loan commitments hereunder that result from a Refinancing Amendment entered into after the Restatement Effective Date.
Other Term Loans shall mean one or more Classes of Term Loans that result from a Refinancing Amendment entered into after the Restatement Effective Date.
Participant Register shall have the meaning assigned to such term in Section 10.04(f).
PBGC shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA.
Perfection Certificate shall mean a certificate in the form of Exhibit II to the Security Agreement or any other form reasonably approved by the Collateral Agent, as the same shall be supplemented from time to time.
Permitted Acquisition shall have the meaning specified in Section 7.02(i).
Permitted First Priority Refinancing Debt shall mean any secured Indebtedness incurred by the Borrower in the form of one or more series of senior secured notes; provided that (i) such Indebtedness may only be secured by assets consisting of Collateral on a pari passu basis (but without regard to the control of remedies) with the Obligations and may not be secured by any property or assets of Holdings, the Borrower or any Restricted Subsidiary other than the Collateral, (ii) such Indebtedness constitutes Credit Agreement Refinancing Indebtedness, (iii) such Indebtedness does not mature or have scheduled amortization or payments of principal and is not subject to mandatory redemption, repurchase, prepayment or sinking fund obligation (except customary asset sale or change of control provisions), in each case prior to the date that is ninety-one (91) days after the then Latest Maturity Date, (iv) such Indebtedness is not at any time guaranteed by any Subsidiaries other than Subsidiaries that are Guarantors, (v) the other terms and conditions of such Indebtedness (excluding pricing, premiums and optional prepayment or optional redemption provisions) are customary market terms for securities of such type (provided, that such terms shall in no event include any financial maintenance covenants) and, in any event, when taken as a whole, are not more favorable to the investors providing such Indebtedness than the terms and conditions of the applicable Refinanced Debt (except with respect to any terms (including covenants) and conditions contained in such Indebtedness that are applicable only after the then Latest Maturity Date) (provided that a certificate of a Responsible Officer delivered to the Administrative Agent at least five Business Days prior to
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the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the requirement of this clause (v) shall be conclusive evidence that such terms and conditions satisfy such requirement unless the Administrative Agent notifies the Borrower within such five Business Day period that it disagrees with such determination (including a reasonable description of the basis upon which it disagrees)), (vi) no Default shall exist immediately prior to or after giving effect to such incurrence, (vii) the security agreements relating to such Indebtedness are substantially the same as the applicable Collateral Documents (with such differences as are reasonably satisfactory to the Administrative Agent) and (viii) a Senior Representative acting on behalf of the holders of such Indebtedness shall have become party to or otherwise subject to the provisions of (1) the ABL Intercreditor Agreement and (2) the First Lien Intercreditor Agreement; provided that if such Indebtedness is the initial Permitted First Priority Refinancing Debt incurred by the Borrower, then the Borrower, Holdings, the Subsidiary Guarantors, the Collateral Agent and the Senior Representative for such Indebtedness shall have executed and delivered the First Lien Intercreditor Agreement. Permitted First Priority Refinancing Debt will include any Registered Equivalent Notes issued in exchange therefor.
Permitted Holders shall mean any of the Investors; provided that if the Management Stockholders own beneficially or of record more than ten percent (10%) of the outstanding voting stock of Holdings in the aggregate at any time, for purposes of any determination of Permitted Holders (including pursuant to the definition of Change of Control) at such time, the Management Stockholders shall be deemed to hold ten percent (10%) of the outstanding voting stock of Holdings at such time.
Permitted Refinancing shall mean, with respect to any Person, any modification, refinancing, refunding, renewal, replacement or extension of any Indebtedness of such Person; provided that (a) the principal amount (or accreted value, if applicable) thereof does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so modified, refinanced, refunded, renewed, replaced or extended except (i) by an amount equal to unpaid accrued interest and premium (including tender premiums) thereon plus other reasonable and customary fees and expenses (including upfront fees and original issue discount) incurred in connection with such modification, refinancing, refunding, renewal, replacement or extension and (ii) by an amount equal to any existing commitments unutilized thereunder, (b) other than with respect to a Permitted Refinancing in respect of Indebtedness permitted pursuant to Section 7.03(e), the Indebtedness resulting from such modification, refinancing, refunding, renewal, replacement or extension has a final maturity date equal to or later than the final maturity date of, and has 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, replaced or extended, (c) other than with respect to a Permitted Refinancing in respect of Indebtedness permitted pursuant to Sections 7.03(e), at the time thereof, no Default shall have occurred and be continuing, (d) if such Indebtedness being modified, refinanced, refunded, renewed, replaced or extended is Indebtedness permitted pursuant to Section 7.03(b), 7.03(q), 7.03(t) or 7.03(u), or is otherwise a Junior Financing, (i) to the extent such Indebtedness being modified, refinanced, refunded, renewed, replaced or extended is subordinated in right of payment or in lien priority to
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the Obligations, the Indebtedness resulting from such modification, refinancing, refunding, renewal, replacement or extension is subordinated in right of payment or in lien priority, as applicable, to the Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being modified, refinanced, refunded, renewed, replaced or extended, (ii) the other terms and conditions (including, if applicable, as to collateral but excluding as to subordination, pricing, premiums and optional prepayment or optional redemption provisions) of any such modified, refinanced, refunded, renewed, replaced or extended Indebtedness, taken as a whole, are not materially less favorable to the Loan Parties or the Lenders than the terms and conditions of the Indebtedness being modified, refinanced, refunded, renewed, replaced or extended, taken as a whole (provided that a certificate of a Responsible Officer delivered to the Administrative Agent at least five Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirement shall be conclusive evidence that such terms and conditions satisfy the foregoing requirement unless the Administrative Agent notifies the Borrower within such five Business Day period that it disagrees with such determination (including a reasonable description of the basis upon which it disagrees)) and (iii) the obligors (including any guarantors) in respect of the Indebtedness resulting from such modification, refinancing, refunding, renewal, replacement or extension shall be the same as the obligors (including any guarantors) of the Indebtedness being modified, refinanced, refunded, renewed, replaced or extended and (e) in the case of any Permitted Refinancing in respect of the ABL Facility, such Permitted Refinancing is secured only by all or any portion of the collateral securing the ABL Facility (but not by any other assets) pursuant to one or more security agreements subject, in the case of assets constituting (or required to constitute) Collateral, to the ABL Intercreditor Agreement. When used with respect to any specified Indebtedness, Permitted Refinancing shall mean the Indebtedness incurred to effectuate a Permitted Refinancing of such specified Indebtedness.
Permitted Repricing Amendment shall have the meaning set forth in Section 10.08(b).
Permitted Second Priority Refinancing Debt shall mean secured Indebtedness incurred by the Borrower in the form of one or more series of second lien secured notes or second lien secured loans; provided that (i) such Indebtedness may only be secured by assets consisting of Collateral on a second lien, subordinated basis to the Obligations, the obligations in respect of any Permitted First Priority Refinancing Debt and the obligations (other than the obligations of any Canadian Subsidiary) in respect of the ABL Facility and may not be secured by any property or assets of Holdings, the Borrower or any Restricted Subsidiary other than the Collateral, (ii) such Indebtedness constitutes Credit Agreement Refinancing Indebtedness, (iii) such Indebtedness does not mature or have scheduled amortization or payments of principal and is not subject to mandatory redemption, repurchase, prepayment or sinking fund obligation (except customary asset sale or change of control provisions), in each case prior to the date that is ninety-one (91) days after the then Latest Maturity Date, (iv) such Indebtedness is not at any time guaranteed by any Subsidiaries other than Subsidiaries that are Guarantors, (v) the other terms and conditions of such Indebtedness (excluding pricing, premiums and optional
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prepayment or optional redemption provisions) are customary market terms for Indebtedness of such type and, in any event, when taken as a whole, are not more favorable to the investors or lenders providing such Indebtedness than the terms and conditions of the applicable Refinanced Debt (except with respect to any terms (including covenants) and conditions contained in such Indebtedness that are applicable only after the then Latest Maturity Date) (provided that a certificate of a Responsible Officer delivered to the Administrative Agent at least five Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the requirement of this clause (v) shall be conclusive evidence that such terms and conditions satisfy such requirement unless the Administrative Agent notifies the Borrower within such five Business Day period that it disagrees with such determination (including a reasonable description of the basis upon which it disagrees)), (vi) the security agreements relating to such Indebtedness reflect the second lien nature of the security interests and are otherwise substantially the same as the applicable Collateral Documents (with such differences as are reasonably satisfactory to the Administrative Agent), (vii) no Default shall exist immediately prior to or after giving effect to such incurrence and (viii) a Senior Representative acting on behalf of the holders of such Indebtedness shall have become party to or otherwise subject to the provisions of (1) the ABL Intercreditor Agreement and (2) the Second Lien Intercreditor Agreement; provided that if such Indebtedness is the initial Permitted Second Priority Refinancing Debt incurred by the Borrower, then the Borrower, Holdings, the Subsidiary Guarantors, the Collateral Agent and the Senior Representative for such Indebtedness shall have executed and delivered the Second Lien Intercreditor Agreement. Permitted Second Priority Refinancing Debt will include any Registered Equivalent Notes issued in exchange therefor.
Permitted Subordinated Debt shall mean unsecured Indebtedness incurred by the Borrower in the form of one or more series of unsecured notes or loans; provided that (i) such Indebtedness (including any Guarantee thereof) is subordinated to the Obligations on terms customary for high yield subordinated debt securities or otherwise reasonably satisfactory to the Administrative Agent, (ii) the Obligations at all times constitute designated senior debt (or comparable term) under the documents governing such Indebtedness, (iii) such Indebtedness does not mature or have scheduled amortization or payments of principal and is not subject to mandatory redemption, repurchase, prepayment or sinking fund obligation (except customary asset sale or change of control provisions), in each case prior to the date that is ninety-one (91) days after the then Latest Maturity Date, (iv) such Indebtedness is not at any time guaranteed by any Person that is not a Guarantor and (v) the other terms and conditions of such Indebtedness (excluding pricing, premiums and optional prepayment or optional redemption provisions) are customary market terms for Indebtedness of such type (provided, that such terms shall in no event include any financial maintenance covenants) and, in any event, when taken as a whole, are no more restrictive on the Borrower and the Restricted Subsidiaries than the terms and conditions applicable to the Term Loans (provided that a certificate of a Responsible Officer delivered to the Administrative Agent at least five Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that the
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Borrower has determined in good faith that such terms and conditions satisfy the requirement of this clause (v) shall be conclusive evidence that such terms and conditions satisfy such requirement unless the Administrative Agent notifies the Borrower within such five Business Day period that it disagrees with such determination (including a reasonable description of the basis upon which it disagrees)).
Permitted Unsecured Refinancing Debt shall mean unsecured Indebtedness incurred by the Borrower in the form of one or more series of unsecured notes or loans; provided that (i) such Indebtedness constitutes Credit Agreement Refinancing Indebtedness, (ii) such Indebtedness does not mature or have scheduled amortization or payments of principal and is not subject to mandatory redemption, repurchase, prepayment or sinking fund obligation (except customary asset sale or change of control provisions), in each case prior to the date that is ninety-one (91) days after the then Latest Maturity Date, (iii) such Indebtedness is not at any time guaranteed by any Subsidiaries other than Subsidiaries that are Guarantors, (iv) such Indebtedness (including any guarantee thereof) is not secured by any Lien on any property or assets of Holdings, the Borrower or any Restricted Subsidiary, (v) the other terms and conditions of such Indebtedness (excluding pricing, premiums and optional prepayment or optional redemption provisions) are customary market terms for Indebtedness of such type and, in any event, when taken as a whole, are not more favorable to the lenders or investors providing such Indebtedness than the terms and conditions of the applicable Refinanced Debt (except with respect to any terms (including covenants) and conditions contained in such Indebtedness that are applicable only after the then Latest Maturity Date) (provided that a certificate of a Responsible Officer delivered to the Administrative Agent at least five Business Days prior to the incurrence of such Indebtedness, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the requirement of this clause (v) shall be conclusive evidence that such terms and conditions satisfy such requirement unless the Administrative Agent notifies the Borrower within such five Business Day period that it disagrees with such determination (including a reasonable description of the basis upon which it disagrees)) and (vi) no Default shall exist immediately prior to or after giving effect to such incurrence. Permitted Unsecured Refinancing Debt will include any Registered Equivalent Notes issued in exchange therefor.
Person shall mean any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
Plan shall mean any employee pension benefit plan subject to the provisions of Title IV of ERISA or Sections 412 and 430 of the Code or Sections 302 and 303 of ERISA and in respect of which a Loan Party, any Restricted Subsidiary or any of their respective ERISA Affiliates is (or if such plan were terminated would under Section 4069 of ERISA be deemed to be) a contributing sponsor as defined in Section 4001(a)(13) of ERISA.
Platform shall have the meaning assigned to such term in Section 10.01.
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Prime Rate shall mean the rate of interest per annum determined from time to time by Credit Suisse AG as its prime rate in effect at its principal office in New York City and notified to the Borrower. The prime rate is a rate set by Credit Suisse based upon various factors including Credit Suisse AGs costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such rate.
Pro Forma Balance Sheet shall have the meaning set forth in Section 5.05(a)(i).
Pro Forma Basis shall mean, with respect to compliance with any test or covenant or calculation of any ratio hereunder, the determination or calculation of such test, covenant or ratio (including in connection with Specified Transactions) in accordance with Section 1.09.
Pro Forma Compliance with the Financial Ratios shall mean, at any time that:
(i) the Total Leverage Ratio, determined on a Pro Forma Basis, as of the last day of the Test Period most recently completed prior to such time, is not greater than the ratio set forth in the table below opposite the last day of such Test Period:
Test Periods Ending |
Total Leverage Ratio |
|||
January 30, 2011 through July 28, 2012 |
6.75 to 1.0 | |||
July 29, 2012 through February 2, 2013 |
6.25 to 1.0 | |||
February 3, 2013 through February 1, 2014 |
5.75 to 1.0 | |||
February 2, 2014 through January 31, 2015 |
5.25 to 1.0 | |||
February 1, 2015 through January 30, 2016 |
4.75 to 1.0 | |||
January 31, 2016 through October 29, 2016 |
4.50 to 1.0 | |||
October 30, 2016 through April 29, 2017 |
4.25 to 1.0 | |||
Thereafter |
4.00 to 1.0 |
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and
(ii) the Interest Coverage Ratio, determined on a Pro Forma Basis, as of the last day of the Test Period most recently completed prior to such time, is not less than the ratio set forth in the table below opposite the last day of such Test Period:
Test Periods Ending |
Interest Coverage Ratio |
|||
January 30, 2011 through February 2, 2013 |
1.50 to 1.0 | |||
February 3, 2013 through January 31, 2015 |
1.75 to 1.0 | |||
February 1, 2015 through January 30, 2016 |
2.00 to 1.0 | |||
Thereafter |
2.25 to 1.0 |
; provided, that if Pro Forma Compliance with the Financial Ratios is being tested at any time prior to the date on which the financial statements for the four consecutive fiscal quarter period ending January 30, 2011 are required to be delivered, such Pro Forma Compliance with the Financial Ratios shall be deemed to require that, as of the last day of the most recently completed four consecutive fiscal quarter period of the Borrower, (x) the Total Leverage Ratio determined on a Pro Forma Basis is not greater than 6.75 to 1.0 and (y) the Interest Coverage Ratio determined on a Pro Forma Basis is not less than 1.50 to 1.0.
Pro Forma Financial Statements shall have the meaning set forth in Section 5.05(a)(i).
Pro Rata Share shall mean, with respect to each Lender at any time a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Commitments (or, if Commitments have been terminated, the principal amount of the Loans) under the applicable Facility or Facilities of such Lender at such time and the denominator of which is the amount of the aggregate Commitments (or, if the Commitments have been terminated, the principal amount of the Loans) under the applicable Facility or Facilities at such time.
Projections shall have the meaning set forth in Section 6.01(c).
Public Lender shall have the meaning assigned to such term in Section 10.01.
Qualified Equity Interests shall mean any Equity Interests that are not Disqualified Equity Interests.
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Qualified IPO shall mean the issuance by Holdings or any direct or indirect parent of Holdings of its common Equity Interests in an underwritten primary public offering (other than a public offering pursuant to a registration statement on Form S-8) pursuant to an effective registration statement filed with the U.S. Securities and Exchange Commission in accordance with the Securities Act (whether alone or in connection with a secondary public offering).
Real Property shall mean, collectively, all right, title and interest (including any leasehold, mineral or other estate) in and to any and all parcels of or interests in real property owned or leased by any Person, whether by lease, license or other means, together with, in each case, all easements, hereditaments and appurtenances relating thereto, all improvements and appurtenant fixtures and equipment, all general intangibles and contract rights and other property and rights incidental to the ownership, lease or operation thereof.
Refinanced Debt shall have the meaning specified in the definition of Credit Agreement Refinancing Indebtedness.
Refinancing shall have the meaning assigned to such term in the introductory statement to this Agreement.
Refinancing Amendment shall mean an amendment to this Agreement executed by each of (a) the Borrower and Holdings, (b) the Administrative Agent, (c) each Additional Lender and (d) each existing Lender that agrees to provide any portion of the Credit Agreement Refinancing Indebtedness being incurred pursuant thereto, in accordance with Section 2.20.
Register shall have the meaning assigned to such term in Section 10.04(d).
Registered Equivalent Notes shall mean, with respect to any notes originally issued in a Rule 144A or other private placement transaction under the Securities Act of 1933, substantially identical notes (having the same Guarantees) issued in a dollar-for-dollar exchange therefor pursuant to an exchange offer registered with the SEC.
Regulation T shall mean Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Regulation U shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Rejection Notice shall have the meaning assigned to such term in Section 2.13(d).
Related Fund shall mean, with respect to any Lender that is a fund or commingled investment vehicle that invests in bank loans, any other fund that invests in bank loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.
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Related Parties shall mean, with respect to any specified Person, such Persons Affiliates and the respective directors, trustees, officers, employees, agents and advisors of such Person and such Persons Affiliates.
Release shall mean any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the environment or within or upon any building, structure, facility or fixture.
Reportable Event shall mean any of the events set forth in Section 4043(c) of ERISA or the regulations issued thereunder, other than events for which the thirty (30) day notice period has been waived with respect to a Plan.
Repricing Transaction shall mean the prepayment, refinancing, substitution or replacement of all or a portion of the Term 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 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 Loans (including, for the avoidance of doubt, a Permitted Repricing Amendment).
Request for Credit Extension shall mean a notice of Borrowing as required by Section 2.03.
Required Class Lenders shall mean, as of any date of determination, subject to the provisions of Section 10.04(l), Lenders of a Class having more than 50% of the sum of the outstanding Loans and unused Commitments of the applicable Class.
Required Lenders shall mean, at any time, subject to the provisions of Section 10.04(l), Lenders having Loans and unused Term Loan Commitments representing more than 50% of the sum of all Loans outstanding and unused Term Loan Commitments at such time.
Responsible Officer shall mean the chief executive officer, president, vice president, chief financial officer, treasurer, assistant treasurer, director of treasury or other similar officer of a Loan Party and, as to any document delivered on the Closing Date or the Restatement Effective Date, any secretary or assistant secretary of such Loan Party. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed by the recipient of such document 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
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conclusively presumed by the recipient of such document to have acted on behalf of such Loan Party.
Restatement Effective Date shall mean February 11, 2011, the date on which all of the conditions precedent to the amendment and restatement of the Existing Credit Agreement set forth in the Amendment Agreement shall have been satisfied.
Restricted Cash shall mean, without duplication, cash and Cash Equivalents (a) held by the Borrower and the Restricted Subsidiaries to the extent use thereof for application to the payment of Indebtedness is prohibited by law or contract, (b) listed as restricted on the balance sheet of the Borrower and the Restricted Subsidiaries or (c) that is contractually restricted from being distributed to the Borrower.
Restricted Payment shall mean any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interest of Holdings, the Borrower or any Restricted Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such Equity Interest of Holdings, the Borrower or any Restricted Subsidiary, or on account of any return of capital to Holdings, the Borrowers or a Restricted Subsidiarys stockholders, partners or members (or the equivalent Persons thereof).
Restricted Subsidiary shall mean any Subsidiary of the Borrower other than an Unrestricted Subsidiary.
Retained Percentage shall mean, with respect to any Excess Cash Flow Period (a) 100% minus (b) the Applicable ECF Percentage with respect to such Excess Cash Flow Period.
S&P shall mean Standard & Poors Ratings Service, or any successor thereto.
SEC shall mean the Securities and Exchange Commission or any Governmental Authority that is the successor thereto.
Second Lien Intercreditor Agreement shall mean a junior lien intercreditor agreement among the Collateral Agent and one or more Senior Representatives for holders of Permitted Second Priority Refinancing Debt, in form and substance reasonably satisfactory to the Collateral Agent.
Secured Hedge Agreement shall mean any Swap Contract permitted under Article 7 that is entered into by and between the Borrower or any Subsidiary Guarantor and any Hedge Bank and that has been designated by the Borrower as a Secured Hedge Agreement in a written notice delivered to the Administrative Agent and the Collateral Agent.
Secured Parties shall have the meaning assigned to such term in the Security Agreement.
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Securities Act shall mean the Securities Act of 1933, as amended.
Security Agreement shall mean a Security Agreement substantially in the form of Exhibit D.
Security Agreement Supplement shall have the meaning specified in the Security Agreement.
Senior Note Documents shall mean the indenture under which the Senior Notes are issued and all other instruments, agreements and other documents evidencing or governing the Senior Notes or providing for any Guarantee or other right in respect thereof.
Senior Notes shall have the meaning assigned to such term in the introductory statement to this Agreement.
Senior Representative shall mean, with respect to any series of Permitted First Priority Refinancing Debt or Permitted Second Priority Refinancing Debt, the trustee, administrative agent, collateral agent, security agent or similar agent under the indenture or agreement pursuant to which such Indebtedness is issued, incurred or otherwise obtained, as the case may be, and each of their successors in such capacities.
Senior Secured Leverage Ratio shall mean, with respect to any applicable period of four consecutive fiscal quarters, the ratio of (a) the Consolidated Total Net Debt (other than any portion of Consolidated Total Net Debt that is unsecured or is secured solely by a Lien that is subordinated to the Liens securing the Obligations pursuant to the Second Lien Intercreditor Agreement) as of the last day of such period to (b) Consolidated EBITDA for such period.
Share Consideration shall have the meaning assigned to such term in the introductory statement to this Agreement.
Shares shall mean the shares of common stock, $0.001 par value per share, of the Company.
Specified Default shall mean a Default under Section 8.01(a), (f) or (g).
Specified Debt Fund shall mean Sankaty Advisors, LLC or any bona fide debt investment fund or other account managed or advised by Sankaty Advisors, LLC, which, in each case, invests primarily in fixed income assets or other credit products in the ordinary course of business, and with respect to which Bain Capital Partners, LLC and investment vehicles managed or advised by Bain Capital Partners, LLC that are not engaged primarily in investing in fixed income assets or other credit products in the ordinary course of business do not make investment decisions.
Specified Equity Contribution shall mean any cash contribution to the common equity of Holdings and/or any purchase or investment in an Equity Interest of Holdings other than Disqualified Equity Interests.
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Specified Representations shall mean those representations and warranties made by the Borrower in Sections 5.01(a) (with respect to organizational existence only), 5.01(b)(ii), 5.02(a), 5.02(b)(i), 5.02(b)(iii), 5.04, 5.13, 5.17 and 5.19(a).
Specified Transaction shall mean any Investment that results in a Person becoming a Restricted Subsidiary or an Unrestricted Subsidiary, any Permitted Acquisition, 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 or a Store of the Borrower or a Restricted Subsidiary, in each case whether by merger, consolidation, amalgamation or otherwise.
Sponsor shall mean Bain Capital Partners, LLC and any of its Affiliates and funds or partnerships managed or advised by Bain Capital Partners, LLC or any of its Affiliates but not including, however, any portfolio company of any of the foregoing.
Sponsor Management Agreement shall mean that certain Management Agreement, dated as of October 23, 2010, by and among Giraffe Holding, Inc., Merger Sub and Bain Capital Partners, LLC, as in effect on the Closing Date and as the same may be amended, supplemented or otherwise modified in accordance with its terms, but only to the extent that any such amendment, supplement or modification does not, directly or indirectly, increase the obligation of Holdings or any of its Affiliates to make any payments thereunder.
SPV shall have the meaning assigned to such term in Section 10.04(i).
Statutory Reserves shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board and any other banking authority, domestic or foreign, to which the Administrative Agent or any Lender (including any branch, Affiliate or other fronting office making or holding a Loan) is subject for Eurocurrency Liabilities (as defined in Regulation D of the Board). Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities (as defined in Regulation D of the Board) and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
Stockholders Agreement shall mean the Stockholders Agreement, dated as of the Closing Date, by and among Giraffe Holding, Inc., Giraffe Intermediate A, Inc., Holdings, the Company, Bain Capital Fund X, L.P. and the other investors from time to time party thereto, as in effect on the Closing Date and as the same may be amended, supplemented or otherwise modified in accordance with its terms.
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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 shall mean any Indebtedness that is, or is required to be, subordinated in right of payment to the Obligations.
Subsidiary of a Person shall mean a corporation, partnership, joint venture, limited liability company or other business entity of which (i) 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 (ii) 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 the Borrower.
Subsidiary Guarantor shall mean any Guarantor other than Holdings. The Subsidiary Guarantors as of the Closing Date are set forth on Schedule 1.01(a).
Successor Borrower shall have the meaning specified in Section 7.04(d).
Swap Contract shall mean (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a Master Agreement), including any such obligations or liabilities under any Master Agreement.
Swap Termination Value shall mean, 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).
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Tax Group shall have the meaning assigned to such term in Section 7.06(i).
Taxes shall have the meaning assigned to such term in Section 3.01(a).
Tender Consideration shall have the meaning assigned to such term in the introductory statement to this Agreement.
Tendered Shares shall have the meaning assigned to such term in the introductory statement to this Agreement.
Term Borrowing shall mean a Borrowing comprised of Term Loans.
Term Lender shall mean a Lender with a Term Loan Commitment or an outstanding Term Loan.
Term Loan Commitment shall mean, with respect to each Lender, the commitment, if any, of such Lender to make a Term Loan hereunder, expressed as an amount representing the maximum principal amount of the Term Loan to be made by such Lender hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant to (i) assignments by or to such Lender pursuant to an Assignment and Acceptance, (ii) an Incremental Amendment, (iii) a Refinancing Amendment or (iv) an Extension. The initial amount of each Lenders Term Loan Commitment is set forth on Schedule 2.01 or, otherwise, in the Assignment and Acceptance, Incremental Amendment or Refinancing Amendment pursuant to which such Lender shall have assumed its Term Loan Commitment, as the case may be. The initial aggregate amount of the Term Loan Commitments as of the Restatement Effective Date is $820,000,000.
Term Loans shall mean the Initial Term Loans, Extended Term Loans, Incremental Term Loans and Other Term Loans.
Term Note means a promissory note of the Borrower payable to any Term Lender or its registered assigns, in substantially the form of Exhibit L hereto, evidencing the aggregate Indebtedness of the Borrower to such Term Lender resulting from the Term Loans made by such Term Lender.
Term Priority Collateral shall have the meaning assigned to such term in the ABL Intercreditor Agreement.
Test Period shall mean, for any date of determination under this Agreement, the most recent period of four consecutive fiscal quarters of the Borrower for which financial statements have been delivered (or are required to be delivered) pursuant to Section 6.01(a) or 6.01(b), as applicable.
Threshold Amount shall mean $25,000,000.
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Top-Up Consideration shall have the meaning assigned to such term in the introductory statement to this Agreement.
Total Assets shall mean the total assets of the Borrower and the Restricted Subsidiaries, as shown on the most recent financial statements delivered pursuant to Section 6.01(a) or Section 6.01(b) and Section 6.01(d).
Total Leverage Ratio shall mean, with respect to any Test Period, the ratio of (a) Consolidated Total Net Debt as of the last day of such Test Period to (b) Consolidated EBITDA for such Test Period.
tranche shall have the meaning assigned to such term in Section 2.21(a).
Transaction Expenses shall mean any fees or expenses incurred or paid by Holdings or any of its Subsidiaries in connection with the Transactions, this Agreement and the other Loan Documents.
Transactions shall mean, collectively, (a) the consummation of the Tender Offer and the Merger and the other transactions contemplated thereby on the Closing Date, (b) the execution and delivery by the Borrower and the Subsidiaries party thereto of the Senior Note Documents and the issuance of the Senior Notes on or prior to the Closing Date, (c) the execution and delivery by the Loan Parties of the Loan Documents to which they are a party and the making of the Borrowings hereunder on the Closing Date, (d) the execution and delivery by the Borrower and the Subsidiaries party thereto of the ABL Facility Documentation and the funding under the ABL Facility on the Closing Date, if any, (e) the repayment of all amounts due or outstanding under or in respect of, and the termination of, the BANA Credit Agreement on the Closing Date and (f) the payment of the Transaction Expenses.
Transferred Guarantor shall have the meaning specified in the Section 11.10.
Type, when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term Rate shall mean the Adjusted LIBO Rate and the Alternate Base Rate.
Unaudited Financial Statements shall mean the unaudited consolidated balance sheets and related statements of income and cash flows of the Company and its consolidated Subsidiaries as at the end of and for the fiscal quarters ended (a) May 1, 2010 and (b) July 31, 2010.
Uniform Commercial Code or UCC shall mean the Uniform Commercial Code as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code (or similar code or statute) of another jurisdiction, to the extent it may be required to apply to any item or items of Collateral.
United States and U.S. mean the United States of America.
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United States Tax Compliance Certificate shall have the meaning assigned to such term in Section 3.01(d).
Unrestricted Subsidiary shall mean (i) each Subsidiary of the Borrower listed on Schedule 1.01(b) and (ii) any Subsidiary of the Borrower designated by the board of directors of the Borrower as an Unrestricted Subsidiary pursuant to Section 6.14 subsequent to the Closing Date.
USA PATRIOT Act shall mean The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. No. 107-56 (signed into law October 26, 2001)).
Weighted Average Life to Maturity shall mean, when applied to any Indebtedness at any date, the number of years obtained by dividing: (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (ii) the then outstanding principal amount of such Indebtedness; provided, that for purposes of determining the Weighted Average Life to Maturity of any Refinanced Debt or any Indebtedness that is being modified, refinanced, refunded, renewed, replaced or extended (the Applicable Indebtedness), the effects of any amortization of or prepayments made on such Applicable Indebtedness prior to the date of the applicable modification, refinancing, refunding, renewal, replacement or extension shall be disregarded.
wholly owned shall mean, with respect to a Subsidiary of a Person, a Subsidiary of such Person all of the outstanding Equity Interests of which (other than (x) directors qualifying shares and (y) shares issued to foreign nationals to the extent required by applicable Law) are owned by such Person and/or by one or more wholly owned Subsidiaries of such Person.
Withdrawal Liability shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
Section 1.02. Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:
(a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.
(b) (i) The words herein, hereto, hereof and hereunder and words of similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision thereof.
(ii) Article, Section, Exhibit and Schedule references are to the Loan Document in which such reference appears.
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(iii) The term including is by way of example and not limitation.
(iv) The term documents includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form.
(c) In the computation of periods of time from a specified date to a later specified date, the word from means from and including; the words to and until each mean to but excluding; and the word through means to and including.
(d) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.
(e) The word or is not exclusive.
(f) For purposes of determining compliance with Sections 7.01, 7.02, 7.03, 7.05, 7.06, 7.08, 7.09 and 7.13, in the event that any Lien, Investment, Indebtedness, Disposition, Restricted Payment, affiliate transaction, Contractual Obligation or prepayment of Indebtedness meets the criteria of more than one of the categories of transactions permitted pursuant to any clause of such Sections 7.01, 7.02, 7.03, 7.05, 7.06, 7.08, 7.09 and 7.13, such transaction (or portion thereof) at any time shall be permitted under one or more of such clauses as determined by the Borrower in its sole discretion at such time.
Section 1.03. Accounting Terms. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP, except as otherwise specifically prescribed herein.
Section 1.04. Rounding. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement (or required to be satisfied in order for a specific action to be permitted under this Agreement) shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).
Section 1.05. References to Agreements, Laws, Etc. Unless otherwise expressly provided herein, (a) references to Organization Documents, agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are not prohibited by any Loan Document; and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law.
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Section 1.06. Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).
Section 1.07. Timing of Payment of Performance. Except as otherwise expressly provided herein, when the payment of any obligation or the performance of any covenant, duty or obligation is stated to be due or performance required on a day which is not a Business Day, the date of such payment (other than as described in the definition of Interest Period) or performance shall extend to the immediately succeeding Business Day (subject to Section 2.16(b)).
Section 1.08. Cumulative Credit 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 Cumulative Credit 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.
Section 1.09. Pro Forma Calculations.
(a) Notwithstanding anything to the contrary herein, the Total Leverage Ratio, the Senior Secured Leverage Ratio and the Interest Coverage Ratio shall be calculated in the manner prescribed by this Section 1.09; provided, that notwithstanding anything to the contrary in clauses (b), (c) or (d) of this Section 1.09, when calculating the Total Leverage Ratio for purposes of the Applicable ECF Percentage of Excess Cash Flow, the events described in this Section 1.09 that occurred subsequent to the end of the applicable Test Period shall not be given pro forma effect.
(b) For purposes of calculating the Total Leverage Ratio, the Senior Secured Leverage Ratio and the Interest Coverage Ratio, Specified Transactions (and the incurrence or repayment of any Indebtedness in connection therewith) that have been made (i) during the applicable Test Period or (ii) subsequent to such Test Period and prior to or simultaneously with the event for which the calculation of any such ratio is made shall be calculated on a pro forma basis assuming that all such Specified Transactions (and any increase or decrease in Consolidated EBITDA and the component financial definitions used therein attributable to any Specified Transaction) had occurred on the first day of the applicable Test Period. If since the beginning of any applicable Test Period any Person that subsequently became a Restricted Subsidiary or was merged, amalgamated or consolidated with or into the Borrower or any of its Restricted Subsidiaries since the beginning of such Test Period shall have made any Specified Transaction that would have required adjustment pursuant to this Section 1.09, then the Total Leverage Ratio, the Senior Secured Leverage Ratio and the Interest Coverage 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, operating expense reductions and synergies projected by the Borrower in good faith to be realized as a
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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, operating expense reductions and synergies had been realized on the first day of such period and as if such cost savings, operating expense reductions and synergies were realized during the entirety of such period) relating to such Specified Transaction, net of the amount of actual benefits realized during such period from such actions; provided, that (A) such amounts are reasonably identifiable, quantifiable and factually 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 24 months after the date of such Specified Transaction, (C) any cost savings, operating expense reductions and synergies that are not actually realized during such period may no longer be added pursuant to this clause (c) after the end of the fourth full fiscal quarter ending after the date of such Specified Transaction, and (D) 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. Notwithstanding the foregoing, (A) all pro forma adjustments under this clause (c) shall not increase pro forma Consolidated EBITDA by more than 10% for any Test Period, (B) any cost savings, operating expense reductions or synergies to be realized in such Test Period shall not be added back in computing the Applicable ECF Percentage and (C) no pro forma adjustments under this clause (c) shall be made in respect of the Transactions (the foregoing not being intended to limit the operation of paragraph (a)(viii) of the definition of Consolidated EBITDA).
(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 Total Leverage Ratio, the Senior Secured Leverage Ratio and the Interest Coverage 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 Test Period or (ii) subsequent to the end of the applicable Test Period and prior to or simultaneously with the event for which the calculation of any such ratio is made, then the Total Leverage Ratio, the Senior Secured Leverage Ratio and the Interest Coverage 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 Test Period in the case of the Total Leverage Ratio and the Senior Secured Leverage Ratio and the first day of the applicable Test Period in the case of the Interest Coverage Ratio. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date of the event for which the calculation of the Interest Coverage Ratio is made had been the applicable rate for the entire period (taking into account any hedging obligations applicable to such Indebtedness). Interest on a Capitalized Lease shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Borrower to be the rate of interest implicit in such Capitalized Lease in accordance with GAAP. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a London interbank offered rate, or other rate, shall be determined to have been based upon the rate actually chosen, or if none, then based upon such optional rate chosen as the Borrower or Restricted Subsidiary may designate.
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(e) Whenever any provision of this Agreement requires the Borrower to be in Pro Forma Compliance with the Financial Ratios or to have a specified Total Leverage Ratio on a Pro Forma Basis in connection with any action to be taken by the Borrower hereunder, the Borrower shall deliver to the Administrative Agent a certificate of a Responsible Officer setting forth in reasonable detail the calculations demonstrating such compliance or such Total Leverage Ratio.
Section 1.10. Certain Accounting Matters. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Statement of Financial Accounting Standards 159 (or any other Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the Borrower or any of its Restricted Subsidiaries at fair value, as defined therein.
Section 1.11. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., an Initial Term Loan) or by Type (e.g., a Eurodollar Loan) or by Class and Type (e.g., a Eurodollar Term Loan). Borrowings also may be classified and referred to by Class (e.g., a Term Borrowing) or by Type (e.g., a Eurodollar Borrowing) or by Class and Type (e.g., a Eurodollar Term Borrowing).
Section 1.12. Currency Equivalents Generally. (a) For purposes of determining compliance with Sections 7.01, 7.02 and 7.03 with respect to any amount of Indebtedness or Investment in a currency other than Dollars, no Default shall be deemed to have occurred solely as a result of changes in rates of currency exchange occurring after the time such Indebtedness or Investment is incurred (so long as such Indebtedness or Investment, at the time incurred, made or acquired, was permitted hereunder).
(b) For purposes of determining the Senior Secured Leverage Ratio, the Total Leverage Ratio and the Interest Coverage Ratio, amounts denominated in a currency other than Dollars will be converted to Dollars at the currency exchange rates used in preparing the Borrowers financial statements corresponding to the Test Period with respect to the applicable date of determination and will, in the case of Indebtedness, reflect the currency translation effects, determined in accordance with GAAP, of Swap Contracts permitted hereunder for currency exchange risks with respect to the applicable currency in effect on the date of determination of the Dollar equivalent of such Indebtedness.
ARTICLE 2
THE CREDITS
Section 2.01. Commitments. Subject to the terms and conditions and relying upon the representations and warranties set forth herein, each Lender agrees, severally and not jointly, to make a Term Loan to the Borrower on the Closing Date in a principal amount not to exceed its
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Term Loan Commitment. Amounts repaid or prepaid in respect of Term Loans may not be reborrowed.
Section 2.02. Loans. (a) Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their applicable Commitments; provided, however, that the failure of any Lender to make any Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). The Loans comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of $1,000,000 and not less than $5,000,000 (except, with respect to any Incremental Term Loans or Other Term Loans, to the extent otherwise provided in the applicable Incremental Amendment or Refinancing Amendment) or (ii) equal to the remaining available balance of the applicable Commitments.
(b) Subject to Sections 2.08 and 3.02 each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan to such Lender in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time; provided, however, that the Borrower shall not be entitled to request any Borrowing that, if made, would result in more than five Eurodollar Borrowings outstanding hereunder at any time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings.
(c) Except to the extent otherwise provided in the Amendment Agreement, each Lender shall make each Initial Term Loan to be made by it hereunder on the Restatement Effective Date by wire transfer of immediately available funds to such account in New York City as the Administrative Agent may designate not later than 1:00 p.m., New York City time, and the Administrative Agent shall promptly credit the amounts so received to an account designated by the Borrower in the applicable Borrowing Request.
(d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lenders portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If the Administrative Agent shall have so made funds available then, to the extent that such Lender shall not have made such portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower to but excluding the date such amount is repaid to the Administrative Agent at (i) in the case of the Borrower, a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of
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such Lender, a rate determined by the Administrative Agent to represent its cost of overnight or short-term funds (which determination shall be conclusive absent manifest error). If such Lender shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Lenders Loan as part of such Borrowing for purposes of this Agreement.
Section 2.03. Borrowing Procedure. In order to request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 (noon), New York City time, three Business Days before a proposed Borrowing, and (b) in the case of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before a proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable, and shall be confirmed promptly by hand delivery or fax to the Administrative Agent of a written Borrowing Request and shall specify the following information: (i) the Class of Loans to be borrowed and whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing (provided that, until the Administrative Agent shall have notified the Borrower that the primary syndication of the Commitments has been completed (which notice shall be given as promptly as practicable and, in any event, within 30 days after the Closing Date), the Borrower shall not be permitted to request a Eurodollar Borrowing with an Interest Period in excess of one month); (ii) the date of such Borrowing (which shall be a Business Day); (iii) the number and location of the account to which funds are to be disbursed; (iv) the amount of such Borrowing; and (v) if such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect thereto; provided, however, that, notwithstanding any contrary specification in any Borrowing Request, each requested Borrowing shall comply with the requirements set forth in Section 2.02. If no election as to the Type of Borrowing is specified in any such notice, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is specified in any such notice, then the Borrower shall be deemed to have selected an Interest Period of one months duration. The Administrative Agent shall promptly advise the applicable Lenders of any notice given pursuant to this Section 2.03 (and the contents thereof), and of each Lenders portion of the requested Borrowing.
Section 2.04. Evidence of Debt; Repayment of Loans. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender the principal amount of each Term Loan of such Lender as provided in Section 2.11 (or, in the case of Extended Term Loans, Incremental Term Loans or Other Term Loans, as provided for in the applicable Extension Offer, Incremental Amendment or Refinancing Amendment).
(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.
(c) The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Loan made hereunder, the Class and Type thereof and, if applicable, the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any
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sum received by the Administrative Agent hereunder from the Borrower or any Guarantor and each Lenders share thereof.
(d) The entries made in the accounts maintained pursuant to paragraphs (b) and (c) above shall be prima facie evidence of the existence and amounts of the obligations therein recorded; provided, however, that (i) the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrower to repay the Loans in accordance with their terms and (ii) in the event of any conflict between the accounts set forth in paragraphs (b) and (c) above, the amounts set forth in the accounts maintained pursuant to paragraph (c) shall prevail.
(e) Any Lender may request that Loans made by it hereunder be evidenced by a Term Note. In such event, the Borrower shall execute and deliver to such Lender a Term Note payable to such Lender and its registered assigns in accordance with Section 10.04. Notwithstanding any other provision of this Agreement, in the event any Lender shall request and receive a Term Note, the interests represented by such Term Note shall at all times (including after any assignment of all or part of such interests pursuant to Section 10.04) be represented by one or more promissory notes payable to the payee named therein or its registered assigns.
Section 2.05. Fees. (a) The Borrower agrees to pay to the Administrative Agent, for its own account, the administrative agent fees applicable to the Facilities set forth in the Fee Letter at the times and in the amounts specified therein (the Fees).
(b) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent. Once paid, none of the Fees shall be refundable under any circumstances.
Section 2.06. Interest on Loans. (a) Subject to the provisions of Section 2.07, the Loans comprising each ABR Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days (or, in the case of ABR Loans that bear interest by reference to the Prime Rate, 365 or 366 days, as applicable) and calculated from and including the date of such Borrowing to but excluding the date of repayment thereof) at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin.
(b) Subject to the provisions of Section 2.07, the Loans comprising each Eurodollar Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin.
(c) Interest on each Loan shall be payable on the Interest Payment Dates applicable to such Loan except as otherwise provided in this Agreement. The applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or day within an Interest Period, as the case may be, shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.
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Section 2.07. Default Interest. During the continuance of a Default under Section 8.01(a) or an Event of Default under Section 8.01(f) (with respect to the Borrower) or 8.01(g) (with respect to the Borrower), the Borrower shall pay interest on past due amounts owing by it hereunder at a fluctuating interest rate per annum at all times, after as well as before judgment, equal to (a) in the case of principal, at the rate otherwise applicable to such Loan pursuant to Section 2.06 plus 2.00% per annum and (b) in all other cases, at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days at all times) equal to the rate that would be applicable to an ABR Loan plus 2.00% per annum, and such interest shall be payable on demand.
Section 2.08. Alternate Rate of Interest. In the event, and on each occasion, that on the day two Business Days prior to the commencement of any Interest Period for a Eurodollar Borrowing the Administrative Agent shall have determined that Dollar deposits in the principal amounts of the Loans comprising such Borrowing are not generally available in the London interbank market, or that the rates at which such Dollar deposits are being offered will not adequately and fairly reflect the cost to the majority of Lenders of making or maintaining Eurodollar Loans during such Interest Period, or that reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall, as soon as practicable thereafter, give written or fax notice of such determination to the Borrower and the Lenders. In the event of any such determination, until the Administrative Agent shall have revoked such notice, any request by the Borrower for a Eurodollar Borrowing pursuant to Section 2.03 or Section 2.10 shall be deemed to be a request for an ABR Borrowing. Each determination by the Administrative Agent under this Section 2.08 shall be conclusive absent manifest error.
Section 2.09. Termination and Reduction of Commitments. (a) The Initial Term Loan Commitments in effect on the Restatement Effective Date shall automatically terminate upon the making of the Initial Term Loans on the Restatement Effective Date.
(b) Upon at least three Business Days prior irrevocable written or fax notice to the Administrative Agent, the Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Term Loan Commitments; provided, however, that each partial reduction of the Term Loan Commitments shall be in an integral multiple of $1,000,000 and in a minimum amount of $5,000,000.
(c) Each reduction in the Term Loan Commitments hereunder shall be made ratably among the Lenders in accordance with their respective applicable Commitments.
Section 2.10. Conversion and Continuation of Borrowings. The Borrower shall have the right at any time upon prior irrevocable written notice to the Administrative Agent (a) not later than 12:00 (noon), New York City time, one Business Day prior to conversion, to convert any Eurodollar Borrowing into an ABR Borrowing, (b) not later than 12:00 (noon), New York City time, three Business Days prior to conversion or continuation, to convert any ABR Borrowing into a Eurodollar Borrowing or to continue any Eurodollar Borrowing as a Eurodollar Borrowing for an additional Interest Period, and (c) not later than 12:00 (noon), New York City time, three
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Business Days prior to conversion, to convert the Interest Period with respect to any Eurodollar Borrowing to another permissible Interest Period, subject in each case to the following:
(i) until the Administrative Agent shall have notified the Borrower that the primary syndication of the Commitments has been completed (which notice shall be given as promptly as practicable and, in any event, within 30 days after the Closing Date), no ABR Borrowing may be converted into a Eurodollar Borrowing with an Interest Period in excess of one month;
(ii) each conversion or continuation shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Loans comprising the converted or continued Borrowing;
(iii) if less than all the outstanding principal amount of any Borrowing shall be converted or continued, then each resulting Borrowing shall satisfy the limitations specified in Sections 2.02(a) and 2.02(b) regarding the principal amount and maximum number of Borrowings of the relevant Type;
(iv) each conversion shall be effected by each Lender and the Administrative Agent by recording for the account of such Lender the new Loan of such Lender resulting from such conversion and reducing the Loan (or portion thereof) of such Lender being converted by an equivalent principal amount; accrued interest on any Eurodollar Loan (or portion thereof) being converted shall be paid by the Borrower at the time of conversion;
(v) if any Eurodollar Borrowing is converted on a day prior to the last day of the Interest Period applicable thereto, the Borrower shall pay, upon demand, any amounts due to the Lenders pursuant to Section 3.05;
(vi) any portion of a Borrowing maturing or required to be repaid in less than one month may not be converted into or continued as a Eurodollar Borrowing;
(vii) any portion of a Eurodollar Borrowing that cannot be converted into or continued as a Eurodollar Borrowing by reason of the immediately preceding clause shall be automatically converted at the end of the Interest Period in effect for such Borrowing into an ABR Borrowing; and
(viii) upon notice to the Borrower from the Administrative Agent given at the request of the Required Lenders, after the occurrence and during the continuance of an Event of Default, no outstanding Loan may be converted into, or continued as, a Eurodollar Loan.
Each notice pursuant to this Section 2.10 shall be irrevocable and shall refer to this Agreement and specify (i) the identity and amount of the Borrowing that the Borrower requests be converted or continued, (ii) whether such Borrowing is to be converted to or continued as a Eurodollar Borrowing or an ABR Borrowing, (iii) if such notice requests a conversion, the date
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of such conversion (which shall be a Business Day) and (iv) if such Borrowing is to be converted to or continued as a Eurodollar Borrowing, the Interest Period with respect thereto. If no Interest Period is specified in any such notice with respect to any conversion to or continuation as a Eurodollar Borrowing, the Borrower shall be deemed to have selected an Interest Period of one months duration. The Administrative Agent shall promptly advise the Lenders of any notice given pursuant to this Section 2.10 and of each Lenders portion of any converted or continued Borrowing. If the Borrower shall not have given notice in accordance with this Section 2.10 to continue any Borrowing into a subsequent Interest Period (and shall not otherwise have given notice in accordance with this Section 2.10 to convert such Borrowing), such Borrowing shall, at the end of the Interest Period applicable thereto (unless repaid pursuant to the terms hereof), automatically be converted into an ABR Borrowing.
Section 2.11. Repayment of Term Borrowings. (a) The Borrower shall repay to the Administrative Agent for the ratable account of the applicable Term Lenders (i) on the last Business Day of each March, June, September and December, commencing with the last Business Day of March 2011, an amount equal to 0.25% of the aggregate principal amount of the Initial Term Loans outstanding on the Restatement Effective Date (which payments shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Sections 2.12 and 2.13 or, if applicable, Section 10.04(m)(vi)) and (ii) on the applicable Maturity Date for such Initial Term Loans, the aggregate principal amount of such Initial Term Loans outstanding on such date, together in each case with accrued and unpaid interest on the principal amount to be paid to but excluding the date of such payment.
(b) To the extent not previously paid, all Term Loans (including, for avoidance of doubt, Term Loans that are not Initial Term Loans) shall be due and payable on the applicable Maturity Date, together with accrued and unpaid interest on the principal amount to be paid to but excluding the date of payment.
(c) All repayments pursuant to this Section 2.11 shall be subject to Section 3.05, but shall otherwise be without premium or penalty.
Section 2.12. Voluntary Prepayment. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, upon at least three Business Days prior written or fax notice (or telephone notice promptly confirmed by written or fax notice) in the case of Eurodollar Loans, or written or fax notice (or telephone notice promptly confirmed by written or fax notice) at least one Business Day prior to the date of prepayment in the case of ABR Loans, to the Administrative Agent before 12:00 (noon), New York City time; provided, however, that each partial prepayment shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000.
(b) Except as may otherwise be set forth in any Extension Offer, any Refinancing Amendment or any Incremental Amendment, voluntary prepayments of Term Loans pursuant to this Section 2.12 (i) shall be applied ratably to each Class of Term Loans then outstanding and (ii) with respect to each Class of Term Loans, shall be applied against the remaining scheduled installments of principal due in respect thereof (in the case of the Initial Term Loans, as set forth
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in Section 2.11) as directed by the Borrower (or, absent such direction, in forward order of maturity).
(c) Each notice of prepayment shall specify the prepayment date and the principal amount of each Borrowing (or portion thereof) to be prepaid, shall be irrevocable and shall commit the Borrower to prepay such Borrowing by the amount stated therein on the date stated therein; provided, however, that if such prepayment is in connection with a refinancing, then the Borrower may condition such notice on the effectiveness of such refinancing (provided, that the provisions of Section 3.05 shall apply to any prepayment that is not made as a result of the failure of such condition). All prepayments under this Section 2.12 shall be subject to Section 2.12(d) (to the extent applicable) and Section 3.05 but otherwise without premium or penalty. All prepayments under this Section 2.12 shall be accompanied by accrued and unpaid interest on the principal amount to be prepaid to but excluding the date of payment.
(d) In the event that, on or prior to the first anniversary of the Restatement Effective Date, the Borrower (x) prepays, refinances, substitutes or replaces any Initial Term Loans in connection with a Repricing Transaction (including, for avoidance of doubt, any prepayment made pursuant to Section 2.13(a)(iv) 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 ratable 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 Loans 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 Loans outstanding immediately prior to such amendment. Such amounts shall be due and payable on the date of effectiveness of such Repricing Transaction.
Section 2.13. Mandatory Prepayments.
(a) (i) Within five (5) Business Days after the earlier of (x) 90 days after the end of each fiscal year of the Borrower and (y) the date on which financial statements have been delivered pursuant to Section 6.01(a) (commencing with the fiscal year ended January 28, 2012) and the related Compliance Certificate has been delivered pursuant to Section 6.02(a), the Borrower shall cause to be prepaid an aggregate amount of Term Loans in an amount equal to (A) the Applicable ECF Percentage of Excess Cash Flow, if any, for the fiscal year covered or required to have been covered by such financial statements minus (B) the sum of (1) all voluntary prepayments of principal of Term Loans during such fiscal year (other than any voluntary prepayments or buybacks made pursuant to Section 10.04(m) and (2) all voluntary prepayments of loans under the ABL Facility or any other revolving credit facility during such fiscal year to the extent accompanied by a corresponding permanent reduction in the commitments under the ABL Facility or such other revolving credit facility, as the case may be, in the case of each of the immediately preceding clauses (1) and (2), to the extent such prepayments are funded with internally generated cash.
(ii) If (1) the Borrower or any Restricted Subsidiary Disposes of any property or assets (other than (X) any Disposition of any property or assets permitted by Section
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7.05(a), (b), (c), (d), (e), (g), (h), (l), (m) (except to the extent such property is subject to a Mortgage), (n) or (o) and (Y) so long as the ABL Credit Agreement is in effect, any Disposition of (A) ABL Priority Collateral and (B) to the extent that any Canadian Subsidiary is party to the ABL Credit Agreement as a borrower or guarantor thereunder (and provided that the related ABL Facility Indebtedness of such Canadian Subsidiary is permitted under Section 7.03(w)), assets of such Canadian Subsidiary of the type described in the definition of ABL Priority Collateral in the ABL Intercreditor Agreement), or (2) any Casualty Event occurs, which results in the realization or receipt by the Borrower or a Restricted Subsidiary of Net Proceeds, the Borrower shall cause to be prepaid on or prior to the date which is ten (10) Business Days after the date of the realization or receipt by the Borrower or any Restricted Subsidiary of such Net Proceeds an aggregate principal amount of Term Loans in an amount equal to 100% of all Net Proceeds realized or received; provided, that if at the time that any such prepayment would be required, the Borrower is required to offer to repurchase Permitted First Priority Refinancing Debt (or any Permitted Refinancing thereof that is secured on a pari passu basis with the Obligations) pursuant to the terms of the documentation governing such Indebtedness with the net proceeds of such Disposition or Casualty Event (such Permitted First Priority Refinancing Debt (or Permitted Refinancing thereof) required to be offered to be so repurchased, Other Applicable Indebtedness), then the Borrower may apply such Net Proceeds on a pro rata basis (determined on the basis of the aggregate outstanding principal amount of the Term Loans and Other Applicable Indebtedness at such time; provided, that the portion of such net proceeds allocated to the Other Applicable Indebtedness shall not exceed the amount of such net proceeds required to be allocated to the Other Applicable Indebtedness pursuant to the terms thereof, and the remaining amount, if any, of such net proceeds shall be allocated to the Term Loans in accordance with the terms hereof) to the prepayment of the Term Loans and to the repurchase of Other Applicable Indebtedness, and the amount of prepayment of the Term Loans that would have otherwise been required pursuant to this Section 2.13(a)(ii) shall be reduced accordingly; provided further, that to the extent the holders of Other Applicable Indebtedness decline to have such indebtedness repurchased, the declined amount shall promptly (and in any event within 10 Business Days after the date of such rejection) be applied to prepay the Term Loans in accordance with the terms hereof.
(iii) [Reserved]
(iv) If the Borrower or any Restricted Subsidiary incurs or issues any Indebtedness after the Closing Date (other than Indebtedness permitted under Section 7.03 (other than clause (i) of Section 7.03(t) or clause (i) of Section 7.03(u))), the Borrower shall cause to be prepaid an aggregate principal amount of Term Loans in an amount equal to 100% of all Net Proceeds received therefrom on or prior to the date which is five (5) Business Days after (or, in the case of Credit Agreement Refinancing Indebtedness, on the date of) the receipt by the Borrower or such Restricted Subsidiary of such Net Proceeds.
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(b) Except as may otherwise be set forth in any Extension Offer, any Refinancing Amendment or any Incremental Amendment, each prepayment of Term Loans pursuant to Section 2.13(a) shall be applied ratably to each Class of Term Loans then outstanding; provided, that any prepayment of Term Loans pursuant to the parenthetical in Section 2.13(a)(iv) shall be applied solely to each applicable Class of Refinanced Debt.
(c) With respect to each Class of Term Loans, each prepayment pursuant to Section 2.13(a) shall be applied (i) in direct order of maturity to the next eight scheduled repayments of such Term Loans (in the case of the Initial Term Loans, required pursuant to Section 2.11(a)) and (ii) to the extent of any excess, ratably to the remaining scheduled repayments of such Term Loans (in the case of the Initial Term Loans, required pursuant to Section 2.11(a)); and each such prepayment shall be paid to the Lenders in accordance with their respective Pro Rata Shares, subject to Section 2.13(d). For the avoidance of doubt, this Section 2.13(c) is applicable to any prepayment made with the Net Proceeds of Indebtedness permitted under clause (i) of Section 7.03(t) or clause (i) of Section 7.03(u).
(d) The Borrower shall notify the Administrative Agent in writing of any mandatory prepayment of Term Loans required to be made pursuant to Section 2.13(a) at least three (3) Business Days prior to the date of such prepayment. Each such notice shall specify the date of such prepayment and provide a reasonably detailed calculation of the amount of such prepayment. The Administrative Agent will promptly notify each applicable Lender of the contents of the Borrowers prepayment notice and of such Lenders Pro Rata Share or other applicable share of the prepayment. Each Term Lender may reject all or a portion of its Pro Rata Share or other applicable share of any mandatory prepayment (such declined amounts, the Declined Proceeds) of Term Loans required to be made pursuant to Section 2.13(a) by providing written notice (each, a Rejection Notice) to the Administrative Agent and the Borrower no later than 5:00 p.m., New York City time, one Business Day after the date of such Lenders receipt of notice from the Administrative Agent regarding such prepayment; provided that, for the avoidance of doubt, no Lender may reject any prepayment made with proceeds of Indebtedness permitted under clause (i) of Section 7.03(t) or clause (i) of Section 7.03(u). Each Rejection Notice from a given Lender shall specify the principal amount of the mandatory prepayment of Term Loans rejected by such Lender. If a Term Lender fails to deliver a Rejection Notice to the Administrative Agent within the time frame specified above or such Rejection Notice fails to specify the principal amount of the Term Loans to be rejected, any such failure will be deemed an acceptance of the total amount of such mandatory prepayment of Term Loans. Any Declined Proceeds shall be retained by the Borrower.
(e) Funding Losses, Etc. All prepayments under this Section 2.13 shall be accompanied by accrued and unpaid interest on the principal amount to be prepaid to but excluding the date of payment and shall be made together with, in the case of any such prepayment of a Eurodollar Loan on a day prior to the last day of an Interest Period therefor, any amounts owing in respect of such Eurodollar Loan pursuant to Section 3.05. All prepayments under Section 2.13(a)(iv) shall be subject to Section 2.12(d) (to the extent applicable). Notwithstanding any of the other provisions of Section 2.13(a), so long as no Event of Default shall have occurred and be continuing, if any prepayment of Eurodollar Loans is required to be
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made under Section 2.13(a) prior to the last day of the Interest Period therefor, the Borrower may, in its sole discretion, deposit the amount of any such prepayment otherwise required to be made thereunder (including accrued interest to the last day of such Interest Period) into a Cash Collateral Account until the last day of such Interest Period, at which time the Administrative Agent shall be authorized (without any further action by or notice to or from the Borrower or any other Loan Party) to apply such amount to the prepayment of such Loans in accordance with this Section 2.13. Upon the occurrence and during the continuance of any Event of Default, the Administrative Agent shall also be authorized (without any further action by or notice to or from the Borrower or any other Loan Party) to apply such amount to the prepayment of the outstanding Loans in accordance with Section 2.13(a).
(f) Foreign Dispositions. Notwithstanding any other provisions of this Section 2.13, (A) to the extent that any of or all the Net Proceeds of any Disposition by a Foreign Subsidiary (Foreign Disposition) or Excess Cash Flow attributable to Foreign Subsidiaries are prohibited or delayed by applicable local law from being repatriated to the United States, the portion of such Net Proceeds or Excess Cash Flow so affected will not be required to be applied to repay Term Loans at the times provided in this Section 2.13 but may be retained by the applicable Foreign Subsidiary so long, but only so long, as the applicable local law will not permit repatriation to the United States (the Borrower hereby agreeing to cause the applicable Foreign Subsidiary to promptly take all actions required by the applicable local law to permit such repatriation), and once such repatriation of any of such affected Net Proceeds or Excess Cash Flow is permitted under the applicable local law, such repatriation will be immediately effected and such repatriated Net Proceeds or Excess Cash Flow will be promptly (and in any event not later than two Business Days after such repatriation) applied (net of additional taxes payable or reserved against as a result thereof) to the repayment of the Term Loans pursuant to this Section 2.13 and (B) to the extent that the Borrower has determined in good faith that repatriation of any of or all the Net Proceeds of any Foreign Disposition or Foreign Subsidiary Excess Cash Flow would cause material adverse tax consequences to the Borrower, such Net Proceeds or Excess Cash Flow so affected may be retained by the applicable Foreign Subsidiary; provided that, in the case of this clause (B), on or before the date on which any such Net Proceeds so retained would otherwise have been required to be applied to reinvestments or prepayments pursuant to Section 2.13(a) or any such Excess Cash Flow would have been required to be applied to prepayments pursuant to Section 2.13(a), the Borrower applies an amount equal to such Net Proceeds or Excess Cash Flow to such reinvestments or prepayments, as applicable, as if such Net Proceeds or Excess Cash Flow had been received by or was attributable to the Borrower rather than such Foreign Subsidiary, less the amount of additional taxes that would have been payable or reserved against if such Net Proceeds or Excess Cash Flow had been repatriated (or, if less, the Net Proceeds or Excess Cash Flow that would be calculated if received by such Foreign Subsidiary).
Section 2.14. Pro Rata Treatment. Except as required under Section 3.02, each Borrowing, each payment or prepayment of principal of any Borrowing, each payment of interest on the Loans, each reduction of the Term Loan Commitments and each conversion of any Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall be allocated pro rata among the Lenders of the applicable Class in accordance with their respective applicable
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Commitments (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their outstanding Loans); provided that the provisions of this Section 2.14 shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement, including (without limitation) in respect of any payment, assignment, sale or participation to Holdings or any of its Affiliates expressly permitted under Section 10.04. Each Lender agrees that in computing such Lenders portion of any Borrowing to be made hereunder, the Administrative Agent may, in its discretion, round each Lenders percentage of such Borrowing to the next higher or lower whole Dollar amount.
Section 2.15. Sharing of Setoffs. Each Lender agrees that if it shall, through the exercise of a right of bankers lien, setoff or counterclaim against the Borrower or any other Loan Party, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, obtain payment (voluntary or involuntary) in respect of any Loan or Loans as a result of which the unpaid principal portion of its Loans shall be proportionately less than the unpaid principal portion of the Loans of any other Lender, it shall be deemed simultaneously to have purchased from such other Lender at face value, and shall promptly pay to such other Lender the purchase price for, a participation in the Loans of such other Lender, so that the aggregate unpaid principal amount of the Loans and participations in Loans held by each Lender shall be in the same proportion to the aggregate unpaid principal amount of all Loans then outstanding as the principal amount of its Loans prior to such exercise of bankers lien, setoff or counterclaim or other event was to the principal amount of all Loans outstanding prior to such exercise of bankers lien, setoff or counterclaim or other event; provided, however, that (i) if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.15 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest, and (ii) the provisions of this Section 2.15 shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or 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, other than to Holdings or any of its Affiliates as to which the provisions of this Section 2.15 shall apply (provided, that if the applicable payment, assignment, sale or participation to Holdings or any of its Affiliates is expressly permitted under Section 10.04, the provisions of this Section 2.15 shall not be construed to apply). The Borrower and Holdings expressly consent to the foregoing arrangements and agree that any Lender holding a participation in a Loan deemed to have been so purchased may exercise any and all rights of bankers lien, setoff or counterclaim with respect to any and all moneys owing by the Borrower and Holdings to such Lender by reason thereof as fully as if such Lender had made a Loan directly to the Borrower in the amount of such participation.
Section 2.16. Payments. (a) The Borrower shall make each payment (including principal of or interest on any Borrowing or any Fees or other amounts due and payable) hereunder and under any other Loan Document not later than 12:00 (noon), New York City time, on the date
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when due in immediately available Dollars, without setoff, defense or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. Each such payment shall be made to the Administrative Agent at its offices at Eleven Madison Avenue, New York, NY 10010 or such other office notified by the Administrative Agent to the Borrower in accordance with Section 10.01. The Administrative Agent shall promptly distribute to each Lender any payments received by the Administrative Agent on behalf of such Lender.
(b) Except as otherwise expressly provided herein, whenever any payment (including principal of or interest on any Borrowing or any Fees or other amounts) hereunder or under any other Loan Document shall become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or Fees, if applicable.
Section 2.17. [Reserved].
Section 2.18. [Reserved].
Section 2.19. Incremental Credit Extensions. (a) The Borrower may at any time or from time to time after the Closing Date, by notice to the Administrative Agent (whereupon the Administrative Agent shall promptly make a copy of such notice available to each of the Lenders), request one or more additional tranches or additions to an existing tranche of term loans (the Incremental Term Loans), provided that (i) both at the time of any such request and upon the effectiveness of any Incremental Amendment referred to below, no Default shall exist and at the time that any such Incremental Term Loan is made (and after giving effect thereto) no Default shall exist, (ii) the Borrower shall be in Pro Forma Compliance with the Financial Ratios as of the last day of the most-recently ended Test Period, in each case, as if such Incremental Term Loans had been outstanding on the last day of such Test Period, (iii) the Senior Secured Leverage Ratio calculated on a Pro Forma Basis shall not be greater than 3.4 to 1.0 as of the last day of the most-recently ended Test Period (calculated as if such Incremental Term Loans had been outstanding on such last day) and (iv) the Borrower shall have delivered a certificate of a Responsible Officer to the effect set forth in clauses (i), (ii) and (iii) above and the last sentence of this paragraph (a), together with reasonably detailed calculations demonstrating compliance with clauses (ii) and (iii) above (which calculations shall, if made as of the last day of any fiscal quarter of the Borrower for which the Borrower has not delivered to the Administrative Agent the financial statements and Compliance Certificate required to be delivered by Section 6.01(a) or 6.01(b) and Section 6.02(a), respectively, be accompanied by a reasonably detailed calculation of Consolidated EBITDA and Consolidated Interest Expense for the relevant period). Each tranche of Incremental Term Loans shall be in an aggregate principal amount that is not less than $25,000,000 and shall be in an increment of $1,000,000 (provided that such amount may be less than $25,000,000 if such amount represents all remaining availability under the limit set forth in the next sentence). Notwithstanding anything to the contrary herein, the aggregate amount of the Incremental Term Loans borrowed hereunder shall
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not exceed $200,000,000 minus the aggregate amount of commitments that shall have become effective pursuant to Section 2.02(a) of the ABL Credit Agreement after the Closing Date.
(b) The following terms shall apply to any Incremental Term Loans established pursuant to an Incremental Amendment: (i) such Incremental Term Loans shall rank pari passu in right of payment and of security with all other Term Loans, (ii) the maturity date of such Incremental Term Loans shall not be earlier than the Original Term Loan Maturity Date, (iii) the Weighted Average Life to Maturity of such Incremental Term Loans shall not be less than the remaining Weighted Average Life to Maturity of the Initial Term Loans, (iv) any Incremental Term Loans may participate on a pro rata basis or on a less than pro rata basis (but not on a greater than pro rata basis) in any voluntary or mandatory prepayments hereunder, as specified in the applicable Incremental Amendment and (v) the applicable yield relating to any term loans incurred pursuant to such Increment Amendment (each facility thereunder, the Incremental Facility), as applicable, shall not exceed the applicable yield with respect to the Initial Term Loans by more than 0.50% per annum unless the yield applicable to the Initial Term Loans is increased so that the yield applicable to the applicable Incremental Facility does not exceed the yield applicable to the Initial Term Loans by more than 0.50% per annum; provided that in determining the yield applicable to the Initial Term Loans and the applicable Incremental Facility, (A) original issue discount (OID) or upfront fees (which shall be deemed to constitute like amounts of OID) payable by the Borrower to the Lenders of the Initial Term Loans or the applicable Incremental Facility in the primary syndication thereof shall be included (with OID being equated to interest based on an assumed four-year life to maturity or, if less, the remaining life to maturity of the applicable Incremental Facility), (B) customary arrangement or commitment fees payable to the Arrangers (or their affiliates) in connection with the Initial Term Loans or to one or more arrangers (or their affiliates) of the applicable Incremental Facility shall be excluded and (C) if the Adjusted LIBO Rate in respect of such Incremental Facility includes a floor in excess of 1.50%, such excess shall be equated to interest margin for purposes of determining any increase to the applicable yield under the Initial Term Loans.
(c) Each notice from the Borrower pursuant to this Section 2.19 shall set forth (i) the requested amount and proposed terms of the relevant Incremental Term Loans and (ii) the date on which the relevant increase is requested to become effective (which shall not be less than 10 Business Days nor more than 60 days after the date of such notice). Incremental Term Loans may be made by any existing Lender (but no existing Lender shall have any obligation to make any Incremental Term Loan except to the extent that it has agreed to do so pursuant to an Incremental Amendment) or by any other bank, financial institution or investor (any such other bank, financial institution or investor being called an Additional Lender), provided that the Administrative Agent shall have consented (not to be unreasonably withheld, conditioned or delayed) to such Lenders or Additional Lenders making such Incremental Term Loans (collectively, the Incremental Lenders) to the extent any such consent would be required under Section 10.04(b) for an assignment of Loans to such Incremental Lender. Commitments in respect of Incremental Term Loans shall become Commitments under this Agreement pursuant to an amendment (an Incremental Amendment) to this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower, each Incremental Lender and the Administrative Agent. The Incremental Amendment shall be on the terms and pursuant to
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documentation to be determined by the Borrower and the Incremental Lenders providing the relevant Incremental Terms Loans; provided that to the extent such terms and documentation are not consistent with this Agreement in any material respect (except to the extent permitted by the foregoing clauses), they shall be reasonably satisfactory to the Administrative Agent. The effectiveness of any Incremental Amendment shall be subject to the satisfaction on the date thereof of each of the conditions set forth in Section 4.01 (and for purposes thereof the making of the Incremental Term Loans shall be deemed to be a Request for Credit Extension) and, to the extent reasonably requested by the Administrative Agent, receipt by the Administrative Agent of customary legal opinions, board resolutions and officers certificates, in each case consistent with those delivered on the Closing Date under Section 4.02 (other than changes to such legal opinions resulting from a change in law, change in fact or change to counsels form of opinion reasonably satisfactory to the Administrative Agent), and customary reaffirmation agreements. The Borrower will use the proceeds of the Incremental Term Loans for any purpose not prohibited by this Agreement. No Lender shall be obligated to provide any Incremental Term Loans, unless it so agrees.
(d) [Reserved].
(e) Any Incremental Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the terms thereof, to the extent such terms are permitted under this Section 2.19. Notwithstanding the foregoing, each of the Administrative Agent and the Collateral Agent shall have the right (but not the obligation) to seek the advice or concurrence of the Required Lenders with respect to any matter contemplated by this Section 2.19 and, if either the Administrative Agent or the Collateral Agent seeks such advice or concurrence, it shall be permitted to enter into such amendments with the Borrower in accordance with any instructions actually received by such Required Lenders and shall also be entitled to refrain from entering into such amendments with the Borrower unless and until it shall have received such advice or concurrence; provided, however, that whether or not there has been a request by the Administrative Agent or the Collateral Agent for any such advice or concurrence, all such amendments entered into with the Borrower by the Administrative Agent or the Collateral Agent hereunder shall be binding and conclusive on the Lenders.
(f) This Section 2.19 shall supersede any provisions in Section 2.14, 2.15 or 10.08 to the contrary.
Section 2.20. Refinancing Amendments.
(a) At any time after the Closing Date, the Borrower may obtain, from any Lender or any Additional Lender, Credit Agreement Refinancing Indebtedness in respect of all or any portion of the Term Loans then outstanding under this Agreement (which for purposes of this clause (a) will be deemed to include any then outstanding Other Term Loans, Incremental Term Loans or Extended Term Loans), in the form of Other Term Loans or Other Term Loan Commitments pursuant to a Refinancing Amendment; provided that (A) such Credit Agreement
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Refinancing Indebtedness will rank pari passu in right of payment and of security with the other Loans and Commitments hereunder, (B) such Credit Agreement Refinancing Indebtedness will have such pricing and optional prepayment terms as may be agreed by the Borrower and the Lenders thereof (provided, that such Credit Agreement Refinancing Indebtedness may participate on a pro rata basis or on a less than pro rata basis (but not on a greater than pro rata basis) in any voluntary or mandatory prepayments hereunder, as specified in the applicable Refinancing Amendment), (C) such Credit Agreement Refinancing Indebtedness will have a maturity date later than the maturity date of, and will have a Weighted Average Life to Maturity that is not shorter than, the Term Loans being refinanced, (D) subject to clause (B) above, such Credit Agreement Refinancing Indebtedness will have terms and conditions that are substantially identical to, or less favorable to the lenders or investors providing such Credit Agreement Refinancing Indebtedness than, the Refinanced Debt and (E) the proceeds of such Credit Agreement Refinancing Indebtedness shall be applied, substantially concurrently with the incurrence thereof, to the prepayment of outstanding Term Loans being so refinanced; provided further that the terms and conditions applicable to such Credit Agreement Refinancing Indebtedness may provide for any additional or different financial or other covenants or other provisions that are agreed between the Borrower and the Lenders thereof and applicable only during periods after the then Latest Maturity Date. The effectiveness of any Refinancing Amendment shall be subject to the satisfaction on the date thereof of each of the conditions set forth in Section 4.01 (and for purposes thereof the incurrence of the Credit Agreement Refinancing Indebtedness shall be deemed to be a Request for Credit Extension) and, to the extent reasonably requested by the Administrative Agent, receipt by the Administrative Agent of customary legal opinions, board resolutions and officers certificates, in each case consistent with those delivered on the Closing Date under Section 4.02 (other than changes to such legal opinions resulting from a change in law, change in fact or change to counsels form of opinion reasonably satisfactory to the Administrative Agent), and customary reaffirmation agreements. Each Class of Credit Agreement Refinancing Indebtedness incurred under this Section 2.20(a) shall be in an aggregate principal amount that is (x) not less than $25,000,000 and (y) an integral multiple of $1,000,000 in excess thereof. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Refinancing Amendment. Each of the parties hereto hereby agrees that, upon the effectiveness of any Refinancing Amendment, this Agreement shall be deemed amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Credit Agreement Refinancing Indebtedness incurred pursuant thereto (including any amendments necessary to treat the Loans and Commitments subject thereto as Other Term Loans and/or Other Term Loan Commitments).
(b) Any Refinancing Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section. Notwithstanding the foregoing, each of the Administrative Agent and the Collateral Agent shall have the right (but not the obligation) to seek the advice or concurrence of the Required Lenders with respect to any matter contemplated by this Section 2.20 and, if either the Administrative Agent or the Collateral Agent seeks such advice or concurrence, it shall be permitted to enter into such amendments with the Borrower in
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accordance with any instructions actually received by such Required Lenders and shall also be entitled to refrain from entering into such amendments with the Borrower unless and until it shall have received such advice or concurrence; provided, however, that whether or not there has been a request by the Administrative Agent or the Collateral Agent for any such advice or concurrence, all such amendments entered into with the Borrower by the Administrative Agent or the Collateral Agent hereunder shall be binding and conclusive on the Lenders.
(c) This Section 2.20 shall supersede any provisions in Section 2.14, 2.15 or 10.08 to the contrary.
Section 2.21. Extensions of Term Loans.
(a) Notwithstanding anything to the contrary in this Agreement, pursuant to one or more offers (each, an Extension Offer) made from time to time by the Borrower to all Lenders of Term Loans with a like Maturity Date on a pro rata basis (based on the aggregate outstanding principal amount of the respective Term Loans with the same Maturity Date) and on the same terms to each such Lender, the Borrower may from time to time with the consent of any Lender that shall have accepted such offer extend the maturity date of any Term Loans and otherwise modify the terms of such Term Loans of such Lender pursuant to the terms of the relevant Extension Offer (including, without limitation, by increasing the interest rate or fees payable in respect of such Term Loans and/or modifying the amortization schedule in respect of such Term Loans) (each, an Extension, and each group of Term Loans as so extended, as well as the original Term Loans not so extended, being a tranche; any Extended Term Loans shall constitute a separate tranche of Term Loans from the tranche of Term Loans from which they were converted), so long as the following terms are satisfied: (i) no Default shall exist at the time the notice in respect of an Extension Offer is delivered to the Lenders, and no Default shall exist immediately prior to or after giving effect to the effectiveness of any Extended Term Loans, (ii) except as to interest rates, fees, amortization, final maturity date, premium, required prepayment dates and participation in prepayments (which shall, subject to immediately succeeding clauses (iii), (iv) and (v), be determined by the Borrower and set forth in the relevant Extension Offer), the Term Loans of any Term Lender (an Extending Term Lender) extended pursuant to any Extension (Extended Term Loans) shall have the same terms as the tranche of Term Loans subject to such Extension Offer, (iii) the final maturity date of any Extended Term Loans shall be no earlier than the then Latest Maturity Date and the amortization schedule applicable to Term Loans pursuant to Section 2.11(a) for periods prior to the Original Term Loan Maturity Date may not be increased, (iv) the Weighted Average Life to Maturity of any Extended Term Loans shall be no shorter than the remaining Weighted Average Life to Maturity of the Term Loans extended thereby, (v) any Extended Term Loans may participate on a pro rata basis or on a less than pro rata basis (but not on a greater than pro rata basis) in any voluntary or mandatory prepayments hereunder, as specified in the applicable Extension Offer, (vi) if the aggregate principal amount of Term Loans (calculated on the face amount thereof) in respect of which Term Lenders shall have accepted the relevant Extension Offer shall exceed the maximum aggregate principal amount of Term Loans offered to be extended by the Borrower pursuant to such Extension Offer, then the Term Loans of such Term Lenders shall be extended ratably up to such maximum amount based on the respective principal amounts (but not to
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exceed actual holdings of record) with respect to which such Term Lenders have accepted such Extension Offer, (vii) all documentation in respect of such Extension shall be consistent with the foregoing, and (viii) any applicable Minimum Extension Condition shall be satisfied unless waived by the Borrower.
(b) If, at the time any Extension becomes effective, not all of the Term Loans that were subject to the applicable Extension Offer shall have been extended (such non-extended Term Loans with respect to any Extension, the Non-Extended Term Loans), then if the effective interest rate (which, for this purpose, shall be reasonably determined by the Administrative Agent and shall take into account any interest rate floors or similar devices and be deemed to include (without duplication) all fees, including up front or similar fees or original issue discount (amortized over the shorter of (x) the life of such new Extended Term Loans and (y) the four years following the date of the respective Extension) payable to Lenders with such new Extended Term Loans, but excluding any arrangement, structuring or other fees payable in connection therewith that are not generally shared with the relevant extending Lenders) in respect of such new Extended Term Loans shall at any time (over the life of such new Extended Term Loans) exceed the effective interest rate applicable to the applicable Non-Extended Term Loans by more than 1.00% (determined on the same basis as provided in the first parenthetical in this sentence), then the Applicable Margin applicable to such Non-Extended Term Loans shall be increased to the extent necessary so that at all times thereafter such Non-Extended Term Loans do not receive less effective interest rate than the effective interest rate applicable to such new Extended Term Loans minus 1.00%.
(c) With respect to all Extensions consummated by the Borrower pursuant to this Section 2.21, (i) such Extensions shall not constitute voluntary or mandatory payments or prepayments for purposes of Section 2.12 or 2.13 and (ii) no Extension Offer is required to be in any minimum amount or any minimum increment, provided that the Borrower may at its election specify as a condition (a Minimum Extension Condition) to consummating any such Extension that a minimum amount (to be determined and specified in the relevant Extension Offer in the Borrowers sole discretion and may be waived by the Borrower) of Term Loans of any or all applicable tranches be tendered. The Administrative Agent and the Lenders hereby consent to the Extensions and the other transactions contemplated by this Section 2.21 (including, for the avoidance of doubt, payment of any interest, fees or premium in respect of any Extended Term Loans on such terms as may be set forth in the relevant Extension Offer) and hereby waive the requirements of any provision of this Agreement (including, without limitation, Sections 2.12, 2.13, 2.14 and 2.15) or any other Loan Document that may otherwise prohibit any such Extension or any other transaction contemplated by this Section 2.21.
(d) The Lenders hereby irrevocably authorize the Administrative Agent and Collateral Agent to enter into amendments to this Agreement and the other Loan Documents with the Borrower as may be necessary in order to establish new tranches or sub-tranches in respect of Term Loans so extended and such technical amendments as may be necessary or appropriate in the reasonable opinion of the Administrative Agent and the Borrower in connection with the establishment of such new tranches or sub-tranches, in each case on terms consistent with this Section 2.21. Notwithstanding the foregoing, each of the Administrative Agent and the
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Collateral Agent shall have the right (but not the obligation) to seek the advice or concurrence of the Required Lenders with respect to any matter contemplated by this Section 2.21(d) and, if either the Administrative Agent or the Collateral Agent seeks such advice or concurrence, it shall be permitted to enter into such amendments with the Borrower in accordance with any instructions actually received by such Required Lenders and shall also be entitled to refrain from entering into such amendments with the Borrower unless and until it shall have received such advice or concurrence; provided, however, that whether or not there has been a request by the Administrative Agent or the Collateral Agent for any such advice or concurrence, all such amendments entered into with the Borrower by the Administrative Agent or the Collateral Agent hereunder shall be binding and conclusive on the Lenders. Without limiting the foregoing, in connection with any Extensions the respective Loan Parties shall (at their expense) amend (and the Collateral Agent is hereby directed to amend) any Mortgage that has a maturity date prior to the then Latest Maturity Date so that such maturity date is extended to the then Latest Maturity Date (or such later date as may be advised by local counsel to the Collateral Agent).
(e) In connection with any Extension, the Borrower shall provide the Administrative Agent at least 5 Business Days (or such shorter period as may be agreed by the Administrative Agent) prior written notice thereof, 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 purposes of this Section 2.21.
(f) This Section 2.21 shall supersede any provisions in Section 2.14, 2.15 or 10.08 to the contrary.
ARTICLE 3
TAXES, INCREASED COSTS PROTECTION AND ILLEGALITY
Section 3.01. Taxes.
(a) Except as provided in this Section 3.01, any and all payments made by or on account of the Borrower or any Guarantor under any Loan Document to any Lender or Agent shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, assessments, withholdings (including backup withholding), fees or similar charges imposed by any Governmental Authority including interest, penalties and additions to tax (collectively Taxes), excluding (i) Taxes imposed on or measured by net income, however denominated, and franchise (and similar) Taxes imposed on it in lieu of net income Taxes, (ii) Taxes attributable to the failure by the relevant Lender or Agent to deliver the documentation required to be delivered pursuant to clause (d) of this Section 3.01, (iii) Taxes imposed by a jurisdiction as a result of any connection between such Lender or Agent and such jurisdiction other than any connection arising from executing, delivering, being a party to, engaging in any transactions pursuant to, performing its obligations under, or enforcing any Loan Document, (iv) any branch profits Taxes imposed by the United States or any similar Tax imposed by any other jurisdiction in which the Borrower or any Guarantor (as appropriate) is located, (v) any U.S. federal tax that is in effect and would be required to be withheld with
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respect to amounts payable hereunder at such time the Lender or Agent becomes a party to this Agreement, or designates a new lending office, except to the extent a 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 with respect to such withholding tax pursuant to this Section 3.01 and (vi) any tax to the extent imposed as a result of a Lender or Agents (A) failure to comply with the applicable requirements of FATCA in such a way to reduce such tax to zero or (B) election under Section 1471(b)(3) of the Code (all such non-excluded Taxes, being hereinafter referred to as Indemnified Taxes). If the Borrower, any Guarantor or other applicable withholding agent shall be required by any Laws to deduct any Indemnified Taxes or Other Taxes (as defined below) from or in respect of any sum payable under any Loan Document to any Agent or any Lender, (i) the sum payable by the Borrower or Guarantor shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.01), such Agent or 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, (iii) the applicable withholding agent shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable Laws, and (iv) within thirty (30) days after the date of such payment (or, if receipts or evidence are not available within thirty (30) days, as soon as possible thereafter), if the Borrower or any Guarantor is the applicable withholding agent, the applicable withholding agent shall furnish to such Agent or Lender (as the case may be) the original or a copy of a receipt evidencing payment thereof or other evidence acceptable to such Agent or Lender.
(b) In addition, the Borrower agrees to pay any and all present or future stamp, court or documentary taxes and any other excise, property, intangible or mortgage recording taxes, or charges or levies of the same character, imposed by any Governmental Authority, which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, any Loan Document (including additions to tax, penalties and interest related thereto) excluding, in each case, such amounts that result from an Agent or Lenders Assignment and Acceptance, grant of a Participation, transfer or assignment to or designation of a new applicable lending office or other office for receiving payments under any Loan Document (collectively, Assignment Taxes) except for Assignment Taxes resulting from assignment or participation that is requested or required in writing by the Borrower (all such non-excluded taxes described in this Section 3.01(b) being hereinafter referred to as Other Taxes).
(c) The Borrower and each Guarantor agree to indemnify each Agent and each Lender for (i) the full amount of Indemnified Taxes and Other Taxes paid by such Agent or Lender and (ii) any expenses arising therefrom or with respect thereto, provided such Agent or Lender, as the case may be, provides Borrower or Guarantor with a written statement thereof setting forth in reasonable detail the basis and calculation of such amounts.
(d) Each Lender and Agent shall, at such times as are reasonably requested by the Borrower or the Administrative Agent, provide the Borrower and the Administrative Agent with any documentation prescribed by Law certifying as to any entitlement of such Lender or Agent to an exemption from, or reduction in, withholding tax with respect to any payments to be made
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to such Lender under the Loan Documents. Each such Lender and Agent shall, whenever a lapse in time or change in circumstances renders such documentation obsolete 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 applicable withholding agent) or promptly notify the Borrower and the Administrative Agent of its inability to do so. Unless the applicable withholding agent has received forms or other documents satisfactory to it indicating that payments under any Loan Document to or for a Lender are not subject to withholding tax or are subject to such Tax at a rate reduced by an applicable tax treaty, the Borrower, the Administrative Agent or other applicable withholding agent shall withhold amounts required to be withheld by applicable Law from such payments at the applicable statutory rate. Notwithstanding the foregoing, a Lender shall not be required to deliver any form pursuant to this clause (d) that such Lender is not legally able to deliver. In addition, each Lender and Agent shall deliver to the Borrower and the Administrative Agent such other tax forms or other documents as shall be prescribed by applicable Law, to the extent applicable, (x) to demonstrate that payments to such Lender or Agent under this Agreement and the other Loan Documents are exempt from any United States federal withholding tax imposed pursuant to FATCA or (y) to allow the Borrower and the Administrative Agent to determine the amount to deduct or withhold under FATCA from a payment hereunder. Without limiting the foregoing:
(i) Each Lender and Agent that is a United States person (as defined in Section 7701(a)(30) of the Code) shall deliver to the Borrower and the Administrative Agent on or before the date on which it becomes a party to this Agreement two properly completed and duly signed original copies of Internal Revenue Service Form W-9 certifying that such Lender or Agent (as the case may be) is exempt from federal backup withholding.
(ii) Each Lender and Agent that is not a United States person (as defined in Section 7701(a)(30) of the Code) shall deliver to the Borrower and the Administrative Agent on or before the date on which it becomes a party to this Agreement whichever of the following is applicable:
(A) two properly completed and duly signed original copies of Internal Revenue Service Form W-8BEN (or any successor forms) claiming eligibility for the benefits of an income tax treaty to which the United States is a party, and such other documentation as required under the Code,
(B) two properly completed and duly signed original copies of Internal Revenue Service Form W-8ECI (or any successor forms) and, in the case of an Agent, a withholding certificate that satisfies the requirements of Treasury Regulation Sections 1.1441-1(b)(2)(iv) and 1.1441-1(e)(3)(v) as applicable to a U.S. branch that has agreed to be treated as a U.S. person for withholding tax purposes,
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(C) in the case of a 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 I-1, I-2, I-3 or I-4, as applicable (any such certificate a United States Tax Compliance Certificate) and (B) two properly completed and duly signed original copies of Internal Revenue Service Form W-8BEN, or
(D) to the extent a Lender is not the beneficial owner (for example, where the Lender is a partnership, or is a participant holding a participation granted by a participating Lender), Internal Revenue Service Form W-8IMY (or any successor forms) of the Lender, accompanied by a Form W-8ECI, W-8BEN, United States Tax Compliance Certificate, Form W-9, Form W-8IMY or any other required information from each beneficial owner, as applicable (provided that, if one or more beneficial owners are claiming the portfolio interest exemption, the United States Tax Compliance Certificate may be provided by such Lender on behalf of such beneficial owner). Each Lender and Agent shall deliver to the Borrower and the Administrative Agent two further original copies of any previously delivered form or certification (or any applicable successor form) on or before the date that any such form or certification expires or becomes obsolete or inaccurate and promptly after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower or the Administrative Agent, or promptly notify the Borrower and the Administrative Agent that it is unable to do so. Each Lender and Agent shall promptly notify the Administrative Agent at any time it determines that it is no longer in a position to provide any previously delivered form or certification to the Borrower or the Administrative Agent.
(e) Any Lender or Agent claiming any additional amounts payable pursuant to this Section 3.01 shall use its reasonable efforts to change the jurisdiction of its lending office (or take any other measures reasonably requested by the Borrower) if such a change or other measures would reduce any such additional amounts (or any similar amount that may thereafter accrue) and would not, in the sole determination of such Lender, result in any unreimbursed cost or expense or be otherwise materially disadvantageous to such Lender.
(f) If any Lender or Agent determines, in its sole discretion, that it has received a refund in respect of any Indemnified Taxes or Other Taxes as to which indemnification or additional amounts have been paid to it by the Borrower pursuant to this Section 3.01, it shall promptly remit such refund to the Borrower or Guarantor, net of all out-of-pocket expenses of the Lender or Agent, as the case may be and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund net of any Taxes payable by any Agent or Lender on such interest); provided that the Borrower and Guarantors, upon the request of the Lender or Agent, as the case may be, agree promptly to return such refund (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such party in the event such party is required to repay such refund to the relevant Governmental Authority. This section shall not be construed to require the Administrative Agent or any Lender
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to make available its tax returns (or any other information relating to Taxes that it deems confidential) to the Borrower or any other person.
(g) Each partys obligations under this Section 3.01 shall survive any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.
Section 3.02. Illegality.
If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable lending office to make, maintain or fund Eurodollar Loans, or to determine or charge interest rates based upon the LIBO Rate, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue Eurodollar Loans or to convert ABR Loans to Eurodollar 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 applicable Eurodollar Loans of such Lender to ABR Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Loans to such day, or promptly, if such Lender may not lawfully continue to maintain such Eurodollar Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted and all amounts due, if any, in connection with such prepayment or conversion under Section 3.05. Each Lender agrees to designate a different lending office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be materially disadvantageous to such Lender.
Section 3.03. [Reserved].
Section 3.04. Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurodollar Loans.
(a) If any Lender reasonably determines that as a result of the introduction of or any change in or in the interpretation of any Law, in each case after the Restatement Effective Date, or such Lenders compliance therewith, there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining any Eurodollar Loans, or a reduction in the amount received or receivable by such Lender in connection with any of the foregoing (excluding for purposes of this Section 3.04(a) any such increased costs or reduction in amount resulting from (i) Indemnified Taxes or Other Taxes covered by Section 3.01, or any Taxes excluded from the definition of Indemnified Taxes under exception (iii) thereof to the extent such Taxes are imposed on or measured by net income or profits or franchise taxes (imposed in lieu of the foregoing taxes) and any Taxes excluded from the definition of Indemnified Taxes under exceptions (i), (ii), (iv), (v) and (vi) thereof or (ii) reserve requirements contemplated by Section 3.04(c) or reflected in the Adjusted LIBO Rate) and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of
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maintaining its obligations to make any Loan), or to reduce the amount of any sum received or receivable by such Lender, then from time to time within fifteen (15) days after demand by such Lender setting forth in reasonable detail such increased costs (with a copy of such demand to the Administrative Agent given in accordance with Section 3.06), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such increased cost or reduction.
(b) If any Lender determines that the introduction of any Law regarding capital adequacy or any change therein or in the interpretation thereof, in each case after the Restatement Effective Date, or compliance by such Lender (or its lending office) therewith, has the effect of reducing the rate of return on the capital of such Lender or any entity controlling such Lender as a consequence of such Lenders obligations hereunder (taking into consideration its policies with respect to capital adequacy and such Lenders desired return on capital), then from time to time upon demand of such Lender setting forth in reasonable detail the charge and the calculation of such reduced rate of return (with a copy of such demand to the Administrative Agent given in accordance with Section 3.06), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender or controlling entity for such reduction within fifteen (15) days after receipt of such demand.
(c) Except to the extent already reflected in the Adjusted LIBO Rate, the Borrower shall pay to each Lender, (i) as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurodollar funds or deposits, additional interest on the unpaid principal amount of each applicable Eurodollar Loan of the Borrower 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 in the absence of manifest error), and (ii) as long as such Lender shall be required to comply with any reserve ratio requirement or analogous requirement of any other central banking or financial regulatory authority imposed in respect of the maintenance of the Commitments or the funding of any Eurodollar Loans of the Borrower, such additional costs (expressed as a percentage per annum and rounded upwards, if necessary, to the nearest five decimal places) equal to the actual costs allocated to such Commitment or Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive absent manifest error) which in each case shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least fifteen (15) days prior notice (with a copy to the Administrative Agent) of such additional interest or cost from such Lender. If a Lender fails to give notice fifteen (15) days prior to the relevant Interest Payment Date, such additional interest or cost shall be due and payable fifteen (15) days from receipt of such notice.
(d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section 3.04 shall not constitute a waiver of such Lenders right to demand such compensation.
(e) If any Lender requests compensation under this Section 3.04, then such Lender will, if requested by the Borrower, use commercially reasonable efforts to designate another lending office for any Loan affected by such event; provided that such efforts are made on terms that, in the reasonable judgment of such Lender, cause such Lender and its lending office(s) to suffer no
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material economic, legal or regulatory disadvantage, and provided further that nothing in this Section 3.04(e) shall affect or postpone any of the Obligations of the Borrower or the rights of such Lender pursuant to Section 3.04(a), (b), (c) or (d).
Section 3.05. Funding Losses.
Upon written demand of any Lender (with a copy to the Administrative Agent) from time to time, which demand shall set forth in reasonable detail the basis for requesting such amount, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense actually incurred by it as a result of:
(i) any continuation or conversion of any Eurodollar Loan of the Borrower on a day prior to the last day of the Interest Period for such Loan, or any payment or prepayment of any Eurodollar Loan of the Borrower on a day prior to the last day of the Interest Period for such Loan; or
(ii) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Eurodollar Loan of the Borrower on the date or in the amount notified by the Borrower;
including an amount equal to the excess, as reasonably determined by such Lender, of (1) its cost of obtaining funds for the Eurodollar Loan that is the subject of such event for the period from the date of such event to the last day of the Interest Period in effect (or that would have been in effect) for such Loan over (2) the amount of interest likely to be realized by such Lender in redeploying the funds released or not utilized by reason of such event for such period, but excluding loss of anticipated profits.
Section 3.06. Matters Applicable to all Requests for Compensation.
(a) Any Agent or any Lender claiming compensation under this Article 3 shall deliver a certificate to the Borrower setting forth the additional amount or amounts to be paid to it hereunder which shall be conclusive in the absence of manifest error. In determining such amount, such Agent or such Lender may use any reasonable averaging and attribution methods.
(b) With respect to any Lenders claim for compensation under Section 3.01, 3.02 or 3.04, the Borrower shall not be required to compensate such Lender for any amount incurred more than one hundred and eighty (180) days prior to the date that such Lender notifies the Borrower of the event that gives rise to such claim; provided that, if the circumstance giving rise to such claim is retroactive, then such 180-day period referred to above shall be extended to include the period of retroactive effect thereof. If any Lender requests compensation by the Borrower under Section 3.04, the Borrower may, by notice to such Lender (with a copy to the Administrative Agent), suspend the obligation of such Lender to make or continue from one Interest Period to another any applicable Eurodollar Loan, or, if applicable, to convert ABR Loans into Eurodollar Loans, until the event or condition giving rise to such request ceases to be
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in effect (in which case the provisions of Section 3.06(c) shall be applicable); provided that such suspension shall not affect the right of such Lender to receive the compensation so requested.
(c) If the obligation of any Lender to make or continue any Eurodollar Loan, or to convert ABR Loans into Eurodollar Loans shall be suspended pursuant to Section 3.06(b) hereof, such Lenders applicable Eurodollar Loans shall be automatically converted into ABR Loans (or, if such conversion is not possible, repaid) on the last day(s) of the then current Interest Period(s) for such Eurodollar Loans (or, in the case of an immediate conversion required by Section 3.02, on such earlier date as required by Law) and, unless and until such Lender gives notice as provided below that the circumstances specified in Section 3.02 or 3.04 hereof that gave rise to such conversion no longer exist:
(i) to the extent that such Lenders Eurodollar Loans have been so converted, all payments and prepayments of principal that would otherwise be applied to such Lenders applicable Eurodollar Loans shall be applied instead to its ABR Loans; and
(ii) all Loans that would otherwise be made or continued from one Interest Period to another by such Lender as Eurodollar Loans shall be made or continued instead as ABR Loans (if possible), and all ABR Loans of such Lender that would otherwise be converted into Eurodollar Loans shall remain as ABR Loans.
(d) If any Lender gives notice to the Borrower (with a copy to the Administrative Agent) that the circumstances specified in Section 3.02 or 3.04 hereof that gave rise to the conversion of any of such Lenders Eurodollar Loans pursuant to this Section 3.06 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Eurodollar Loans made by other Lenders under the applicable Facility are outstanding, if applicable, such Lenders ABR Loans shall be automatically converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Eurodollar Loans, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Eurodollar Loans under such Facility and by such Lender are held pro rata (as to principal amounts, interest rate basis, and Interest Periods) in accordance with their respective Commitments for the applicable Facility.
(e) Notwithstanding anything herein to the contrary, the Dodd Frank Wall Street Reform and Consumer Protection Act, and all requests, rules, guidelines and directives promulgated thereunder, shall be deemed to have been adopted after the Restatement Effective Date, regardless of the date enacted or adopted.
Section 3.07. Replacement of Lenders under Certain Circumstances.
(a) If at any time (i) the Borrower become obligated to pay additional amounts or indemnity payments described in Section 3.01 or 3.04 as a result of any condition described in such Sections or any Lender ceases to make any Eurodollar Loans as a result of any condition described in Section 3.02 or Section 3.04 or (ii) any Lender becomes a Non-Consenting Lender, then the Borrower may, on ten (10) Business Days prior written notice to the Administrative
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Agent and such Lender, (x) replace such Lender by causing such Lender to (and such Lender shall be obligated to) assign pursuant to Section 10.04(b) (with the assignment fee to be paid by the Borrower in such instance) (it being understood that any such assignment shall become effective only in accordance with Section 10.04(e)), all of its rights and obligations under this Agreement (in respect of any applicable Facility only in the case of clause (i) or, with respect to a Class vote, clause (ii)) to one or more Eligible Assignees; provided that neither the Administrative Agent nor any Lender shall have any obligation to the Borrower to find a replacement Lender or other such Person; and provided further that (A) 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 and (B) in the case of any such assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable Eligible Assignees shall have agreed to, and shall be sufficient (together with all other consenting Lenders) to cause the adoption of, the applicable departure, waiver or amendment of the Loan Documents; or (y) terminate the Commitment of such Lender and repay all Obligations of the Borrower owing to such Lender relating to the Loans and participations held by such Lender as of such termination date; provided that in the case of any such termination of a Non-Consenting Lender such termination shall be sufficient (together with all other consenting Lenders) to cause the adoption of the applicable departure, waiver or amendment of the Loan Documents and such termination shall be in respect of any applicable Facility only in the case of clause (i) or, with respect to a Class vote, clause (ii);
(b) In the event that (i) the Borrower or the Administrative Agent has requested that the Lenders consent to a departure or waiver of any provisions of the Loan Documents or agree to any amendment thereto, (ii) the consent, waiver or amendment in question requires the agreement of each Lender, each affected Lender, each Lender with respect to a certain Class of Loans or each affected Lender with respect to a certain Class of Loans, in each case in accordance with Section 10.08, and (iii) the Required Lenders (or, in the case of a consent, waiver or amendment involving all Lenders or all affected Lenders of a certain Class, the Required Class Lenders) have agreed to such consent, waiver or amendment, then any Lender who does not agree to such consent, waiver or amendment shall be deemed a Non-Consenting Lender.
(c) Any Lender being replaced pursuant to Section 3.07(a) above shall (i) execute and deliver an Assignment and Acceptance with respect to such Lenders applicable Commitment and outstanding Loans, and (ii) deliver any Term Notes evidencing such Loans to the Borrower or Administrative Agent. Pursuant to such Assignment and Acceptance, (A) the assignee Lender shall acquire all or a portion, as the case may be, of the assigning Lenders outstanding Loans, (B) all obligations of the Borrower owing to the assigning Lender relating to the Loans and participations so assigned shall be paid in full by the assignee Lender to such assigning Lender concurrently with such Assignment and Acceptance and (C) upon such payment and, if so requested by the assignee Lender, delivery to the assignee Lender of the appropriate Term Note executed by the Borrower, the assignee Lender shall become a Lender hereunder and the assigning Lender shall cease to constitute a Lender hereunder with respect to such assigned Loans, Commitments and participations, except with respect to indemnification provisions under
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this Agreement, which shall survive as to such assigning Lender. In connection with any such replacement, if any such Non-Consenting Lender does not execute and deliver to the Administrative Agent a duly executed Assignment and Acceptance reflecting such replacement within five (5) Business Days of the date on which the assignee Lender executes and delivers such Assignment and Acceptance to such Non-Consenting Lender, then such Non-Consenting Lender shall be deemed to have executed and delivered such Assignment and Acceptance without any action on the part of the Non-Consenting Lender.
(d) Notwithstanding anything to the contrary contained above, the Lender that acts as the Administrative Agent may not be replaced hereunder except in accordance with Article 9.
Section 3.08. Survival.
All of the Borrowers obligations under this Article 3 shall survive termination of the Commitments and repayment of all other Obligations hereunder.
ARTICLE 4
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS
Section 4.01. All Credit Extensions After The Closing Date.
The obligation of each Lender to honor any Request for Credit Extension (other than a Request for Credit Extension requesting only a conversion of Loans to the other Type, or a continuation of Eurodollar Loans) after the Closing Date is subject to the following conditions precedent:
(i) The representations and warranties set forth in Article 5 and in each other Loan Document shall be true and correct in all material respects on and as of the date of such Credit Extension with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date; provided, that any such representation and warranty that is qualified by materiality, material adverse effect or similar language shall be true and correct in all respects (after giving effect to such qualification therein) on and as of the date of such Credit Extension with the same effect as though made on and as of such date or such earlier date, as applicable.
(ii) No Default shall exist or would result from such proposed Credit Extension or from the application of the proceeds therefrom.
(iii) The Administrative Agent shall have received a Request for Credit Extension in accordance with the requirements hereof.
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Each Request for Credit Extension (other than a Request for Credit Extension requesting only a conversion of Loans to the other Type, or a continuation of Eurodollar Loans) submitted by the Borrower after the Closing Date shall be deemed to be a representation and warranty by Holdings and the Borrower that the conditions specified in Sections 4.01(i) and (ii) have been satisfied on and as of the date of the applicable Credit Extension.
Section 4.02. First Credit Extension.
Each Lender shall make the Credit Extension to be made by it on the Closing Date subject only to the following conditions precedent:
(a) The Administrative Agent shall have received the following, each properly executed by a Responsible Officer of the signing Loan Party, each dated as of the Closing Date:
(i) executed counterparts of this Agreement duly executed by the Borrower and each Guarantor; and
(ii) a Term Note executed by the Borrower in favor of each Lender that has requested a Term Note at least two Business Days in advance of the Closing Date.
(b) The Administrative Agent shall have received a Request for Credit Extension in accordance with the requirements hereof.
(c) The Administrative Agent shall have received, on behalf of itself, the Collateral Agent and the Lenders, an opinion of (i) Ropes & Gray LLP, counsel for the Loan Parties, substantially to the effect set forth in Exhibit G-1, and (ii) from each local counsel for the Loan Parties listed on Schedule 4.02(c), substantially to the effect set forth in Exhibit G-2, in each case, dated the Closing Date and addressed to the Administrative Agent, the Collateral Agent and the Lenders, and Holdings and the Borrower hereby request such counsel to deliver such opinions.
(d) The Administrative Agent shall have received (i) a copy of the certificate or articles of incorporation or organization or certificate of formation, including all amendments thereto, of each Loan Party, certified, if applicable, as of a recent date by the Secretary of State of the state of its organization, and a certificate as to the good standing (where relevant) of each Loan Party as of a recent date, from such Secretary of State or similar Governmental Authority; (ii) a certificate of the Secretary or Assistant Secretary of each Loan Party dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the by-laws or operating (or limited liability company) agreement of such Loan Party as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the board of directors (or equivalent governing body) of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such Person is a party and, in the case of the Borrower, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate or articles of incorporation or organization or certificate of formation of such Loan Party have not been
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amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to clause (i) above, and (D) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party; and (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to clause (ii) above.
(e) (i) The Administrative Agent shall have received the results of (x) searches of the Uniform Commercial Code filings (or equivalent filings) and (y) judgment and tax lien searches, made with respect to the Loan Parties in the states or other jurisdictions of formation of such Person and with respect to such other locations and names listed on the Perfection Certificate, together with (in the case of clause (y)) copies of the financing statements (or similar documents) disclosed by such search and (ii) the Security Agreement shall have been duly executed and delivered by each Loan Party that is to be a party thereto, together with (x) certificates, if any, representing the Pledged Equity of the Borrower and Subsidiary Guarantors accompanied by undated stock powers executed in blank and (y) documents and instruments to be recorded or filed that the Administrative Agent may deem reasonably necessary to satisfy the Collateral and Guarantee Requirement; provided, however, that, each of the requirements set forth in clauses (i) and (ii) above, including lien searches and the delivery of documents and instruments necessary to satisfy the Collateral and Guarantee Requirement (except to the extent that a lien on such Collateral may be perfected (x) by the filing of a financing statement under the UCC or (y) by the delivery of stock certificates of the Borrower and its wholly owned Domestic Subsidiaries and related stock powers) shall not constitute conditions precedent to the Credit Extension on the Closing Date after the Borrowers use of commercially reasonable efforts, without undue burden or cost, to provide such items on or prior to the Closing Date if the Borrower agrees to deliver, or cause to be delivered, such search results, documents and instruments, or take or cause to be taken such other actions as may be required to perfect such security interests within 90 days after the Closing Date (subject to extensions approved by the Administrative Agent in its reasonable discretion).
(f) (i) The ABL Credit Agreement shall have become effective and all conditions to the initial credit extension thereunder satisfied and (ii) the ABL Intercreditor Agreement shall have been duly executed and delivered by the ABL Agent and each Loan Party party thereto.
(g) The Administrative Agent shall have received a copy of the Merger Agreement (together with all exhibits, schedules, amendments, supplements and modifications thereto) and all certificates, opinions and other documents delivered thereunder, certified by a Responsible Officer of the Borrower as being complete. Prior to or substantially concurrently with the initial Credit Extension on the Closing Date, the Merger shall have been consummated pursuant to the Merger Agreement, and no provision of the Merger Agreement shall have been waived or amended in any material respect by Holdings or Merger Sub in a manner materially adverse to the Lenders (in their capacity as such) without the consent of the Arrangers, such consent not to be unreasonably withheld or delayed (it being understood that (x) any reduction in the acquisition consideration by more than 10% shall be deemed to be materially adverse to the
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Lenders and (y) any reduction in the acquisition consideration of less than or equal to 10% shall reduce the aggregate amount of the Senior Notes permitted hereby on a dollar-for-dollar basis).
(h) (i) The conditions in Section 7.2(a) of the Merger Agreement or in clause (d)(ii) of Annex I to the Merger Agreement, as applicable (but only with respect to representations and warranties made by the Company in the Merger Agreement that are material to the interests of the Lenders, and only to the extent that Giraffe Holding, Inc. or Merger Sub has the right to terminate its obligations under the Merger Agreement as a result of a breach of such representations and warranties in the Merger Agreement), shall be satisfied; (ii) the Specified Representations shall be true and correct in all material respects (or, if qualified by materiality, material adverse effect or similar language, in all respects (after giving effect to such qualification)); (iii) the Borrower shall have received the Equity Contribution; (iv) Merger Sub or the Borrower shall have issued and sold the Senior Notes in a Rule 144A or other private placement on or prior to the Closing Date yielding at least $400,000,000 in gross cash proceeds on the Closing Date; and (v) the Administrative Agent shall have received a certificate from the chief executive officer, president or chief financial officer of the Borrower, in form and substance reasonably satisfactory to the Administrative Agent, certifying as to the matters set forth in this Section 4.02(h).
(i) The Administrative Agent shall have received a solvency certificate, substantially in the form set forth in Exhibit J, from the chief financial officer or other officer with equivalent duties of the Borrower, or in lieu thereof at the option of the Borrower, an opinion of a nationally recognized valuation firm as to the solvency (on a consolidated basis) of the Borrower and its Restricted Subsidiaries as of the Closing Date.
(j) All principal, premium, if any, interest, fees and other amounts due or outstanding under the BANA Credit Agreement shall have been paid in full, the commitments thereunder terminated and all guarantees and security in support thereof discharged and released, and the Administrative Agent shall have received reasonably satisfactory evidence thereof. Immediately after giving effect to the Transactions and the other transactions contemplated hereby, Holdings, the Borrower and the Subsidiaries shall have outstanding no Indebtedness for borrowed money other than (a) Indebtedness outstanding under this Agreement, (b) Indebtedness outstanding under the ABL Facility Documentation in an amount not to exceed the amount contemplated in the preliminary statements hereto, (c) Indebtedness in respect of the Senior Notes, in an aggregate principal amount not to exceed $400,000,000 (or such lesser amount as contemplated by clause (y) of Section 4.02(g)), (d) Indebtedness set forth on Schedule 7.03(b) and (e) Indebtedness permitted pursuant to Section 7.03(d).
(k) The Administrative Agent shall have received, at least 5 days prior to the Closing Date, all documentation and other information about the Borrower and the Guarantors required under applicable know your customer and anti-money laundering rules and regulations, including without limitation the USA PATRIOT Act, that has been requested in writing at least 10 days prior to the Closing Date.
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(l) The Arrangers shall have received the Audited Financial Statements, the Unaudited Financial Statements and the Pro Forma Financial Statements.
(m) (A) Since January 30, 2010, there shall not have occurred any Company Material Adverse Effect except (i) as disclosed in the Company SEC Documents (as defined in the Merger Agreement) filed with the SEC after December 31, 2009 and prior to the date of the Merger Agreement (other than any disclosure in such Company SEC Documents (A) that is set forth under the captions Risk Factors or Forward Looking Statements or (B) that is otherwise predictive, cautionary or forward-looking in nature), in each case, if and only if the nature and content of the applicable disclosure in such Company SEC Document is such that its relevance to the determination of the occurrence of a Company Material Adverse Effect is reasonably apparent on the face of such disclosure, or (ii) as disclosed in any section of the Company Disclosure Letter (as defined in the Merger Agreement) the relevance of which disclosure to the determination of the occurrence of a Company Material Adverse Effect is reasonably apparent on the face of such disclosure and (B) the Administrative Agent shall have received a certificate from a Responsible Officer of the Borrower certifying as to the matters set forth in this Section 4.02(m).
For purposes hereof, Company Material Adverse Effect means any change, event, effect, occurrence, state of facts or development (whether or not constituting a breach of a representation, warranty or covenant set forth in the Merger Agreement) that, individually or in the aggregate with any such other changes, events, effects, occurrences, state of facts or developments, (a) has had or is reasonably likely to have a material adverse effect on the business, results of operations, assets, liabilities or financial condition, in each case, of the Company and its subsidiaries taken as a whole, or (b) prevents or would be reasonably likely to prevent the consummation of the merger of Merger Sub with and into the Company, other than, in the case of clause (a), any changes, events, effects, occurrences, state of facts or developments to the extent attributable to: (i) any changes in general economic or political conditions, or in the financial, credit or securities markets in general (including changes in interest rates, exchange rates, stock, bond and/or debt prices) in any country or region in which the Company or any of its subsidiaries conducts business; (ii) any events, circumstances, changes or effects that affect the industries in which the Company or any of the Companys subsidiaries operate; (iii) any changes, after October 11, 2010, in laws applicable to the Company or any of the Companys subsidiaries or any of their respective properties or assets or changes, after October 11, 2010, in GAAP or rules and policies of the Public Company Accounting Oversight Board; (iv) any natural disasters or acts of war, sabotage or terrorism, or armed hostilities, or any escalation or worsening thereof, in each case occurring after October 11, 2010; (v) the entry into, announcement or performance of the Merger Agreement and the transactions contemplated thereby (including compliance with the covenants set forth therein), but in any event excluding the obligation to comply with Section 6.1 of the Merger Agreement and Section 6.4 of the Merger Agreement and other than for purposes of any representation or warranty contained in Section 4.5 of the Merger Agreement; (vi) any changes in the market price or trading volume of shares of the Companys common stock or any failure to meet internal or published projections, forecasts or revenue, net retail sales, comparable store sales or earnings predictions for any period (provided that the underlying cause of such decline or failure shall not be excluded); (vii)
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any loss of, or change in, the relationship of the Company or any of the Companys subsidiaries, contractual or otherwise, with its customers, suppliers, vendors, lenders, employees, investors, or venture partners arising out of the execution, delivery or performance of the Merger Agreement, the consummation of the transactions contemplated thereby or the announcement of any of the foregoing; or (viii) any litigation arising from allegations of a breach of fiduciary duty or other violation of applicable Law relating to the Merger Agreement or the transactions contemplated by the Merger Agreement, in the case of clauses (i), (ii), (iii) and (iv), other than to the extent such change, event, effect, occurrence, state of facts or development disproportionately impact the Company and its subsidiaries relative to other companies in its industry.
(n) The Administrative Agent, the Arrangers and the Lenders shall have received all applicable fees and other amounts due and payable on or prior to the Closing Date, including, to the extent invoiced at last two Business Days prior to the Closing Date (except as otherwise reasonably agreed by the Borrower), reimbursement or payment of all out of pocket expenses required to be reimbursed or paid by the Borrower hereunder or under any other Loan Document on or prior to the Closing Date.
Section 4.03. Conditions Precedent to the Effectiveness of the Amended Agreement. The Amended Agreement shall become effective on the Restatement Effective Date upon satisfaction of the conditions set forth in Section 8 of the Amendment Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Each of Holdings, the Borrower and each of the Subsidiary Guarantors party hereto represents and warrants to the Administrative Agent, the Collateral Agent and each of the Lenders that:
Section 5.01. Existence, Qualification and Power; Compliance with Laws. Each Loan Party and each Restricted Subsidiary (a) is a Person duly organized or formed, validly existing and in good standing (where relevant) under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority to (i) own or lease its assets and carry on its business as currently conducted and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party and, in the case of the Borrower, to borrow hereunder, (c) is duly qualified and in good standing (where relevant) under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, (d) is in compliance with all Laws, orders, writs and injunctions and (e) has all requisite governmental licenses, authorizations, consents and approvals to operate its business as currently conducted; except in each case, referred to in clause (a) (other than with respect to any Loan Party), (b) (i) (other than with respect to any Loan Party), (c), (d) or (e), to the extent that failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
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Section 5.02. Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is a party, and the consummation of the Transactions, are within such Loan Partys corporate or other powers, (a) have been duly authorized by all necessary corporate or other organizational action, and (b) do not (i) contravene the terms of any of such Persons Organization Documents, (ii) conflict with or result in any breach or contravention of, or the creation of (or the requirement to create) any Lien under (other than as permitted by Section 7.01), or require any payment to be made under (x) any Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (y) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (iii) violate any material Law; except with respect to any conflict, breach or contravention or payment (but not creation of Liens) referred to in clause (ii)(x), to the extent that such violation, conflict, breach, contravention or payment, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
Section 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 (a) the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, or for the consummation of the Transactions, (b) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (c) the perfection or maintenance of the Liens created under the Collateral Documents (including the priority thereof) or (d) the exercise by the Administrative Agent, the Collateral Agent or any Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents, except for (i) filings and registrations necessary to perfect the Liens on the Collateral granted by the Loan Parties in favor of the Secured Parties, (ii) the approvals, consents, exemptions, authorizations, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect (except to the extent not required to be obtained, taken, given or made or to be in full force and effect pursuant to the Collateral and Guarantee Requirement) and (iii) those approvals, consents, exemptions, authorizations or other actions, notices or filings, the failure of which to obtain or make, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
Section 5.04. Binding Effect. This Agreement and each other Loan Document has been duly executed and delivered by each Loan Party that is a party thereto. This Agreement and each other Loan Document constitutes a legal, valid and binding obligation of each such Loan Party, enforceable against each Loan Party that is a party thereto in accordance with its terms, except as such enforceability may be limited by Debtor Relief Laws and by general principles of equity.
Section 5.05. Financial Statements; No Material Adverse Effect.
(a) (i) The unaudited pro forma consolidated balance sheet of the Company and its Subsidiaries as at the last day of the most recent fiscal quarter for which Unaudited Financial Statements have been delivered (including the notes thereto describing the pro forma adjustments) (the Pro Forma Balance Sheet) and the unaudited pro forma consolidated statement of
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income of the Company and its Subsidiaries for the twelve months ended on the last day of the most recent fiscal quarter for which Unaudited Financial Statements have been delivered (together with the Pro Forma Balance Sheet, the Pro Forma Financial Statements), copies of which will be furnished to each Lender prior to the Closing Date, have been prepared giving effect (as if such events had occurred on such date or at the beginning of such periods, as the case may be) to the Transactions. The Pro Forma Financial Statements have been prepared in good faith, based on assumptions believed by the Borrower to be reasonable as of the date of delivery thereof, and present fairly in all material respects on a pro forma basis the estimated financial position of the Company and its consolidated Subsidiaries as at the last day of the most recent fiscal quarter for which Unaudited Financial Statements have been delivered and their estimated results of operations for the periods covered thereby, assuming that the events specified in the preceding sentence had actually occurred at such date or at the beginning of the periods covered thereby.
(ii) The Audited Financial Statements fairly present in all material respects the financial condition of the Company and its consolidated Subsidiaries as of the dates thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the periods covered thereby, except as otherwise expressly noted therein.
(iii) The Unaudited Financial Statements fairly present in all material respects the financial condition of the Company and its consolidated Subsidiaries as of the dates thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the periods covered thereby, except as otherwise expressly noted therein.
(b) The forecasts of income statements of the Borrower and its Subsidiaries which have been furnished to the Administrative Agent prior to the Restatement Effective Date have been prepared in good faith on the basis of the assumptions stated therein, which assumptions were believed to be reasonable at the time of preparation of such forecasts, it being understood that actual results may vary from such forecasts and that such variations may be material.
(c) Since the Closing Date, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.
(d) As of the Closing Date, neither Holdings, the Borrower nor any of the Restricted Subsidiaries has any Indebtedness or other obligations or liabilities, direct or contingent (other than (i) the liabilities reflected on Schedule 5.05, (ii) obligations arising under the Loan Documents, (iii) liabilities incurred in the ordinary course of business, and (iv) liabilities disclosed in the Pro Forma Financial Statements) that, either individually or in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect.
Section 5.06. Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of Holdings or the Borrower, threatened in writing, at law, in
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equity, in arbitration or before any Governmental Authority, by or against Holdings, the Borrower or any of its Restricted Subsidiaries or against any of their properties or revenues that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
Section 5.07. Compliance With Laws; No Default.
(a) Neither Holdings or the Borrower nor any of the Restricted Subsidiaries is in default under or with respect to, or a party to, any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) None of Holdings, the Borrower or any of the Restricted Subsidiaries or any of their respective properties or assets is in violation of, nor will the continued operation of their properties and assets as currently conducted violate, any law, rule or regulation (including any zoning, building, Environmental Law, ordinance, code or approval or any building permits) or any restrictions of record or agreements affecting the Mortgaged Property, or is in default with respect to any judgment, writ, injunction, decree or order of any Governmental Authority, where such violation or default, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.
Section 5.08. Ownership of Property; Liens; Casualty Events. (a) Each of Holdings, the Borrower and the Restricted Subsidiaries has good record title to, or valid leasehold interests in, or easements or other limited property interests in, all its properties and assets (including all Mortgaged Property), free and clear of all Liens except for minor defects in title that do not materially interfere with its ability to conduct its business or to utilize such assets for their intended purposes and Liens permitted by Section 7.01 and except where the failure to have such title could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(b) As of the Restatement Effective Date, Schedule 1 to the Perfection Certificate dated the Closing Date contains a true and complete list of each Material Real Property owned by Holdings, the Borrower and the Subsidiaries.
(c) As of the Restatement Effective Date, except as otherwise disclosed in writing to the Collateral Agent, (i) no Loan Party has received any notice of, nor has any knowledge of, the occurrence (and still pending as of the Restatement Effective Date) or pendency or contemplation of any Casualty Event affecting all or any portion of a Mortgaged Property, and (ii) no Mortgage encumbers improved Mortgaged Property 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 Flood Laws unless Evidence of Flood Insurance has been delivered to the Collateral Agent.
Section 5.09. Environmental Matters. Except as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect:
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(a) Each Loan Party and each Restricted Subsidiary is and has been in compliance with all Environmental Laws, which includes obtaining and maintaining all applicable Environmental Permits required under such Environmental Laws to carry on the business of the Loan Parties and the Restricted Subsidiaries;
(b) the Loan Parties and the Restricted Subsidiaries have not received any written notice that alleges any of them is in violation of or potentially liable under any Environmental Laws and none of the Loan Parties and the Restricted Subsidiaries nor any of the Real Property is the subject of any claims, investigations, liens, demands, or judicial, administrative or arbitral proceedings pending or, to the knowledge of the Borrower, threatened in writing, under any Environmental Law or to revoke or modify any Environmental Permit held by any of the Loan Parties or the Restricted Subsidiaries;
(c) there has been no Release, discharge or disposal of Hazardous Materials on, to, at, under or from any Real Property or facilities owned or leased by any of the Loan Parties or the Restricted Subsidiaries, or, to the knowledge of the Borrower, Real Property formerly owned, operated or leased by any Loan Party or any Restricted Subsidiary or arising out of the conduct of the Loan Parties or the Restricted Subsidiaries that could reasonably be expected to require investigation, remedial activity or corrective action or cleanup or could reasonably be expected to result in the Borrower or any other Loan Party or Restricted Subsidiary incurring liability relating to Environmental Laws; and
(d) there are no facts, circumstances or conditions arising out of or relating to the operations of the Loan Parties or the Restricted Subsidiaries or any Real Property or facilities currently or previously owned or leased by the Loan Parties or any Restricted Subsidiary that could reasonably be expected to require investigation, remedial activity or corrective action or cleanup or could reasonably be expected to result in the Borrower or any other Loan Party or Restricted Subsidiary incurring any Environmental Liability.
Section 5.10. Taxes. Except as could not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, each of the Loan Parties and their Subsidiaries have timely filed all tax returns required to be filed, and have paid all Taxes levied or imposed upon them or their properties, that are due and payable (including in their capacity as a withholding agent), except those which are being contested in good faith by appropriate proceedings diligently conducted if such contest shall have the effect of suspending enforcement or collection of such Taxes and for which adequate reserves have been provided in accordance with GAAP. There is no proposed Tax deficiency or assessment known to any Loan Party against any Loan Party or any Restricted Subsidiary that would, if made, individually or in the aggregate, have a Material Adverse Effect.
Section 5.11. ERISA Compliance, Etc. (a) Except as could not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, each Plan is in compliance with the applicable provisions of ERISA, the Code and other Federal or state Laws (and the regulations and published interpretations thereunder).
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(b) As of the Restatement Effective Date, (i) no Plan is a Multiemployer Plan; nor is any Plan subject to Section 302 or Title IV of ERISA or Section 412 of the Code and (ii) no Loan Party, Restricted Subsidiary or any of their respective ERISA Affiliates nor any predecessor thereof (A) has in the past six years sponsored, maintained or contributed to, any Plan subject to Title IV of ERISA or (B) has in the past six years contributed to any Multiemployer Plan.
(c) (i) No Loan Party, Restricted Subsidiary or any of their respective ERISA Affiliates has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (ii) no Loan Party, Restricted Subsidiary or any of their respective ERISA Affiliates has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (iii) no Loan Party, Restricted Subsidiary or any of their respective ERISA Affiliates has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA, except, with respect to each of the foregoing clauses of this Section 5.11(c), as could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.
(d) The Plans and Foreign Pension Plans of the Loan Parties and the Subsidiaries are funded to the extent required by Law or otherwise to comply with the requirements of any material Law applicable in the jurisdiction in which the relevant pension scheme is maintained, in each case, except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
Section 5.12. Subsidiaries. As of the Restatement Effective Date (after giving effect to the Transactions), no Loan Party has any direct or indirect Subsidiaries other than those specifically disclosed in Schedule 5.12, and all of the outstanding Equity Interests owned by the Loan Parties (or a Subsidiary of any Loan Party) in such Subsidiaries have been validly issued and are fully paid and (if applicable) non-assessable and all Equity Interests owned by a Loan Party (or a Subsidiary of any Loan Party) in such Subsidiaries are owned free and clear of all Liens except (a) those created under the Collateral Documents or under the ABL Facility Documentation (which Liens shall be subject to the ABL Intercreditor Agreement) and (b) any non-consensual Lien that is permitted under Section 7.01. As of the Restatement Effective Date, (i) Section I.A. to the Perfection Certificate sets forth the name and jurisdiction of each Loan Party and (ii) Section III.A. to the Perfection Certificate sets forth the ownership interest of Holdings, the Borrower and any other Subsidiary thereof in each Subsidiary, including the percentage of such ownership.
Section 5.13. Margin Regulations; Investment Company Act.
(a) No Loan Party or Restricted Subsidiary is engaged nor will it engage, principally, or as one of its important activities, in the business of purchasing or carrying Margin Stock, or extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Borrowings will be used, whether directly or indirectly, and whether immediately, incidentally or
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ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation T, U or X.
(b) Neither Holdings, nor the Borrower, nor any of the Restricted Subsidiaries is or is required to be registered as an investment company under the Investment Company Act of 1940.
Section 5.14. Disclosure. No confidential information memorandum, report, financial statement, certificate or other written information furnished by or on behalf of any Loan Party (other than projected financial information, pro forma financial information and information of a general economic or industry nature) to any 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 (as modified or supplemented by other information so furnished) when taken as a whole contains or will contain any material misstatement of fact or omits or will omit to state any material fact necessary to make the statements therein (when taken as a whole), in the light of the circumstances under which they were or will be made, not materially misleading. With respect to projected financial information and pro forma financial information, each of Holdings and the Borrower represents that such information was prepared in good faith based upon assumptions believed to be reasonable at the time of preparation; it being understood that such projections may vary from actual results and that such variances may be material.
Section 5.15. Labor Matters.
Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against the Borrower or any of its Restricted Subsidiaries pending or, to the knowledge of the Borrower, threatened in writing; (b) hours worked by and payment made to employees of the Borrower or any of its Restricted Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Laws dealing with such matters; and (c) all payments due from the Borrower or any of its Restricted Subsidiaries on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant party.
Section 5.16. Intellectual Property; Licenses, Etc. (a) Holdings, the Borrower and its Restricted Subsidiaries own, license or possess the right to use all of the trademarks, service marks, trade names, domain names, copyrights, patents, patent rights, licenses, technology, software, know-how, trade secrets, database rights, design rights and other intellectual property rights (and all registrations and applications for registration of any of the foregoing) (collectively, IP Rights), in each case reasonably necessary for the conduct of their respective businesses as currently conducted, except to the extent that the failure to own, license or possess the right to use such IP Rights, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, and, such IP Rights do not conflict with the rights of any Person, except to the extent such conflicts, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
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(b) The conduct of the business of Holdings, the Borrower or any of its Restricted Subsidiaries does not infringe, misappropriate or otherwise violate any IP Rights held by any Person, except for such infringements, misappropriations or violations, which, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. There is no claim, investigation, suit or proceeding pending or, to the knowledge of the Borrower, threatened in writing, against Holdings, the Borrower or any of its Restricted Subsidiaries (i) challenging the validity of any IP Rights held by any of them or (ii) alleging that their respective use of any IP Rights or the conduct of their respective businesses infringes, misappropriates, or otherwise violates the IP Rights of any other Person, in each case which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
(c) As of the Closing Date, Section IV.A. to the Perfection Certificate contains a true and complete list of all patents, patent applications, registered trademarks, trademark applications, material registered copyrights and material copyright applications that are owned by Holdings, the Borrower or any of its Restricted Subsidiaries and all such IP Rights are valid and in full force and effect, except to the extent the failure of such IP Rights to be valid and in full force and effect could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
Section 5.17. Solvency. Immediately after giving effect to the consummation of the Transactions to occur on the Closing Date, including the making of the Loans under this Agreement, and immediately after giving effect to the application of the proceeds of such Loans, (a) the fair value of the assets of the Borrower and its Subsidiaries, on a consolidated basis, exceeds, on a consolidated basis, their debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of the Borrower and its Subsidiaries, on a consolidated basis, is greater than the amount that will be required to pay the probable liability, on a consolidated basis, of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Borrower and its Subsidiaries, on a consolidated basis, are able to pay their debts and liabilities, subordinated, contingent or otherwise, as such liabilities become absolute and matured; and (d) the Borrower and its Subsidiaries, on a consolidated basis, are not engaged in, and are not about to engage in, business for which they have unreasonably small capital. For purposes of this Section 5.17, the amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual and matured liability.
Section 5.18. Subordination of Junior Financing.
The Obligations are Senior Debt, Senior Indebtedness, Guarantor Senior Debt or Senior Secured Financing (or any comparable term) under, and as defined in, any Junior Financing Documentation.
Section 5.19. Collateral Documents.
(a) Valid Liens. Each Collateral Document (other than the Mortgages) is, or on execution and delivery thereof by the parties thereto will be, effective to create in favor of the
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Collateral Agent for the benefit of the Secured Parties, legal, valid and enforceable Liens on, and security interests in, the Collateral described therein to the extent intended to be created thereby and (i) when financing statements and other filings in appropriate form are filed in the offices specified on Section I.H. to the Perfection Certificate 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 possession or control by the Collateral Agent is required by the Security Agreement), the Liens created by the Collateral Documents (other than the Mortgages) shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the grantors in such Collateral, in each case prior and superior in right to any other person, other than Liens expressly permitted by Section 7.01 (other than Liens securing Permitted Second Priority Refinancing Debt or any Permitted Refinancing thereof).
(b) PTO Filing; Copyright Office Filing. When the Security Agreement or a short form thereof is properly filed in the United States Patent and Trademark Office and the United States Copyright Office, to the extent such filings may perfect such interests, the Liens created by such Security Agreement shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the grantors thereunder in Patents and Trademarks (each as defined in the Security Agreement) registered or applied for with the United States Patent and Trademark Office or Copyrights (as defined in such Security Agreement) registered or applied for with the United States Copyright Office, as the case may be, in each case prior and superior in right to any other person, other than Liens expressly permitted by Section 7.01 (other than Liens securing Permitted Second Priority Refinancing Debt or any Permitted Refinancing thereof) (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to establish a Lien on registered Patents, Trademarks and Copyrights acquired by the grantors thereof after the Closing Date).
(c) Mortgages. Upon recording thereof in the appropriate recording office, each Mortgage is effective to create, in favor of the Collateral Agent, for its benefit and the benefit of the Secured Parties, legal, valid and enforceable perfected Liens on, and a security interest in, all of the Loan Parties right, title and interest in and to the Mortgaged Property thereunder and the proceeds thereof, subject only to Liens permitted hereunder, and when such Mortgage is filed in the offices specified on Section I.H. to the Perfection Certificate dated the Closing Date (or, in the case of any Mortgage executed and delivered after the date thereof in accordance with the provisions of Sections 6.11 and 6.13, when such Mortgage is filed in the offices specified in the local counsel opinion delivered with respect thereto in accordance with the provisions of Sections 6.11 and 6.13), such Mortgage shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Party to such Mortgage in the Mortgaged Property described therein and the proceeds thereof, in each case prior and superior in right to any other person, other than Liens expressly permitted by Section 7.01 (other than Liens securing Permitted Second Priority Refinancing Debt or any Permitted Refinancing thereof).
Notwithstanding anything herein (including this Section 5.19) or in any other Loan Document to the contrary, neither the Borrower nor any other Loan Party makes any representation or warranty as to (A) the effects of perfection or non-perfection, the priority or the
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enforceability of any pledge of or security interest in (other than with respect to those pledges and security interests made under the Laws of the jurisdiction of formation of the applicable Foreign Subsidiary) any Equity Interests of any Foreign Subsidiary, or as to the rights and remedies of the Agents or any Lender with respect thereto, under foreign Law, (B) the pledge or creation of any security interest, or the effects of perfection or non-perfection, the priority or the enforceability of any pledge of or security interest to the extent such pledge, security interest, perfection or priority is not required pursuant to the Collateral and Guarantee Requirement or (C) on the Closing Date and until required pursuant to Section 6.13 or Section 4.02(e), the pledge or creation of any security interest, or the effects of perfection or non-perfection, the priority or enforceability of any pledge or security interest to the extent not required on the Closing Date pursuant to Section 4.02(e).
ARTICLE 6
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder or any Loan or other Obligation (other than obligations under Secured Hedge Agreements) hereunder which is accrued or payable shall remain unpaid or unsatisfied, then from and after the Closing Date, Holdings and the Borrower shall and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, 6.03 and 6.15) cause each of the Restricted Subsidiaries to:
Section 6.01. Financial Statements, Reports, Etc. In the case of the Borrower, deliver to the Administrative Agent for prompt further distribution to each Lender:
(a) as soon as available, but in any event within ninety (90) days after the end of each fiscal year of the Borrower (beginning with the fiscal year ending January 29, 2011), a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income or operations, stockholders equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of Deloitte & Touche LLP or any other independent registered public accounting firm of nationally recognized standing, 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 forty-five (45) days after the end of each of the first three (3) fiscal quarters of each fiscal year of the Borrower (commencing with the fiscal quarter ended April 30, 2011), a consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal quarter, and the related (x) consolidated statements of income or operations for such fiscal quarter and for the portion of the fiscal year then ended and (y) consolidated statements of cash flows for such fiscal quarter and the portion of the 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, all in
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reasonable detail and certified by a Responsible Officer of the Borrower as fairly presenting in all material respects the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;
(c) as soon as available, but in any event within ninety (90) days after the end of each fiscal year (commencing with the fiscal year ending January 29, 2011) of the Borrower, a reasonably detailed consolidated budget for the following fiscal year on a quarterly basis (including a projected consolidated balance sheet of the Borrower and its Subsidiaries as of the end of the following fiscal year, the related consolidated statements of projected cash flow and projected income and a summary of the material underlying assumptions applicable thereto) (collectively, the Projections), which Projections shall in each case be accompanied by a certificate of a Responsible Officer stating that such Projections have been prepared in good faith on the basis of the assumptions stated therein, which assumptions were believed to be reasonable at the time of preparation of such Projections, it being understood that actual results may vary from such Projections and that such variations may be material; and
(d) simultaneously with the delivery of each set of consolidated financial statements referred to in Sections 6.01(a) and 6.01(b) above, the related consolidating financial statements reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) (which may be in footnote form only) from such consolidated financial statements.
Notwithstanding the foregoing, the obligations in paragraphs (a) and (b) of this Section 6.01 may be satisfied with respect to financial information of the Borrower and the Restricted Subsidiaries by furnishing within the time period specified in the applicable paragraph (A) the applicable financial statements of the Borrower (or any direct or indirect parent of the Borrower) or (B) the Borrowers (or any direct or indirect parent thereof), as applicable, Form l0-K or 10-Q, as applicable, filed with the SEC; provided that, with respect to clauses (A) and (B), (i) to the extent such information relates to a parent of the Borrower, such information is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to the Borrower (or such parent), on the one hand, and the information relating to the Borrower and the Restricted Subsidiaries on a standalone basis, on the other hand and (ii) to the extent such information is in lieu of information required to be provided under Section 6.01(a), such materials are accompanied by a report and opinion of Deloitte & Touche LLP or any other independent registered public accounting firm of nationally recognized standing, 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.
Documents required to be delivered pursuant to Section 6.01(a), (b), (c) and (d) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower (or any direct or indirect parent of the Borrower) posts such documents, or provides a link thereto, on the website on the Internet at www.gymboree.com; or (ii) on which such documents are posted on the Borrowers behalf on IntraLinks/IntraAgency or another relevant website, if any, to which each Lender and the Administrative Agent have access
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(whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) upon written request by the Administrative Agent, the Borrower shall deliver paper copies of such documents to the Administrative Agent for further distribution to each Lender until a written request to cease delivering paper copies is given by the Administrative Agent and (ii) the Borrower shall notify (which may be by facsimile or electronic mail) the Administrative Agent of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. Each Lender shall be solely responsible for timely accessing posted documents or requesting delivery of paper copies of such documents from the Administrative Agent and maintaining its copies of such documents. Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(a) to the Administrative Agent; provided, however, that if such Compliance Certificate is first delivered by electronic means, the date of such delivery by electronic means shall constitute the date of delivery for purposes of compliance with Section 6.02(a).
Section 6.02. Certificates; Other Information.
Deliver to the Administrative Agent for prompt further distribution to each Lender:
(a) no later than five (5) days after the delivery of the financial statements referred to in Section 6.01(a) and 6.01(b) (or the date on which such delivery is required), commencing with the first full fiscal quarter completed after the Closing Date, a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower;
(b) [Reserved];
(c) promptly after the same are publicly available, copies of all annual, regular, periodic and special reports and registration statements which Holdings, the Borrower or any Restricted Subsidiary files with the SEC or with any Governmental Authority that may be substituted therefor (other than amendments to any registration statement (to the extent such registration statement, in the form it became effective, is delivered), exhibits to any registration statement and, if applicable, any registration statement on Form S-8) and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;
(d) promptly after the furnishing thereof, copies of any material requests or material notices received by any Loan Party or Restricted Subsidiary (other than in the ordinary course of business) or material statements or material reports furnished to any holder of Indebtedness or debt securities (other than in connection with any board observer rights and, with respect to the ABL Facility, other than borrowing base and related certificates) of any Loan Party or of any of its Restricted Subsidiaries pursuant to the terms of the ABL Facility Documentation, the Senior Notes Documents, any Junior Financing Documentation, any Permitted Unsecured Refinancing Debt, any Permitted First Priority Refinancing Debt, any Permitted Second Priority Refinancing Debt or any Permitted Refinancing of any thereof in each case (other than with respect to the ABL Facility) in a principal amount in excess of the Threshold Amount and not otherwise required to be furnished to the Lenders pursuant to any clause of this Section 6.02;
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(e) together with the delivery of each Compliance Certificate pursuant to Section 6.02(a), (i) in the case of annual Compliance Certificates only, a report setting forth the information required by sections of the Perfection Certificate describing the legal name and the jurisdiction of formation of each Loan Party and the location of the chief executive office of each Loan Party or confirming that there has been no change in such information since the Closing Date or the date of the last such report, (ii) a description of each event, condition or circumstance during the last fiscal quarter covered by such Compliance Certificate requiring a mandatory prepayment under Section 2.13(a) and (iii) a list of each Subsidiary of the Borrower that identifies each Subsidiary as a Restricted or an Unrestricted Subsidiary and as a Loan Party or a non-Loan Party as of the date of delivery of such Compliance Certificate;
(f) promptly, such additional information regarding the business, legal, financial or corporate affairs of the Loan Parties or any of their respective Restricted Subsidiaries, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender through the Administrative Agent may from time to time reasonably request;
(g) no later than 5 days after each delivery of financial statements referred to in Section 6.01(a) and 6.01(b) (or the date on which such delivery is required), any change to Schedule 1.01(b);
(h) 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; and
(i) promptly after the receipt thereof by Holdings or the Borrower or any of the Restricted Subsidiaries, a copy of any management letter received by any such Person from its certified public accountants and the managements response thereto;
Section 6.03. Notices. Promptly after a Responsible Officer of Holdings, the Borrower or any Subsidiary Guarantor has obtained knowledge thereof, notify the Administrative Agent:
(a) of the occurrence of any Default;
(b) of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect;
(c) of the filing or commencement of, or any threat or notice of intention of any person to file or commence, any action, suit, litigation or proceeding, whether at law or in equity by or before any Governmental Authority, (i) against Holdings, the Borrower or any of its Restricted Subsidiaries that could reasonably be expected to result in a Material Adverse Effect or (ii) with respect to any Loan Document, and any material development with respect thereto; and
(d) of the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liabilities of a Loan
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Party, any Restricted Subsidiary or any of their respective ERISA Affiliates in an aggregate amount exceeding the Threshold Amount.
Each notice pursuant to this Section shall be accompanied by a written statement of a Responsible Officer of the Borrower (x) that such notice is being delivered pursuant to Section 6.03(a), (b), (c) or (d) (as applicable) and (y) setting forth details of the occurrence referred to in Section 6.03(a), (b), (c) or (d), as applicable, and stating what action the Borrower has taken and proposes to take with respect thereto.
Section 6.04. Payment of Obligations. Promptly pay, discharge or otherwise satisfy as the same shall become due and payable in the normal conduct of its business, (a) all of its Indebtedness and other obligations in accordance with their terms and (b) all its obligations and liabilities in respect of Taxes imposed upon it or upon its income or profits or in respect of its property, except, in the case of this clause (b), to the extent any such Tax is being contested in good faith and by appropriate proceedings for which appropriate reserves have been established in accordance with GAAP if such contest shall have the effect of suspending enforcement or collection of such Taxes and except, in the case of clauses (a) and (b), where the failure to pay, discharge or otherwise satisfy the same could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
Section 6.05. Preservation of Existence, Etc.
(a) Preserve, renew and maintain in full force and effect its legal existence under the Laws of the jurisdiction of its organization except in a transaction permitted by Section 7.04 or Section 7.05 and (b) obtain, maintain, renew, extend and keep in full force and effect all rights (including IP Rights), privileges (including its good standing where applicable in the relevant jurisdiction), permits, licenses and franchises necessary or desirable in the normal conduct of its business, except, in the case of clause (a) (other than with respect to any Loan Party) or (b), to the extent that failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
Section 6.06. Maintenance of Properties.
Except if the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (a) maintain, preserve and protect all of its properties and equipment necessary in the operation of its business in good working order, repair and condition, ordinary wear and tear excepted and fire, casualty or condemnation excepted, and (b) make all necessary renewals, replacements, modifications, improvements, upgrades, extensions and additions thereof or thereto in accordance with prudent industry practice and in the normal conduct of its business.
Section 6.07. Maintenance of Insurance.
(a) Generally. Maintain with financially sound and reputable insurance companies, insurance with respect to its properties and business against loss or damage of the kinds
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customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts (after giving effect to any self-insurance reasonable and customary for similarly situated Persons engaged in the same or similar businesses as the Borrower and the Restricted Subsidiaries) as are customarily carried under similar circumstances by such other Persons.
(b) Requirements of Insurance. (A) Use commercially reasonable efforts to cause, not later than ninety (90) days after the Closing Date (or such longer period as the Administrative Agent may agree in writing in its discretion), all insurance required pursuant to Section 6.07(a) (x) to provide (and to continue to provide at all times thereafter) that it shall not be canceled, modified or not renewed (i) by reason of nonpayment of premium upon not less than 10 days prior written notice thereof by the insurer to the Administrative Agent and the Collateral Agent (giving the Administrative Agent and the Collateral Agent the right to cure defaults in the payment of premiums) or (ii) for any other reason upon not less than 30 days prior written notice thereof by the insurer to the Administrative Agent and the Collateral Agent (the Borrower shall deliver a copy of the policy (and to the extent any such policy is cancelled or renewed, a renewal or replacement policy) or other evidence thereof to the Administrative Agent and the Collateral Agent, or insurance certificate with respect thereto) and (y) to name the Collateral Agent as additional insured on behalf of the Secured Parties (in the case of liability insurance) or loss payee (in the case of property insurance), as applicable (and to continue to so name the Collateral Agent at all times thereafter) and (B) in the case of all such property and casualty insurance policies with respect to the Mortgaged Properties located in the United States, not later than ninety (90) days after the Closing Date (or such longer period as the Administrative Agent may agree in writing in its discretion) cause such policies to be endorsed or otherwise amended to include a standard or New York lenders loss payable endorsement, in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent, which endorsement shall provide that, from and after the Closing Date, if the insurance carrier shall have received written notice from the Administrative Agent or the Collateral Agent of the occurrence of an Event of Default, the insurance carrier shall pay all proceeds otherwise payable to the Borrower or the Loan Parties under such policies directly to the Collateral Agent; cause all such policies to provide that neither the Borrower, the Collateral Agent, the Administrative Agent nor any other party shall be a coinsurer thereunder and to contain a Replacement Cost Endorsement, without any deduction for depreciation, and such other provisions as the Administrative Agent or the Collateral Agent may reasonably (in light of a Default or a material development in respect of the insured Mortgaged Property) require from time to time to protect their interests.
(c) Flood Insurance. With respect to each Mortgaged Property, if at any time the area in which any building or other improvement is located is designated a flood hazard area in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), obtain flood insurance in such amount and with such deductible as is required to ensure compliance with the Flood Laws. Following the Closing Date, the Borrower shall deliver to the Collateral Agent annual renewals of the flood insurance policy or annual renewals of a force-placed flood insurance policy. In connection with any amendment to this Agreement pursuant to which any increase, extension, or renewal of Loans is contemplated, the Borrower
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shall cause to be delivered to the Collateral Agent for any Mortgaged Property, a Flood Determination Form, Borrower Notice and Evidence of Flood Insurance, as applicable.
(d) Carry and maintain commercial general liability insurance including the broad form CGL endorsement (or equivalent coverage) and coverage on an occurrence basis against claims made for personal injury (including bodily injury, death and property damage) and umbrella liability insurance against any and all claims, in each case in amounts and against such risks as are customarily maintained by companies engaged in the same or similar industry operating in the same or similar locations naming the Collateral Agent as an additional insured, on forms reasonably satisfactory to the Collateral Agent.
(e) Notify the Administrative Agent and the Collateral Agent promptly whenever any separate insurance concurrent in form or contributing in the event of material loss with that required to be maintained under this Section 6.07 is taken out by the Borrower or another Loan Party; and promptly deliver to the Administrative Agent and the Collateral Agent a duplicate original copy of such policy or policies, or an insurance certificate with respect thereto.
Section 6.08. Compliance with Laws.
Comply with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except if the failure to comply therewith could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
Section 6.09. Books and Records.
Maintain proper books of record and account, in which entries are made that are full, true and correct in all material respects and are in conformity with GAAP and which reflect all material financial transactions and matters involving the assets and business of Holdings, the Borrower or a Restricted Subsidiary, as the case may be.
Section 6.10. Inspection Rights.
Permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants (subject to such accountants customary policies and procedures), all at the reasonable expense of the Borrower and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided that, excluding any such visits and inspections during the continuation of an Event of Default, (x) only the Administrative Agent on behalf of the Lenders may exercise rights of the Administrative Agent and the Lenders under this Section 6.10 and (y) the Administrative Agent shall not exercise such rights more often than two (2) times during any calendar year and only one (1) such time shall be at the Borrowers expense; provided further that when an Event of Default exists, the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may
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do any of the foregoing at the expense of the Borrower at any time during normal business hours and upon reasonable advance notice. The Administrative Agent and the Lenders shall give the Borrower the opportunity to participate in any discussions with the Borrowers independent public accountants.
Section 6.11. Additional Collateral; Additional Guarantors.
At the Borrowers expense, take all action necessary or reasonably requested by the Administrative Agent or the Collateral Agent to ensure that the Collateral and Guarantee Requirement continues to be satisfied, including:
(a) Upon the formation or acquisition of any new direct or indirect wholly owned Domestic Subsidiary (in each case, other than an Excluded Subsidiary) by the Borrower, the designation in accordance with Section 6.14 of any existing direct or indirect wholly owned Domestic Subsidiary as a Restricted Subsidiary or any wholly owned Domestic Subsidiary ceasing to be an Excluded Subsidiary:
(i) as soon as practicable, but in any event within 60 days after such formation, acquisition, designation or other event, or such longer period as the Administrative Agent may agree in writing in its discretion:
(A) cause each such Domestic Subsidiary to duly execute and deliver to the Administrative Agent or the Collateral Agent (as appropriate) joinders to this Agreement as Guarantors, Security Agreement Supplements, Intellectual Property Security Agreements, a counterpart of the Intercompany Note and other security agreements and documents (including, with respect to such Mortgages, the documents listed in Section 6.13(b)), as reasonably requested by and in form and substance reasonably satisfactory to the Administrative Agent (consistent with the Mortgages, Security Agreement, Intellectual Property Security Agreements and other security agreements in effect on the Closing Date), in each case granting Liens required by the Collateral and Guarantee Requirement;
(B) cause each such Domestic Subsidiary (and the parent of each such Domestic Subsidiary that is a Loan Party) to deliver to the Collateral Agent any and all certificates representing Equity Interests (to the extent certificated) and intercompany notes (to the extent certificated) that are required to be pledged pursuant to the Collateral and Guarantee Requirement, accompanied by undated stock powers or other appropriate instruments of transfer executed in blank;
(C) take and cause such Restricted Subsidiary and each direct or indirect parent of such Restricted Subsidiary to take whatever action (including the recording of Mortgages, the filing of UCC financing statements and delivery of stock and membership interest certificates) as may be necessary in the reasonable opinion of the Collateral Agent to vest in the Collateral Agent (or in any representative of the Collateral Agent designated by it) valid and perfected
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Liens to the extent required by the Collateral and Guarantee Requirement, and to otherwise comply with the requirements of the Collateral and Guarantee Requirement;
(ii) if reasonably requested by the Administrative Agent or the Collateral Agent, as soon as available but in any event within forty-five (45) days after such request (or such longer period as the Administrative Agent may agree in writing in its discretion), deliver to the Administrative Agent a signed copy of an opinion, addressed to the Administrative Agent and the Lenders, of counsel for the Loan Parties reasonably acceptable to the Administrative Agent as to such matters set forth in this Section 6.11(a) as the Administrative Agent may reasonably request;
(iii) as promptly as practicable after the request therefor by the Administrative Agent or Collateral Agent, deliver to the Collateral Agent with respect to each Material Real Property, any existing surveys, title reports, abstracts or environmental assessment reports, to the extent available and in the possession or control of the Borrower; provided, however, that there shall be no obligation to deliver to the Collateral Agent any existing environmental assessment report whose disclosure to the Collateral Agent would require the consent of a Person other than the Borrower or one of its Subsidiaries, where, despite the commercially reasonable efforts of the Borrower to obtain such consent, such consent cannot be obtained; and
(iv) if reasonably requested by the Administrative Agent or the Collateral Agent, as soon as available but in any event within sixty (60) days after such request (or such longer period as the Administrative Agent may agree in writing in its discretion), deliver to the Collateral Agent any other items necessary from time to time to satisfy the Collateral and Guarantee Requirement with respect to the validity, perfection, existence and priority of security interests with respect to property of any Guarantor acquired after the Closing Date and subject to the Collateral and Guarantee Requirement, but not specifically covered by the preceding clauses (i), (ii) or (iii) or clause (b) below.
(b) As soon as is practicable, but in any event not later than one hundred twenty (120) days after the acquisition by any Loan Party of Material Real Property that is required to be provided as Collateral pursuant to the Collateral and Guarantee Requirement (or such longer period as the Administrative Agent may agree in writing in its discretion), which property would not be automatically subject to another Lien pursuant to pre-existing Collateral Documents, cause such property to be subject to a Lien in favor of the Collateral Agent for the benefit of the Secured Parties and take, or cause the relevant Loan Party to take, such actions as shall be necessary or reasonably requested by the Administrative Agent or the Collateral Agent to grant and perfect or record such Lien, in each case to the extent required by, and subject to the limitations and exceptions of, the Collateral and Guarantee Requirement and to otherwise comply with the requirements of the Collateral and Guarantee Requirement.
(c) Always ensuring that the Obligations are secured by a first-priority security interest in all the Equity Interests of the Borrower.
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Section 6.12. Compliance with Environmental Laws.
Except, in each case, to the extent that the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, comply, and take all reasonable actions to cause all lessees and other Persons operating or occupying its properties to comply, with all applicable Environmental Laws and Environmental Permits; obtain and renew all Environmental Permits necessary for its operations and properties; and, in each case to the extent the Loan Parties or the Restricted Subsidiaries are required by Environmental Laws, conduct any investigation, remedial or other corrective action necessary to address Hazardous Materials at any property or facility in accordance with applicable Environmental Laws.
Section 6.13. Further Assurances and Post-Closing Conditions.
(a) Within ninety (90) days after the Closing Date (subject to extension by the Administrative Agent or the Collateral Agent in its reasonable discretion), deliver each Collateral Document set forth on Schedule 6.13(a), duly executed by each Loan Party thereto, together with all documents and instruments required to perfect the security interest of the Collateral Agent in the Collateral free of any other pledges, security interests or mortgages, except Liens expressly permitted hereunder, to the extent required pursuant to the Collateral and Guarantee Requirement.
(b) Promptly upon reasonable request by the Administrative Agent or the Collateral Agent (i) correct any material defect or error that may be discovered in the execution, acknowledgment, filing or recordation of any Collateral Document or other document or instrument relating to any Collateral, and (ii) 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 the Collateral Agent may reasonably request from time to time in order to carry out more effectively the purposes of the Loan Documents and to cause the Collateral and Guarantee Requirement to be and remain satisfied. If the Administrative Agent or the Collateral Agent reasonably determines that it is required by applicable Law to have appraisals prepared in respect of each Material Real Property of any Loan Party subject to a Mortgage, the Borrower shall cooperate with the Administrative Agent and/or Collateral Agent, as applicable, in obtaining such appraisals and pay all costs and expenses relating thereto.
(c) Use commercially reasonable efforts to cause, not later than 90 days after the Closing Date (subject to extension by the Administrative Agent or the Collateral Agent in its reasonable discretion), all Liens set forth on Schedule 6.13(c) to be removed from the public record.
Section 6.14. Designation of Subsidiaries.
The Borrower may at any time after the Closing Date designate any Restricted Subsidiary of the Borrower 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) immediately after giving effect to such designation, the
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Borrower shall be in Pro Forma Compliance with the Financial Ratios (it being understood that, as a condition precedent to the effectiveness of any such designation, the Borrower shall deliver to the Administrative Agent a certificate of a Responsible Officer setting forth in reasonable detail the calculations demonstrating such compliance), (iii) no Subsidiary may be designated as an Unrestricted Subsidiary or continue as an Unrestricted Subsidiary if it is a Restricted Subsidiary for the purpose of the Senior Notes, the ABL Facility, any Junior Financing or any other Indebtedness, as applicable, (iv) no Restricted Subsidiary may be designated an Unrestricted Subsidiary if it was previously designated an Unrestricted Subsidiary and (v) if a Restricted Subsidiary is being designated as an Unrestricted Subsidiary hereunder, the sum of (A) the fair market value of assets of such Subsidiary as of such date of designation (the Designation Date), plus (B) the aggregate fair market value of assets of all Unrestricted Subsidiaries designated as Unrestricted Subsidiaries pursuant to this Section 6.14 prior to the Designation Date (in each case measured as of the date of each such Unrestricted Subsidiarys designation as an Unrestricted Subsidiary) shall not exceed the amount permitted pursuant to Section 7.02 as of such Designation Date pro forma for such designation. The designation of any Subsidiary as an Unrestricted Subsidiary after the Closing Date shall constitute an Investment by the Borrower therein at the date of designation in an amount equal to the fair market value of the Borrowers or its Subsidiarys (as applicable) investment therein. The designation of any Unrestricted Subsidiary as a Restricted Subsidiary shall constitute (i) the incurrence at the time of designation of any Investment, Indebtedness or Liens of such Subsidiary existing at such time and (ii) a return on any Investment by the Borrower in Unrestricted Subsidiaries pursuant to the preceding sentence in an amount equal to the fair market value at the date of such designation of the Borrowers or its Subsidiarys (as applicable) Investment in such Subsidiary.
Section 6.15. Maintenance of Ratings.
In the case of the Borrower, use commercially reasonable efforts to maintain a public corporate rating from S&P and a public corporate family rating from Moodys, in each case in respect of the Borrower.
ARTICLE 7
NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder or any Loan or other Obligation (other than obligations under Secured Hedge Agreements) hereunder which is accrued or payable shall remain unpaid or unsatisfied, then from and after the Closing Date:
Section 7.01. Liens.
Neither Holdings nor the Borrower shall, nor shall they permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following:
(a) Liens created pursuant to any Loan Document;
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(b) Liens existing on the Closing Date and listed on Schedule 7.01(b) and any modifications, replacements, renewals, refinancings or extensions thereof; provided that (i) the Lien does not extend to any additional property other than (A) after-acquired property that is affixed or incorporated into the property covered by such Lien and (B) proceeds and products thereof, and (ii) the replacement, renewal, extension or refinancing of the obligations secured or benefited by such Liens, to the extent constituting Indebtedness, is permitted by Section 7.03;
(c) Liens for taxes, assessments or governmental charges that are not overdue for a period of more than thirty (30) days or that are being contested in good faith and by appropriate actions, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;
(d) statutory or common law Liens of landlords, sublandlords, carriers, warehousemen, mechanics, materialmen, repairmen, construction contractors or other like Liens, or other customary Liens (other than in respect of Indebtedness) in favor of landlords, in each case arising in the ordinary course of business that secure amounts not overdue for a period of more than thirty (30) days or if more than thirty (30) days overdue, that are being contested in good faith and by appropriate actions, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;
(e) (i) pledges or deposits in the ordinary course of business in connection with workers compensation, unemployment insurance and other social security legislation and (ii) pledges and deposits 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 the Borrower or any of its Restricted Subsidiaries;
(f) deposits to secure the performance of bids, trade contracts, governmental contracts and leases (in the case of each of the foregoing, other than for Indebtedness), statutory obligations, surety, stay, customs and appeal bonds, performance bonds and other obligations of a like nature (including those to secure health, safety and environmental obligations), in each case incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions (including zoning restrictions), encroachments, protrusions and other similar encumbrances and minor title defects affecting Real Property that do not in the aggregate materially interfere with the ordinary conduct of the business of Holdings, the Borrower and the Restricted Subsidiaries, taken as a whole, and any exceptions on the Mortgage Policies issued in connection with the Mortgaged Properties;
(h) Liens securing judgments for the payment of money not constituting an Event of Default under Section 8.01(h);
(i) leases, licenses, subleases or sublicenses granted to others in the ordinary course of business which do not (i) interfere in any material respect with the business of Holdings, the Borrower and the Restricted Subsidiaries, taken as a whole or (ii) secure any Indebtedness;
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(j) Liens (i) in favor of customs and revenue authorities arising as a matter of Law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business or (ii) on specific items of inventory or other goods and proceeds thereof of any Person securing such Persons obligations in respect of bankers acceptances or letters of credit issued or created for the account of such person to facilitate the purchase, shipment or storage of such inventory or such other goods in the ordinary course of business;
(k) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection and (ii) arising in the ordinary course of business in favor of a banking or other financial institution arising as a matter of Law or under customary general terms and conditions encumbering deposits or other funds maintained with a financial institution (including the right of set-off) and that are within the general parameters customary in the banking industry or arising pursuant to such banking institutions general terms and conditions;
(l) Liens (i) on cash advances in favor of the seller of any property to be acquired in an Investment permitted pursuant to Sections 7.02(i) and (n) or, to the extent related to any of the foregoing, Section 7.02(r), in each case to be applied against the purchase price for such Investment, and (ii) consisting of an agreement to Dispose of any property in a Disposition permitted under Section 7.05, in each case, solely to the extent such Investment or Disposition, as the case may be, would have been permitted on the date of the creation of such Lien;
(m) Liens (i) in favor of the Borrower or a Restricted Subsidiary on assets of a Restricted Subsidiary that is not a Loan Party securing Indebtedness permitted under Section 7.03(b) and (ii) in favor of the Borrower or any Subsidiary Guarantor;
(n) any interest or title (and all encumbrances and other matters affecting such interest or title) of a lessor, sublessor, licensor or sublicensor under leases, subleases, licenses or sublicenses entered into by the Borrower or any of the Restricted Subsidiaries in the ordinary course of business; provided, that no such lease or sublease shall constitute a Capitalized Lease;
(o) Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods entered into by the Borrower or any of the Restricted Subsidiaries in the ordinary course of business permitted by this Agreement;
(p) Liens deemed to exist in connection with Investments in repurchase agreements permitted under Section 7.02(a);
(q) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;
(r) Liens that are customary contractual rights of set-off (i) relating to the establishment of depository relations with banks in the ordinary course of business and not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts
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of the Borrower or any of its Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower or any of its Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Borrower or any of its Restricted Subsidiaries in the ordinary course of business;
(s) Liens solely on any cash earnest money deposits made by the Borrower or any of its Restricted Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder;
(t) ground leases in respect of Real Property on which facilities owned or leased by the Borrower or any of the Restricted Subsidiaries are located;
(u) Liens (including any interest or title (and all encumbrances and other matters affecting such interest or title) of a lessor or sublessor under Capitalized Leases) securing Indebtedness permitted under Section 7.03(e); provided that (i) such Liens are created within 270 days of the acquisition, construction, repair, lease or improvement, as applicable, of the property subject to such Liens, (ii) such Liens do not at any time encumber property (except for replacements, additions and accessions to such property) other than the property financed by such Indebtedness and the proceeds and products thereof and customary security deposits and (iii) with respect to Capitalized Leases, such Liens do not at any time extend to or cover any assets (except for replacements, additions and accessions to such assets) other than the assets subject to such Capitalized Leases and the proceeds and products thereof and customary security deposits; provided that individual financings of equipment provided by one lender may be cross collateralized to other financings of equipment provided by such lender;
(v) Liens on property (i) of any Subsidiary that is not a Loan Party and (ii) that does not constitute Collateral, which Liens secure Indebtedness of the applicable Subsidiary permitted under Section 7.03;
(w) Liens (x) existing on property at the time of its acquisition or existing on the property of any Person at the time such Person becomes a Restricted Subsidiary (other than by designation as a Restricted Subsidiary pursuant to Section 6.14), in each case after the Closing Date (other than Liens on the Equity Interests of any Person that becomes a Restricted Subsidiary) and (y) placed upon property or assets of any Restricted Subsidiary or its Restricted Subsidiaries acquired pursuant to a Permitted Acquisition to secure Indebtedness incurred pursuant to Section 7.03(g) in connection with such Permitted Acquisition; provided that (i) in the case of clause (x), such Lien was not created in contemplation of such acquisition or such Person becoming a Restricted Subsidiary, (ii) in the case of clause (x), such Lien does not extend to or cover any other assets or property (other than the proceeds or products thereof and other than after-acquired property subjected to a Lien securing Indebtedness and other obligations incurred prior to such time and which Indebtedness and other obligations are permitted hereunder that require, pursuant to their terms at such time, a pledge of after-acquired property, it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition), and (iii) in the case of clauses
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(x) and (y), (1) the obligations secured thereby do not exceed $50,000,000 at any time outstanding and (2) the Indebtedness secured thereby is permitted under Section 7.03(g);
(x) (i) zoning, building, entitlement and other land use regulations by Governmental Authorities with which the normal operation of the business complies, and (ii) any zoning or similar law or right reserved to or vested in any Governmental Authority to control or regulate the use of any real property that does not materially interfere with the ordinary conduct of the business of Holdings, the Borrower and the Restricted Subsidiaries, taken as a whole;
(y) Liens arising from precautionary Uniform Commercial Code financing statements or similar filings;
(z) Liens on insurance policies and the proceeds thereof securing the financing of the premiums with respect thereto;
(aa) the modification, replacement, renewal or extension of any Lien permitted by clauses (u) and (w) of this Section 7.01; provided that (i) the Lien does not extend to any additional property, other than (A) after-acquired property that is affixed or incorporated into the property covered by such Lien and (B) proceeds and products thereof, and (ii) the renewal, extension or refinancing of the obligations secured or benefited by such Liens is permitted by Section 7.03 (to the extent constituting Indebtedness);
(bb) other Liens with respect to property or assets of the Borrower or any of its Restricted Subsidiaries securing obligations in an aggregate principal amount outstanding at any time not to exceed $60,000,000;
(cc) Liens on the Collateral securing Indebtedness permitted under Section 7.03(s); provided, that such Liens shall be subject to the ABL Intercreditor Agreement;
(dd) Liens on the Collateral securing Permitted First Priority Refinancing Debt or Permitted Second Priority Refinancing Debt and any Permitted Refinancing of the foregoing; provided, that (x) any such Liens securing any Permitted Refinancing in respect of Permitted First Priority Refinancing Debt are subject to the ABL Intercreditor Agreement and the First Lien Intercreditor Agreement and (y) any such Liens securing any Permitted Refinancing in respect of Permitted Second Priority Refinancing Debt are subject to the ABL Intercreditor Agreement and the Second Lien Intercreditor Agreement;
(ee) Liens on the Equity Interests of any joint venture entity consisting of a transfer restriction, purchase option, call or similar right of a third party joint venture partner; and
(ff) Liens arising by operation of law in the United States under Article 2 of the UCC in favor of a reclaiming seller of goods or buyer of goods.
Notwithstanding the foregoing, no consensual Liens shall exist on Equity Interests that constitute Collateral other than pursuant to clauses (a), (cc), (dd) or (ee) above.
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Section 7.02. Investments.
Neither Holdings nor the Borrower shall, nor shall they permit any Restricted Subsidiary to, directly or indirectly, make or hold any Investments, except:
(a) Investments by Holdings, the Borrower or any of the Restricted Subsidiaries in assets that were Cash Equivalents when such Investment was made;
(b) loans or advances to officers, directors and employees of any Loan Party or any of its Restricted Subsidiaries (i) for reasonable and customary business-related travel, entertainment, relocation and analogous ordinary business purposes, (ii) in connection with such Persons purchase of Equity Interests of Holdings or any direct or indirect parent thereof directly from such issuing entity (provided that the amount of such loans and advances shall be contributed to the Borrower in cash as common equity) and (iii) for any other purposes not described in the foregoing clauses (i) and (ii); provided that the aggregate principal amount of loans and advances outstanding at any time under this Section 7.02(b) shall not exceed $18,000,000;
(c) Investments (i) by Holdings in the Borrower, (ii) by the Borrower or any Restricted Subsidiary in any Loan Party (other than Holdings), (iii) by any Restricted Subsidiary that is not a Loan Party in any other Restricted Subsidiary that is not a Loan Party and (iv) by any Loan Party in a Restricted Subsidiary that is not a Loan Party; provided, that the aggregate amount of Investments at any time outstanding under this clause (iv) shall not exceed $25,000,000;
(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 and other credits to suppliers in the ordinary course of business;
(e) Investments consisting of transactions permitted under Sections 7.01, 7.03 (other than 7.03(c) and (d)), 7.04 (other than 7.04(c), (d) or (e)), 7.05 (other than 7.05(d) or (e)), 7.06 (other than 7.06(e) or (i)(iv)) and 7.13;
(f) Investments (i) existing or contemplated on the Closing Date and set forth on Schedule 7.02(f) and any modification, replacement, renewal or extension thereof and (ii) existing on the Closing Date by any Loan Party in any other Loan Party and any modification, replacement, renewal or extension thereof; provided, that the amount of the original Investment is not increased except by the terms of such original Investment as set forth on Schedule 7.02(f) or as otherwise permitted by this Section 7.02;
(g) Investments in Swap Contracts permitted under Section 7.03;
(h) promissory notes and other non-cash consideration received in connection with Dispositions permitted by Section 7.05;
(i) any acquisition by the Borrower or any Restricted Subsidiary of (x) all or substantially all the assets of, or all the Equity Interests (other than directors qualifying shares,
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shares issued to foreign nationals as required by applicable law or any options for Equity Interests that cannot, as a matter of law, be cancelled, redeemed or otherwise extinguished without the express agreement of the holder thereof at or prior to acquisition) in, a Person or division, business unit or line of business of a Person (or any subsequent investment made in a Person, division, business unit or line of business previously acquired in a Permitted Acquisition) or (y) any Stores, in each case in a single transaction or series of related transactions, if (i) no Event of Default shall have occurred and be continuing or would result therefrom; (ii) all transactions related thereto shall be consummated in accordance with applicable Laws to the extent required as a condition to the consummation of such transactions pursuant to the agreement governing such transactions; (iii) immediately after giving effect to such acquisition or investment and any related transactions, the Borrower and the Restricted Subsidiaries shall be in Pro Forma Compliance with the Financial Ratios; (iv) any acquired or newly formed Restricted Subsidiary shall not be liable for any Indebtedness except for Indebtedness otherwise permitted by Section 7.03; (v) to the extent required by the Collateral and Guarantee Requirement, (A) the property, assets and businesses acquired in such purchase or other acquisition shall constitute Collateral and (B) any such newly created or acquired Subsidiary (other than an Excluded Subsidiary) shall become a Guarantor, in each case, in accordance with Section 6.11; and (vi) the Borrower shall have delivered to the Administrative Agent a certificate of a Responsible Officer of the Borrower certifying that the conditions set forth in the preceding clauses (i) through (v) have been satisfied (any such acquisition, a Permitted Acquisition); provided that the aggregate amount of Investments made by Loan Parties pursuant to this Section 7.02(i) in assets that are not (or do not become) owned by a Loan Party or in Equity Interests in Persons that do not become Loan Parties upon consummation of such Permitted Acquisition shall not exceed $75,000,000 at any time outstanding;
(j) Investments made to effect the Transactions;
(k) Investments in the ordinary course of business consisting of UCC Article 3 endorsements for collection or deposit and UCC Article 4 customary trade arrangements with customers consistent with past practices;
(l) Investments (including debt obligations and Equity Interests) received in connection with the bankruptcy or reorganization of suppliers and customers or in settlement of delinquent obligations of, or other disputes with, customers and suppliers arising in the ordinary course of business or upon the foreclosure with respect to any secured Investment or other transfer of title with respect to any secured Investment;
(m) loans and advances to Holdings in lieu of and not in excess of the amount of (after giving effect to any other loans, advances or Restricted Payments in respect thereof) Restricted Payments permitted to be made to Holdings in accordance with Sections 7.06(g), (h) or (i);
(n) other Investments (including for Permitted Acquisitions) in an aggregate amount outstanding pursuant to this clause (n) (valued at the time of the making thereof, and without giving effect to any write downs or write offs thereof) at any time not to exceed (x) the greater of (i) $90,000,000 and (ii) 2.75% of Total Assets (net of any after tax cash return in respect thereof
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to the extent not included in the determination of the Cumulative Credit, including, to the extent not so included in the determination of the Cumulative Credit, dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) plus (y) the portion, if any, of the Cumulative Credit on the date of such election that the Borrower elects to apply to this subsection (y), such election to be specified in a written notice of a Responsible Officer of the Borrower calculating in reasonable detail the amount of Cumulative Credit immediately prior to such election and the amount thereof elected to be so applied; provided, that no Event of Default shall have occurred and be continuing or would result from the making of any such Investment;
(o) advances of payroll payments to employees in the ordinary course of business;
(p) Investments to the extent that payment for such Investments is made solely with Equity Interests (other than Disqualified Equity Interests) of Holdings (or any direct or indirect parent of Holdings);
(q) Investments of a Restricted Subsidiary acquired after the Closing Date pursuant to a Permitted Acquisition or of a corporation merged or amalgamated or consolidated into the Borrower or merged, amalgamated or consolidated with a Restricted Subsidiary, in each case in accordance with this Section and Section 7.04 after the Closing Date to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger, amalgamation or consolidation and were in existence on the date of such acquisition, merger or consolidation;
(r) Investments made by any Restricted Subsidiary that is not a Loan Party to the extent such Investments are financed with the proceeds received by such Restricted Subsidiary from an Investment in such Restricted Subsidiary made pursuant to Section 7.02(c)(iv), Section 7.02(i) or Section 7.02(n); and
(s) Guarantees by the Borrower or any of its Restricted Subsidiaries of leases (other than Capitalized Leases) or of other obligations that do not constitute Indebtedness, in each case entered into in the ordinary course of business.
Section 7.03. Indebtedness.
Neither Holdings nor the Borrower shall, nor shall they permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Indebtedness, except:
(a) Indebtedness of any Loan Party under the Loan Documents;
(b) Indebtedness outstanding on the Closing Date and listed on Schedule 7.03(b) and any Permitted Refinancing thereof; provided, that (x) any intercompany Indebtedness shall be evidenced by an Intercompany Note and (y) any intercompany Indebtedness of any Loan Party owed to any Person that is not a Loan Party shall be unsecured and subordinated to the Obligations pursuant to the subordination provisions contained in the Intercompany Note;
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(c) Guarantees by Holdings, the Borrower and any Restricted Subsidiary in respect of Indebtedness of the Borrower or any Restricted Subsidiary of the Borrower otherwise permitted hereunder; provided that (i) no Guarantee by Holdings or any Restricted Subsidiary of any Indebtedness permitted pursuant to Section 7.03(s), the Senior Notes, any Junior Financing, any Permitted First Priority Refinancing Debt, any Permitted Second Priority Refinancing Debt, any Permitted Unsecured Refinancing Debt or any Permitted Refinancing of any of the foregoing shall be permitted unless such guaranteeing party shall have also provided a Guarantee of the Obligations on the terms set forth herein and (ii) if the Indebtedness being Guaranteed is Junior Financing, such Guarantee shall be subordinated to the Guarantee of the Obligations on terms at least as favorable to the Lenders as those contained in the subordination of such Junior Financing;
(d) Indebtedness (other than Indebtedness permitted under Section 7.03(b)) of the Borrower or any Restricted Subsidiary owing to any Loan Party or any other Restricted Subsidiary to the extent constituting an Investment permitted by Section 7.02; provided that (x) all such Indebtedness shall be evidenced by an Intercompany Note and (y) all such Indebtedness of any Loan Party owed to any Person that is not a Loan Party shall be unsecured and subordinated to the Obligations pursuant to the subordination provisions contained in the Intercompany Note;
(e) (i) Attributable Indebtedness and other Indebtedness of the Borrower or any Restricted Subsidiary (including Capitalized Leases) financing an acquisition, construction, repair, replacement, lease or improvement of a fixed or capital asset incurred prior to or within 270 days after the acquisition, lease or improvement of the applicable asset in an aggregate amount (together with any Permitted Refinancings thereof) not to exceed $25,000,000 at any time outstanding, and (ii) Attributable Indebtedness of the Borrower or any Restricted Subsidiary arising out of sale-leaseback transactions permitted by Section 7.05(m) and any Permitted Refinancing thereof;
(f) Indebtedness in respect of Swap Contracts designed to hedge against the Borrowers or any Restricted Subsidiarys exposure to interest rates, foreign exchange rates or commodities pricing risks incurred in the ordinary course of business and not for speculative purposes;
(g) Indebtedness of any Restricted Subsidiary (i) assumed in connection with any Permitted Acquisition, provided, that such Indebtedness is not incurred in contemplation of such Permitted Acquisition, and any Permitted Refinancing thereof or (ii) incurred to finance a Permitted Acquisition and any Permitted Refinancing thereof; provided that (w) in the case of clauses (i) and (ii), such Indebtedness and all Indebtedness resulting from a Permitted Refinancing thereof is unsecured (except for (A) Liens permitted by Section 7.01(w) securing Indebtedness (together with Permitted Refinancings thereof) in an aggregate principal amount outstanding not to exceed $50,000,000 and (B) Liens permitted by Section 7.01(bb)), (x) in the case of clauses (i) and (ii), both immediately prior and after giving effect thereto, (1) no Event of Default shall exist or result therefrom (other than a Permitted Acquisition made pursuant to a legally binding commitment entered into at a time when no Event of Default exists or would result therefrom), and (2) the Borrower and the Restricted Subsidiaries will be in Pro Forma
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Compliance with the Financial Ratios, (y) in the case of any such incurred Indebtedness under clause (ii), such Indebtedness matures after, and does not require any scheduled amortization or other scheduled payments of principal prior to, the then Latest Maturity Date, and (z) in the case of clause (i) and (ii), to the extent that the aggregate principal amount of Indebtedness (together with any Permitted Refinancings thereof) outstanding under this Section 7.03(g) would exceed $50,000,000, after giving effect to such assumption or incurrence of Indebtedness, the Total Leverage Ratio would not exceed 4.00:1.0 on a Pro Forma Basis;
(h) Indebtedness representing deferred compensation to employees of Holdings, the Borrower or any of its Restricted Subsidiaries incurred in the ordinary course of business;
(i) Indebtedness consisting of unsecured promissory notes issued by Holdings, the Borrower or any of its Restricted Subsidiaries to current or former officers, managers, consultants, directors and employees, their respective estates, spouses or former spouses to finance the purchase or redemption of Equity Interests of Holdings or any direct or indirect parent of Holdings permitted by Section 7.06;
(j) Indebtedness incurred by the Borrower or any of its Restricted Subsidiaries in a Permitted Acquisition, any other Investment expressly permitted hereunder or any Disposition expressly permitted hereunder, in each case, constituting customary indemnification obligations or customary obligations in respect of purchase price (including earnouts) or other similar adjustments;
(k) Indebtedness consisting of obligations of the Borrower or any of its Restricted Subsidiaries under deferred compensation or other similar arrangements incurred by such Person in connection with the Transactions, and Permitted Acquisitions or any other Investment expressly permitted hereunder;
(l) Indebtedness in respect of treasury, depository, credit card, debit card and cash management services or automated clearinghouse transfer of funds, overdraft or any similar services incurred in the ordinary course of business;
(m) Indebtedness of the Borrower or any of its Restricted Subsidiaries, in an aggregate principal amount at any time outstanding not to exceed $90,000,000;
(n) Indebtedness consisting of (i) the financing of insurance premiums or (ii) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business;
(o) Indebtedness incurred by the Borrower or any of its Restricted Subsidiaries in respect of letters of credit, bank guarantees, bankers acceptances or similar instruments issued or created in the ordinary course of business, including in respect of workers compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness incurred in the ordinary course of business with respect to reimbursement-type obligations regarding workers compensation claims; provided that any
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reimbursement obligations in respect thereof are reimbursed within 30 days following the incurrence thereof;
(p) obligations in respect of performance, bid, appeal and surety bonds and performance and completion guarantees and similar obligations provided by the Borrower or any of its Restricted Subsidiaries or obligations in respect of letters of credit, bank guarantees or similar instruments related thereto, in each case in the ordinary course of business or consistent with past practice and not in connection with the borrowing of money or Swap Contracts;
(q) Indebtedness of the Loan Parties constituting the Senior Notes in an aggregate principal amount not to exceed $400,000,000, and any Permitted Refinancing thereof;
(r) [Reserved];
(s) (i) ABL Facility Indebtedness of the Loan Parties in an aggregate principal amount at any time outstanding not to exceed the sum of (x) $225,000,000 plus (y) $75,000,000 minus (z) the excess, if any, of (A) the aggregate principal amount of Incremental Term Loans borrowed hereunder in accordance with Section 2.19 (whether or not outstanding) over (B) $125,000,000 and (ii) any Permitted Refinancing thereof;
(t) (i) Permitted Unsecured Refinancing Debt of a Loan Party and (ii) any Permitted Refinancing thereof;
(u) (i) Permitted First Priority Refinancing Debt and Permitted Second Priority Refinancing Debt, in each case of a Loan Party and (ii) any Permitted Refinancing thereof;
(v) Permitted Subordinated Debt of a Loan Party; provided that (x) no Default shall have occurred and be continuing at the time of the incurrence of such Indebtedness or would result therefrom and (y) the Borrower and the Restricted Subsidiaries shall be in Pro Forma Compliance with the Financial Ratios after giving effect to the incurrence of such Indebtedness;
(w) Indebtedness of Restricted Subsidiaries that are not Subsidiary Guarantors, in an aggregate principal amount at any time outstanding not to exceed $40,000,000; provided, that (i) if such Indebtedness is ABL Facility Indebtedness, the obligors thereon shall only be Canadian Subsidiaries and (ii) notwithstanding the provisions of Section 7.03(c) or any other provision hereof, no Restricted Subsidiary that is not a Loan Party may Guarantee any ABL Facility Indebtedness of a Loan Party, the Senior Notes, any Junior Financing, any Permitted First Priority Refinancing Debt, any Permitted Second Priority Refinancing Debt, any Permitted Unsecured Refinancing Debt or any Permitted Refinancing of any of the foregoing; and
(x) all premiums (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (a) through (w) above.
Notwithstanding anything to the contrary contained in this Agreement, ABL Facility Indebtedness (and any Permitted Refinancing thereof) may only be incurred pursuant to Section
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7.03(s) or, solely in the case of ABL Facility Indebtedness of Canadian Subsidiaries (and any Permitted Refinancing thereof), Section 7.03(w).
Section 7.04. Fundamental Changes.
Neither Holdings nor the Borrower shall, nor shall they permit any Restricted Subsidiary to, directly or indirectly, 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 may merge, amalgamate or consolidate with (i) the Borrower (including a merger, the purpose of which is to reorganize the Borrower into a new jurisdiction); provided that (w) no Event of Default exists or would result therefrom, (x) the Borrower shall be the continuing or surviving Person, (y) such transaction does not result in the Borrower ceasing to be organized under the laws of the United States, any State thereof or the District of Columbia and (z) such transaction does not have an adverse effect on the perfection or priority of the Liens granted under the Collateral Documents or (ii) one or more other Restricted Subsidiaries; provided, in the case of this clause (ii), that when such transaction involves a Loan Party, a Loan Party shall be the continuing or surviving Person except to the extent otherwise constituting an Investment permitted by Section 7.02 (other than Section 7.02(e));
(b) (i) any Restricted Subsidiary that is not a Loan Party may merge, amalgamate or consolidate with or into any other Restricted Subsidiary that is not a Loan Party and (ii) any Restricted Subsidiary may liquidate or dissolve or change its legal form if the Borrower determines in good faith that such action is in the best interest of the Borrower and the Restricted Subsidiaries and is not materially disadvantageous to the Lenders (it being understood that in the case of any liquidation or dissolution of a Guarantor, such Guarantor shall transfer its assets to a Loan Party, and in the case of any change in legal form, a Restricted Subsidiary that is a Guarantor will remain a Guarantor (unless such Guarantor is otherwise permitted to cease being a Guarantor hereunder) and such transaction shall not have an adverse effect on the perfection or priority of the Liens granted under the Collateral Documents);
(c) any Restricted Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another Restricted Subsidiary; provided that if the transferor in such a transaction is a Guarantor, then (i) the transferee must be a Guarantor or the Borrower or (ii) to the extent constituting an Investment, such Investment must be a permitted Investment in or Indebtedness of a Restricted Subsidiary which is not a Loan Party in accordance with Sections 7.02 (other than Section 7.02(e)) and 7.03, respectively;
(d) so long as no Event of Default exists or would result therefrom, the Borrower may merge with any other Person; provided that (i) the Borrower shall be the continuing or surviving corporation or (ii) if the Person formed by or surviving any such merger or consolidation is not the Borrower (any such Person, the Successor Borrower), (A) the Successor Borrower shall be an entity organized or existing under the Laws of the United States, any state thereof, the District of Columbia or any territory thereof and such transaction shall not have an adverse effect
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on the perfection or priority of the Liens granted under the Collateral Documents, (B) the Successor Borrower shall expressly assume all the obligations of the Borrower under this Agreement and the other Loan Documents to which the Borrower is a party pursuant to a supplement hereto or thereto in form reasonably satisfactory to the Administrative Agent, (C) each Guarantor, unless it is the other party to such merger or consolidation, shall have confirmed that its Guarantee shall apply to the Successor Borrowers obligations under the Loan Documents, (D) each Guarantor, unless it is the other party to such merger or consolidation, shall have by a supplement to the Security Agreement and other applicable Collateral Documents confirmed that its obligations thereunder shall apply to the Successor Borrowers obligations under the Loan Documents, (E) if requested by the Collateral Agent, each mortgagor of a Mortgaged Property, unless it is the other party to such merger or consolidation, shall have by an amendment to or restatement of the applicable Mortgage (or other instrument reasonably satisfactory to the Collateral Agent) confirmed that its obligations thereunder shall apply to the Successor Borrowers obligations under the Loan Documents, and (F) the Borrower shall have delivered to the Administrative Agent an officers certificate and an opinion of counsel, each stating that such merger or consolidation and such supplement to this Agreement or any Collateral Document comply with this Agreement; provided further, that if the foregoing are satisfied, the Successor Borrower will succeed to, and be substituted for, the Borrower under this Agreement; provided further that the Borrower agrees to provide any documentation and other information about the Successor Borrower as shall have been reasonably requested in writing by any Lender through the Administrative Agent that is required by regulatory authorities or under applicable know your customer and anti-money laundering rules and regulations, including without limitation the USA Patriot Act;
(e) so long as no Event of Default exists or would result therefrom (in the case of a merger involving a Loan Party), any Restricted Subsidiary may merge with any other Person (other than Holdings or the Borrower) in order to effect an Investment permitted pursuant to Section 7.02 (other than Section 7.02(e)); provided that the continuing or surviving Person shall be a Restricted Subsidiary, which together with each of its Restricted Subsidiaries, shall have complied with the requirements of Section 6.11 to the extent required pursuant to the Collateral and Guarantee Requirement;
(f) Holdings, the Borrower and the Restricted Subsidiaries may consummate the Merger, related transactions contemplated by the Merger Agreement (and documents related thereto) and the Transactions; and
(g) so long as no Event of Default exists or would result therefrom, any Restricted Subsidiary may effect a merger, dissolution, liquidation or consolidation, the purpose of which is to effect a Disposition permitted pursuant to Section 7.05 (other than Section 7.05(e)).
Section 7.05. Dispositions.
Neither Holdings nor the Borrower shall, nor shall they permit any Restricted Subsidiary to, directly or indirectly, make any Disposition, except:
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(a) Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business and Dispositions in the ordinary course of business of property no longer used or useful in the conduct of the business of Holdings, the Borrower or any of the Restricted Subsidiaries;
(b) Dispositions of inventory and goods held for sale in the ordinary course of business and immaterial assets (considered in the aggregate) (including allowing any registrations or any applications for registration of any immaterial IP Rights to lapse or go abandoned in the ordinary course of business) in the ordinary course of business;
(c) Dispositions of property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such Disposition are promptly applied to the purchase price of such replacement property; provided that to the extent the property being transferred constitutes Term Priority Collateral, such replacement property shall constitute Term Priority Collateral;
(d) Dispositions of property to the Borrower or any Restricted Subsidiary; provided that if the transferor of such property is a Loan Party (i) the transferee thereof must be a Loan Party and if such property constitutes Collateral, it shall continue to constitute Collateral after such Disposition or (ii) if such transaction constitutes an Investment, such transaction is permitted under Section 7.02 (other than Section 7.02(e));
(e) to the extent constituting Dispositions, transactions permitted by Sections 7.01 (other than Section 7.01(l)(ii)), 7.02 (other than Section 7.02(e)), 7.04 (other than Section 7.04(g)) and 7.06 (other than Section 7.06(e));
(f) so long as no Event of Default exists or would result therefrom, bulk sales or other Dispositions by the Borrower and the Restricted Subsidiaries of inventory not in the ordinary course of business in connection with Store closings; provided that (i) all such sales or other Dispositions are on arms length terms, (ii) all such sales or other Dispositions are made in accordance with customary liquidation agreements with professional liquidators, (iii) all such sales or other Dispositions are permitted under the ABL Credit Agreement as in effect on the Closing Date and (iv) for avoidance of doubt, assets constituting Term Priority Collateral may not be sold or otherwise Disposed of pursuant to this Section 7.05(f);
(g) Dispositions of Cash Equivalents;
(h) leases, subleases, licenses or sublicenses (including the provision of software under an open source license), in each case in the ordinary course of business and which do not materially interfere with the business of Holdings, the Borrower or any of its Restricted Subsidiaries;
(i) transfers of property subject to Casualty Events upon the receipt (where practical) of the Net Proceeds of such Casualty Event;
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(j) Dispositions of property not otherwise permitted under this Section 7.05 in an aggregate amount (calculated based on fair market value) during the term of this Agreement not to exceed $250,000,000; provided that (i) at the time of such Disposition (other than any such Disposition made pursuant to a legally binding commitment entered into at a time when no Event of Default exists), no Event of Default shall exist or would result from such Disposition and (ii) with respect to any Disposition or series of related Dispositions pursuant to this clause (j) for a purchase price in excess of $5,000,000, the Borrower or any of the Restricted Subsidiaries shall receive not less than 75% of such consideration in the form of cash or Cash Equivalents (in each case, free and clear of all Liens at the time received, other than nonconsensual Liens permitted by Section 7.01 and Liens permitted by Section 7.01(a), (f), (k), (p), (q), (cc) and (dd) and clauses (i) and (ii) of Section 7.01(r)); provided, however, that for the purposes of this clause (j)(ii), the following shall be deemed to be cash: (A) any liabilities (as shown on the Borrowers most recent balance sheet provided hereunder or in the footnotes thereto) of the Borrower or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the payment in cash of the Obligations, that are assumed by the transferee with respect to the applicable Disposition and for which Holdings, the Borrower and all of its Restricted Subsidiaries shall have been validly released by all applicable creditors in writing, (B) any securities received by the Borrower or the applicable Restricted Subsidiary from such transferee that are converted by the Borrower or such Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents received) within 180 days following the closing of the applicable Disposition, and (C) aggregate non-cash consideration received by the Borrower or the applicable Restricted Subsidiary having an aggregate fair market value (determined as of the closing of the applicable Disposition for which such non-cash consideration is received) not to exceed $10,000,000 at any time (net of any non-cash consideration converted into cash and Cash Equivalents);
(k) Dispositions listed on Schedule 7.05(k);
(l) Dispositions or discounts without recourse of accounts receivable in connection with the compromise or collection thereof in the ordinary course of business;
(m) Dispositions of property pursuant to sale-leaseback transactions; provided that (i) the fair market value of all property so Disposed of after the Closing Date shall not exceed $40,000,000, (ii) the Borrower or the Restricted Subsidiary, as applicable, shall receive not less than 75% of the consideration thereof in the form of cash or Cash Equivalents and (iii) if such sale-leaseback transaction results in a Capitalized Lease, such Capitalized Lease is permitted by Section 7.03 and any Lien made the subject of such Capitalized Lease is permitted by Section 7.01;
(n) any swap of assets in exchange for services or other assets in the ordinary course of business of comparable or greater value or usefulness to the business of the Borrower and the Subsidiaries as a whole, as determined in good faith by the management of the Borrower; provided, that if the asset swapped constitutes Term Priority Collateral, the asset received in exchange shall constitute Term Priority Collateral;
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(o) any sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary; and
(p) Dispositions of Investments in joint ventures to the extent required by, or made pursuant to, customary buy/sell arrangements between the joint venture parties set forth in joint venture arrangements and similar binding arrangements;
provided that any Disposition of any property pursuant to this Section 7.05 (except pursuant to Sections 7.05(e), (i) and (p) and except for Dispositions from a Loan Party to any other Loan Party) shall be for no less than the fair market value of such property at the time of such Disposition. To the extent any Collateral is Disposed of as expressly permitted by this Section 7.05 to any Person other than a Loan Party, such Collateral shall be sold free and clear of the Liens created by the Loan Documents, and, if requested by the Borrower, upon the certification delivered to the Administrative Agent by the Borrower that such Disposition is permitted by this Agreement, the Administrative Agent or the Collateral Agent, as applicable, shall be authorized to take any actions deemed appropriate in order to effect the foregoing.
Section 7.06. Restricted Payments.
Neither Holdings nor the Borrower shall, nor shall they permit any Restricted Subsidiary to, directly or indirectly, declare or make, directly or indirectly, any Restricted Payment, except:
(a) each Restricted Subsidiary may make Restricted Payments to the Borrower or any other Restricted Subsidiary (and, in the case of a Restricted Payment by a non-wholly owned Restricted Subsidiary, to the Borrower and any other Restricted Subsidiary and to each other owner of Equity Interests of such Restricted Subsidiary based on their relative ownership interests of the relevant class of Equity Interests);
(b) Holdings, the Borrower and each Restricted Subsidiary may declare and make dividend payments or other Restricted Payments payable solely in the Equity Interests (other than Disqualified Equity Interests) of such Person;
(c) [Reserved];
(d) Restricted Payments made on the Closing Date to consummate the Transactions;
(e) to the extent constituting Restricted Payments, Holdings, the Borrower and the Restricted Subsidiaries may enter into and consummate transactions expressly permitted by any provision of Section 7.02 (other than 7.02(e)), 7.04 or 7.08 (other than Section 7.08(f) or 7.08(k));
(f) repurchases of Equity Interests in Holdings, the Borrower or any Restricted Subsidiary deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants;
(g) Holdings, the Borrower and each Restricted Subsidiary may pay (or make Restricted Payments to allow Holdings or any direct or indirect parent thereof to pay) for the
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repurchase, retirement or other acquisition or retirement for value of Equity Interests of Holdings or any direct or indirect parent thereof held by any present or former employee, officer, director or consultant of Holdings or any direct or indirect parent thereof or of the Borrower or any Restricted Subsidiary upon the death, disability, retirement or termination of employment of any such Person or pursuant to any employee or director equity plan, employee or director stock option plan or any other employee or director benefit plan or any agreement (including any stock subscription or shareholder agreement) with any employee, director, officer or consultant of Holdings or any direct or indirect parent thereof or of the Borrower or any Restricted Subsidiary; provided, that the aggregate amount of Restricted Payments made pursuant to this clause (g) shall not exceed $10,000,000 in any fiscal year commencing with the fiscal year beginning January 30, 2011 (or $2,000,000 for the period from the Closing Date through January 29, 2011); provided, further, that to the extent that the aggregate amount of Restricted Payments made by Holdings, the Borrower and the Restricted Subsidiaries pursuant to this clause (g) in any fiscal year is less than the amount set forth above, 100% of the amount of such difference may be carried forward and used to make such Restricted Payments pursuant to this clause (g) in the next two succeeding fiscal years (provided, that any such amount carried forward shall be deemed to be used to make such Restricted Payments in any fiscal year after the amount set forth above for such fiscal year shall be deemed to be used to make such Restricted Payments for such fiscal year);
(h) the Borrower may make Restricted Payments to Holdings (the proceeds of which may be utilized by Holdings to make additional Restricted Payments) in an aggregate amount, when combined with the aggregate amount of prepayments, redemptions, purchases, defeasances and other payments of Indebtedness made pursuant to Section 7.13(a)(iv), not to exceed (x) $40,000,000, plus (y) the portion, if any, of the Cumulative Credit on such date that the Borrower elects to apply to this paragraph, such election to be specified in a written notice of a Responsible Officer of the Borrower calculating in reasonable detail the amount of Cumulative Credit immediately prior to such election and the amount thereof elected to be so applied; provided, that with respect to any Restricted Payment made pursuant to this Section 7.06(h), no Default has occurred and is continuing or would result therefrom;
(i) the Borrower may make Restricted Payments to Holdings or any direct or indirect parent thereof (without duplication):
(i) to pay (A) its operating expenses incurred in the ordinary course of business and other corporate overhead costs and expenses (including administrative, legal, accounting and similar expenses provided by third parties), which are reasonable and customary and incurred in the ordinary course of business and attributable to the ownership or operations of the Borrower and its Restricted Subsidiaries and (B) Transaction Expenses and any reasonable and customary indemnification claims made by directors or officers of such parent attributable to the ownership or operations of the Borrower and its Restricted Subsidiaries;
(ii) the proceeds of which shall be used by Holdings or any direct or indirect parent thereof to pay franchise taxes and other fees, taxes and expenses required to
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maintain its (or any of its direct or indirect parents) corporate or other organizational existence;
(iii) for any taxable period in which the Borrower and/or any of its Subsidiaries is a member of a consolidated, combined or similar income tax group of which a direct or indirect parent of Borrower is the common parent (a Tax Group), to pay federal, foreign, state and local income taxes of such Tax Group that are attributable to the taxable income of the Borrower and/or its Subsidiaries; provided that, for each taxable period, the amount of such payments made in respect of such taxable period in the aggregate shall not exceed the amount that the Borrower and the Subsidiaries would have been required to pay in respect of federal, foreign, state and local income taxes in the aggregate if such entities were corporations paying taxes separately from any Tax Group at the highest combined applicable federal, foreign, state and local tax rate for such fiscal year (it being understood and agreed that if the Borrower or any Subsidiary pays any such federal, foreign, state or local income taxes directly to such taxing authority, that a Restricted Payment in duplication of such amount shall not be permitted to be made pursuant to this clause (iii)); provided further that the permitted payment pursuant to this clause (iii) with respect to any taxes of any Unrestricted Subsidiary for any taxable period shall be limited to the amount actually paid with respect to such period by such Unrestricted Subsidiary to the Borrower or its Restricted Subsidiaries for the purposes of paying such consolidated, combined or similar taxes;
(iv) to finance any Investment that would be permitted to be made pursuant to Section 7.02 (if the recipient thereof is not Holdings, assuming that such recipient were subject to such section); provided that (A) such Restricted Payment shall be made substantially concurrently with the closing of such Investment and (B) Holdings or such parent shall, immediately following the closing thereof, cause (1) all property acquired (whether assets or Equity Interests) to be contributed to the Borrower or the Restricted Subsidiaries or (2) the merger (to the extent permitted in Section 7.04) of the Person formed or acquired into the Borrower or its Restricted Subsidiaries in order to consummate such Permitted Acquisition or Investment, in each case, in accordance with the requirements of Section 6.11;
(v) the proceeds of which shall be used to pay customary salary, bonus and other benefits payable to officers and employees of Holdings or any direct or indirect parent company of Holdings to the extent such salaries, bonuses and other benefits are attributable to the ownership or operation of the Borrower and the Restricted Subsidiaries;
(vi) the proceeds of which shall be used by Holdings to pay (or to make Restricted Payments to allow any direct or indirect parent thereof to pay reasonable and customary fees and expenses (other than to Affiliates) related to any unsuccessful equity or debt offering by Holdings (or any direct or indirect parent thereof) not prohibited by this Agreement that is directly attributable to the operations of the Borrower and its Restricted Subsidiaries; and
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(vii) the proceeds of which shall be used to make payments permitted under Sections 7.08(e), (h), (j) and (n) (but only to the extent such payments have not been and are not expected to be made by the Borrower or a Restricted Subsidiary).
(j) payments made or expected to be made by Holdings, the Borrower or any of the Restricted Subsidiaries in respect of withholding or similar Taxes payable by any present or former employee, director, manager or consultant and any repurchases of Equity Interests in consideration of such payments including deemed repurchases in connection with the exercise of stock options;
(k) after a Qualified IPO, so long as no Event of Default shall have occurred and be continuing or would result therefrom (i) any Restricted Payment by the Borrower or any other direct or indirect parent of the Borrower to pay listing fees and other costs and expenses directly attributable to being a publicly traded company which are reasonable and customary and (ii) Restricted Payments of up to 6% per annum of the net proceeds received by (or contributed to the common equity of) the Borrower and its Restricted Subsidiaries from such Qualified IPO; and
(l) Holdings and the Borrower may make cash payments in lieu of the issuance of fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Equity Interests of Holdings, the Borrower or any Restricted Subsidiary; provided, however, that any such cash payment shall not be for the purpose of evading the limitations of this Agreement.
Section 7.07. Change in Nature of Business.
The Borrower shall not, nor shall the Borrower permit any of the Restricted Subsidiaries to, directly or indirectly, engage in any material line of business substantially different from those lines of business conducted by the Borrower and the Restricted Subsidiaries on the Closing Date or any business reasonably related, complementary, synergistic or ancillary thereto or reasonable extensions thereof.
Section 7.08. Transactions with Affiliates.
Neither Holdings nor the Borrower shall, nor shall they permit any Restricted Subsidiary to, directly or indirectly, enter into any transaction of any kind with any of its Affiliates, whether or not in the ordinary course of business, other than (a) transactions among the Borrower and the Restricted Subsidiaries or any entity that becomes a Restricted Subsidiary as a result of such transaction, (b) on terms substantially as favorable to Holdings, the Borrower or such Restricted Subsidiary as would be obtainable by Holdings, the Borrower or such Restricted Subsidiary at the time in a comparable arms-length transaction with a Person other than an Affiliate, (c) the Transactions and the payment of fees and expenses (including Transaction Expenses) as part of or in connection with the Transactions, (d) the issuance of Equity Interests to any officer, director, employee or consultant of Holdings, the Borrower or any of its Restricted Subsidiaries in connection with the Transactions, (e) the payment of management, monitoring, consulting,
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transaction and advisory fees (including termination fees) and related indemnities and expenses pursuant to the Sponsor Management Agreement, (f) Restricted Payments permitted under Section 7.06, (g) customary employment and severance arrangements between Holdings, the Borrower and the Restricted Subsidiaries and their respective officers and employees in the ordinary course of business and transactions pursuant to stock option plans and employee benefit plans and similar arrangements in the ordinary course of business, (h) the payment of customary fees and reasonable out of pocket costs to, and customary indemnities provided on behalf of, directors, officers, employees and consultants of Holdings, the Borrower and the Restricted Subsidiaries (or any direct or indirect parent of Holdings) in the ordinary course of business to the extent attributable to the ownership or operation of Holdings, the Borrower and its Restricted Subsidiaries, (i) transactions pursuant to agreements in existence on the Closing Date and set forth on Schedule 7.08 (other than the Sponsor Management Agreement) or any amendment thereto to the extent such an amendment is not adverse to the Lenders in any material respect, (j) 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 the majority of the members of the board of directors or a majority of the disinterested members of the board of directors of the Borrower, in good faith, (k) payments by Holdings, the Borrower or any of its Subsidiaries pursuant to any tax sharing agreements with any direct or indirect parent of Holdings to the extent attributable to the ownership or operation of Holdings, the Borrower and the Restricted Subsidiaries, but only to the extent permitted by Section 7.06(i)(iii), (l) the issuance or transfer of Equity Interests (other than Disqualified Equity Interests) of Holdings to any Permitted Holder or to any former, current or future director, manager, officer, employee or consultant (or any Affiliate of any of the foregoing) of the Borrower, any of its Subsidiaries or any direct or indirect parent thereof to the extent not otherwise prohibited under this Agreement or resulting in an Event of Default, (m) any payments required to be made pursuant to the Merger Agreement and (n) the payment of reasonable out-of-pocket costs and expenses relating to registration rights and indemnities provided to shareholders of Holdings or any direct or indirect parent thereof pursuant to the Stockholders Agreement or the registration and participation rights agreement entered into on the Closing Date in connection therewith.
Section 7.09. Burdensome Agreements.
Neither Holdings nor the Borrower shall, nor shall they permit any Restricted Subsidiary to, directly or indirectly, enter into or permit to exist any Contractual Obligation (other than this Agreement or any other Loan Document) that limits the ability of (a) any Restricted Subsidiary that is not a Guarantor to make Restricted Payments to the Borrower or any Guarantor or to make or repay loans or advances to or otherwise transfer assets to or make Investments in the Borrower or any Restricted Subsidiary that is a Guarantor or (b) any Loan Party to create, incur, assume or suffer to exist Liens on property of such Person to secure the Obligations; provided that the foregoing clauses (a) and (b) shall not apply to Contractual Obligations which (i) (x) exist on the Closing Date and (to the extent not otherwise permitted by this Section 7.09) are listed on Schedule 7.09 hereto and (y) to the extent Contractual Obligations permitted by clause (x) are set forth in an agreement evidencing Indebtedness, are set forth in any agreement
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evidencing any permitted modification, replacement, renewal, extension or refinancing of such Indebtedness so long as such modification, replacement, renewal, extension or refinancing does not expand the scope of such Contractual Obligation, (ii) are binding on a Restricted Subsidiary at the time such Restricted Subsidiary first becomes a Restricted Subsidiary, so long as such Contractual Obligations were not entered into solely in contemplation of such Person becoming a Restricted Subsidiary; provided further that this clause (ii) shall not apply to Contractual Obligations that are binding on a Person that becomes a Restricted Subsidiary pursuant to Section 6.14, (iii) represent Indebtedness of a Restricted Subsidiary which is not a Loan Party which is permitted by Section 7.03, (iv) arise in connection with any Disposition permitted by Section 7.04 or 7.05 and relate solely to the assets or Person subject to such Disposition, (v) are customary provisions in joint venture agreements and other similar agreements applicable to joint ventures permitted under Section 7.02 and applicable solely to such joint venture and are entered into in the ordinary course of business, (vi) are negative pledges and restrictions on Liens in favor of any holder of Indebtedness (other than any Junior Financing) permitted under Section 7.03 but solely to the extent any negative pledge relates to the property financed by such Indebtedness, (vii) are customary restrictions on leases, subleases, licenses or asset sale agreements otherwise permitted hereby so long as such restrictions relate only to the assets subject thereto, (viii) comprise restrictions imposed by any agreement governing secured Indebtedness permitted pursuant to Section 7.03(e), (g) or (m) to the extent that such restrictions apply only to the property or assets securing such Indebtedness, (ix) are customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or any Restricted Subsidiary entered into in the ordinary course of business, (x) are customary provisions restricting assignment of any agreement entered into in the ordinary course of business, (xi) are restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business, (xii) are customary restrictions contained in the Senior Note Documents or the ABL Facility Documentation, (xiii) arise in connection with cash or other deposits permitted under Sections 7.01 and 7.02 and limited to such cash or deposit, (xiv) arise under applicable law or any applicable rule, regulation or order and (xv) 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 required hereunder.
Section 7.10. Use of Proceeds. Neither Holdings nor the Borrower shall, nor shall they permit any Restricted Subsidiary to, directly or indirectly, (a) use the proceeds of the Term Loans borrowed on the Closing Date and the Senior Notes for any purpose other than to pay the Share Consideration, to finance the Refinancing, to pay Transaction Expenses or to otherwise fund the Transactions, (b) use the proceeds of the borrowings under the ABL Facility on the Closing Date for any purpose other than as set forth in the introductory statement to this Agreement (and any borrowings under the ABL Facility on the Closing Date shall be limited solely to the extent necessary to fund such purposes) or (c) use the proceeds of the Term Loans
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borrowed on the Restatement Effective Date for any purpose other than to refinance the Existing Term Loans.
Section 7.11. [Reserved].
Section 7.12. Fiscal Year.
Neither Holdings nor the Borrower shall make any change in its fiscal year or fiscal quarters (it being understood that the Borrowers fiscal year ends on the Saturday closest to January 31 of each year, and that each of the first three fiscal quarters of each fiscal year of the Borrower ends on the Saturday closest to each of April 30, July 31 and October 31, respectively); provided, however, that Holdings may, upon written notice to the Administrative Agent, change its and the Borrowers fiscal year and fiscal quarters to any other fiscal year (and any other fiscal quarters) reasonably acceptable to the Administrative Agent, in which case, Holdings 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 changes.
Section 7.13. Prepayments, Etc. of Indebtedness.
(a) Neither Holdings nor the Borrower shall, nor shall they permit any Restricted Subsidiary to, directly or indirectly, prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner (it being understood that payments of regularly scheduled interest shall be permitted unless such payments violate any subordination terms of any Junior Financing Documentation) any Permitted Second Priority Refinancing Debt (or any Permitted Refinancing thereof) or any Junior Financing, or make any payment in violation of any subordination terms of any Junior Financing Documentation, except (i) any Permitted Refinancing permitted in respect thereof, (ii) the conversion of any Junior Financing or any Permitted Second Priority Refinancing Debt (or any Permitted Refinancing thereof) to Equity Interests (other than Disqualified Equity Interests) of Holdings or any of its direct or indirect parents, (iii) the prepayment of Indebtedness of the Borrower or any Restricted Subsidiary to the Borrower or any Restricted Subsidiary, to the extent not prohibited by the subordination provisions contained in the Intercompany Note, and (iv) prepayments, redemptions, purchases, defeasances and other payments in respect of Permitted Second Priority Refinancing Debt (or any Permitted Refinancing thereof) and Junior Financings prior to their scheduled maturity in an aggregate amount, when combined with the aggregate amount of Restricted Payments made pursuant to Section 7.06(h), not to exceed (A) $40,000,000 plus (B) the portion, if any, of the Cumulative Credit on such date that the Borrower elects to apply to this paragraph, such election to be specified in a written notice of a Responsible Officer of the Borrower calculating in reasonable detail the amount of Cumulative Credit immediately prior to such election and the amount thereof elected to be so applied; provided, that no prepayment, redemption, purchase, defeasance or other payment shall be made pursuant to this clause (iv) if a Default has occurred and is continuing or would result therefrom.
(b) Neither Holdings nor the Borrower shall, nor shall they permit any Restricted Subsidiary to, directly or indirectly, amend, modify, change, terminate or release in any manner
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materially adverse to the interests of the Lenders any term or condition of any Junior Financing Documentation or the documentation governing any Permitted Second Priority Refinancing Debt (or any Permitted Refinancing thereof) without the consent of the Administrative Agent (which consent shall not be unreasonably withheld).
Section 7.14. Permitted Activities.
With respect to Holdings, engage in any operating or business activities (other than to a de minimis extent) or have any material assets or liabilities; provided, that, to the extent not otherwise prohibited under Article 7, the following shall be permitted: (i) its ownership of the Equity Interests of Borrower and activities incidental thereto, (ii) the maintenance of its legal existence (including the ability to incur fees, costs and expenses relating to such maintenance), (iii) the performance of its obligations with respect to the Loan Documents and any other Indebtedness permitted hereunder, (iv) any public offering of its common stock or any other issuance or sale of its Equity Interests (other than Disqualified Equity Interests), (v) financing activities, including the issuance of securities, incurrence of debt, payment of dividends, making contributions to the capital of the Borrower and guaranteeing the obligations of the Borrower, (vi) participating in tax, accounting and other administrative matters as a member of the consolidated group of Holdings and the Borrower, (vii) holding any cash or property (but not operate any property), (viii) providing indemnification to officers and directors and (ix) any activities incidental to the foregoing. Holdings shall not incur any Liens on Equity Interests of the Borrower other than Liens securing the Obligations and Liens permitted under Section 7.01(cc) or 7.01(dd), and Holdings shall not own any Equity Interests other than those of the Borrower.
ARTICLE 8
EVENTS OF DEFAULT AND REMEDIES
Section 8.01. Events of Default.
Any of the following from and after the Closing Date shall constitute an event of default (an Event of Default):
(a) Non-Payment. Any Loan Party fails to pay (i) when and as required to be paid herein or in any other Loan Document, any amount of principal of any Loan, or (ii) within five (5) Business Days after the same becomes due, any interest on any Loan or any other amount payable hereunder or with respect to any other Loan Document; or
(b) Specific Covenants. Holdings or the Borrower fails to perform or observe any term, covenant or agreement contained in any of Sections 6.03(a) or 6.05(a) (solely with respect to Holdings or the Borrower) or Article 7; or
(c) Other Defaults. Any Loan Party fails to perform or observe any other term, covenant or agreement (not specified in Section 8.01(a) or (b) above) contained in any Loan
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Document on its part to be performed or observed and such failure continues for thirty (30) days after notice thereof by the Administrative Agent to the Borrower; 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 required to be delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or
(e) Cross-Default. Any Loan Party or any Restricted Subsidiary (i) fails to make any payment after the applicable grace period with respect thereto, if any, (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of (x) any Indebtedness under the ABL Credit Agreement or any Permitted Refinancing thereof or (y) any other Indebtedness (other than Indebtedness hereunder) having an outstanding aggregate principal amount of not less than the Threshold Amount or (ii) fails to observe or perform any other agreement or condition relating to any such Indebtedness, 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 a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity; provided that, any such failure or the occurrence of any such other event referred to in subclause (ii) relating to Indebtedness under the ABL Credit Agreement or any Permitted Refinancing thereof shall constitute an Event of Default under this Section 8.01(e) only after the earliest to occur of (x) expiration of a 60-day period following the commencement of such failure or the date of such occurrence, (y) any acceleration of the ABL Obligations (as defined in the ABL Intercreditor Agreement) outstanding under the ABL Credit Agreement, whether automatic or otherwise or (z) the commencement of the Exercise of Any Secured Creditor Remedies (as defined in the ABL Intercreditor Agreement) by the ABL Agent or any holder of ABL Obligations as a result of such failure or occurrence; provided that this clause (e)(ii) 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; or
(f) Insolvency Proceedings, Etc. Any Loan Party or any Restricted Subsidiary institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for sixty (60) calendar days, or an order for relief is entered in any such proceeding; or
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(g) Inability to Pay Debts; Attachment. Any Loan Party or any Restricted Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or 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 the Borrower and the Restricted Subsidiaries, taken as a whole, and is not released, vacated or fully bonded within sixty (60) days after its issue or levy; or
(h) Judgments. There is entered against any Loan Party or any Restricted Subsidiary a final judgment or order for the payment of money in an aggregate amount exceeding the Threshold Amount (to the extent not covered by independent third-party insurance as to which the insurer has been notified of such judgment or order and has not denied coverage) and such judgment or order shall not have been satisfied, vacated, discharged or stayed or bonded pending an appeal for a period of sixty (60) consecutive days; or
(i) Invalidity of Loan Documents. Any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder (including as a result of a transaction permitted under Section 7.04 or 7.05) or as a result of acts or omissions by the Administrative Agent or Collateral Agent or any Lender or the satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party contests in writing the validity or enforceability of any provision of any Loan Document or the validity or priority of a Lien as required by the Collateral Documents on a material portion of the Collateral; or any Loan Party denies in writing that it has any or further liability or obligation under any Loan Document (other than as a result of repayment in full of the Obligations), or purports in writing to revoke or rescind any Loan Document; or
(j) Change of Control. There occurs any Change of Control; or
(k) Collateral Documents. Any Collateral Document after delivery thereof pursuant to Section 4.02, 6.11 or 6.13 shall for any reason (other than pursuant to the terms hereof or thereof including as a result of a transaction permitted under Section 7.04 or 7.05) cease to create a valid and perfected Lien, with the priority required by the Collateral Documents on and security interest in any material portion of the Collateral purported to be covered thereby, subject to Liens permitted under Section 7.01, (i) except to the extent that any such perfection or priority is not required pursuant to the Collateral and Guarantee Requirement or results from the failure of the Administrative Agent or the Collateral Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Collateral Documents or to file Uniform Commercial Code continuation statements and (ii) except as to Collateral consisting of Real Property to the extent that such losses are covered by a lenders title insurance policy and such insurer has not denied coverage; or
(l) ERISA. (i) An ERISA Event that, alone or together with any other ERISA Events that have occurred, has resulted or could reasonably be expected to result in liability of a Loan Party, any Restricted Subsidiary or any of their respective ERISA Affiliates in an aggregate amount at any particular time exceeding the Threshold Amount, or (ii) a Loan Party, any Restricted Subsidiary or any of their respective ERISA Affiliates fails to pay when due, after the
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expiration of any applicable grace period, any installment payment with respect to its Withdrawal Liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount exceeding the Threshold Amount; or
(m) Junior Financing Documentation. (i) Any of the Obligations of the Loan Parties under the Loan Documents for any reason shall cease to be Senior Indebtedness (or any comparable term) or Senior Secured Financing (or any comparable term) under, and as defined in, any Junior Financing Documentation or (ii) the subordination provisions set forth in any Junior Financing Documentation shall, in whole or in part, cease to be effective or cease to be legally valid, binding and enforceable against the holders of any Junior Financing, if applicable.
Section 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 the Required Lenders shall, take any or all of the following actions:
(i) declare the commitment of each Lender to make Loans to be terminated, whereupon such commitments shall be terminated;
(ii) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable or accrued hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower and each other Loan Party; and
(iii) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable Law;
provided that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans 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, in each case without further act of the Administrative Agent or any Lender, and without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower and each other Loan Party.
Section 8.03. Exclusion of Immaterial Subsidiaries.
Solely for the purpose of determining whether a Default or an Event of Default has occurred under clause (f) or (g) of Section 8.01, any reference in any such clause to any Restricted Subsidiary or Loan Party shall be deemed not to include any Restricted Subsidiary (an Immaterial Subsidiary) affected by any event or circumstances referred to in any such clause that did not, as of the last day of the most recent completed fiscal quarter of the Borrower, have assets with a fair market value in excess of $75,000,000 and did not, as of the four quarter period ending on the last day of such fiscal quarter, have revenues exceeding 5% of the total revenues of
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the Borrower and the Restricted Subsidiaries (it being agreed that all Restricted Subsidiaries affected by any event or circumstance referred to in any such clause shall be considered together, as a single consolidated Restricted Subsidiary, for purposes of determining whether the condition specified above is satisfied).
Section 8.04. Application of Funds.
Subject to the ABL Intercreditor Agreement, 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), any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order (to the fullest extent permitted by mandatory provisions of applicable Law):
First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (other than principal and interest, but including Attorney Costs payable under Section 10.05 and amounts payable under Article 3) payable to the Administrative Agent or the Collateral Agent in its capacity as such;
Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders (including Attorney Costs payable under Section 10.05 and amounts payable under Article 3), ratably among them in proportion to the amounts described in this clause Second payable to them;
Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans, and any fees, premiums and scheduled periodic payments due under Secured Hedge Agreements, ratably among the Secured Parties in proportion to the respective amounts described in this clause Third payable to them;
Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans and any breakage, termination or other payments under Secured Hedge Agreements, ratably among the Secured Parties in proportion to the respective amounts described in this clause Fourth held by them;
Fifth, to the payment of all other Obligations of the Borrower that are due and payable to the Administrative Agent and the other Secured Parties on such date, ratably based upon the respective aggregate amounts of all such Obligations owing to the Administrative Agent and the other Secured Parties on such date; and
Last, the balance, if any, after all of the Obligations have been paid in full, to the Borrower or as otherwise required by Law.
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ARTICLE 9
THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT
Each Lender hereby irrevocably appoints the Administrative Agent and the Collateral Agent (for purposes of this Article 9, the Administrative Agent and the Collateral Agent are referred to collectively as the Agents) its agent and authorizes the Agents to take such actions on its behalf and to exercise such powers as are delegated to such Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. Without limiting the generality of the foregoing, the Agents are hereby expressly authorized to (i) execute any and all documents (including releases) with respect to the Collateral and the rights of the Secured Parties with respect thereto, as contemplated by and in accordance with the provisions of this Agreement and the Collateral Documents (including, for the avoidance of doubt, (x) the ABL Intercreditor Agreement and any amendment or supplement expressly contemplated thereby and (y) upon the incurrence of any Permitted First Priority Refinancing Debt or Permitted Second Priority Refinancing Debt, the First Lien Intercreditor Agreement or the Second Lien Intercreditor Agreement, respectively) and (ii) negotiate, enforce or settle any claim, action or proceeding affecting the Lenders in their capacity as such, at the direction of the Required Lenders, which negotiation, enforcement or settlement will be binding upon each Lender.
The institution serving as the Administrative Agent and/or the 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 an Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with Holdings, the Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent hereunder.
Neither Agent shall have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) neither Agent shall be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) neither Agent shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that such Agent is instructed in writing to exercise by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.08), and (c) except as expressly set forth in the Loan Documents, neither Agent shall have any duty to disclose, nor shall it be liable for the failure to disclose, any information relating to Holdings, the Borrower or any of the Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent and/or Collateral Agent or any of its Affiliates in any capacity. Neither Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.08) or in the absence of its own gross negligence or willful misconduct. Neither Agent shall be deemed to have knowledge of any Default unless and until written notice thereof is given to such Agent by Holdings, the Borrower or a Lender, and neither Agent shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered
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thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article 4 or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to such Agent.
Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. Each Agent may also rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. Each Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
Each Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by it. Each Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of each Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the Facilities as well as activities as Agent.
Subject to the appointment and acceptance of a successor Agent as provided below, either Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. If no successor Agent has been appointed pursuant to the immediately preceding sentence by the 30th day after the date such notice of resignation was given by such Agent, such Agents resignation shall become effective and the Required Lenders shall thereafter perform all the duties of such Agent hereunder and/or under any other Loan Document until such time, if any, as the Required Lenders appoint a successor Administrative Agent and/or Collateral Agent, as the case may be. Upon the acceptance of its appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After an Agents resignation hereunder, the provisions of this Article and Section 10.05 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while acting as Agent.
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Each Lender acknowledges that it has, independently and without reliance upon the Agents or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agents or any other Lender 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 or any other Loan Document, any related agreement or any document furnished hereunder or thereunder.
Each Lender acknowledges and agrees that Credit Suisse AG or one or more of its affiliates may (but is not obligated to) act as collateral agent or representative for the holders of Permitted First Priority Refinancing Debt or Permitted Second Priority Refinancing Debt under the security agreements with respect thereto and/or under the First Lien Intercreditor Agreement or the Second Lien Intercreditor Agreement. Each Lender waives any conflict of interest, now contemplated or arising hereafter, in connection therewith and agrees not to assert against Credit Suisse AG or any of its affiliates any claims, causes of action, damages or liabilities of whatever kind or nature relating thereto.
Notwithstanding any other provision of this Agreement or any provision of any other Loan Document, the Arrangers are named as such for recognition purposes only, and in their capacities as such shall have no duties, responsibilities or liabilities with respect to this Agreement or any other Loan Document; it being understood and agreed that each of the Arrangers shall be entitled to all indemnification and reimbursement rights in favor of the Agents provided herein and in the other Loan Documents. Without limitation of the foregoing, the Arrangers in their capacities as such shall not, by reason of this Agreement or any other Loan Document, have any fiduciary relationship in respect of any Lender, Loan Party or any other Person.
ARTICLE 10
MISCELLANEOUS
Section 10.01. Notices; Electronic Communications. 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 fax, as follows:
(a) if to the Borrower, Holdings or any other Loan Party, to it at:
The Gymboree Corporation
Att: Kimberly Holtz MacMillan
Vice President and General Counsel
500 Howard Street
San Francisco, CA 94105
415-278-7228 (phone)
415-278-7562 (fax)
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kimberly_macmillan@gymboree.com
and
The Gymboree Corporation
Att: Jeffrey P. Harris
Chief Financial Officer
500 Howard Street
San Francisco, CA 94105
415-278-7693 (phone)
415-278-7196 (fax)
jeff_harris@gymboree.com
(b) if to the Administrative Agent, to:
Credit Suisse AG, Cayman Islands Branch
Att: Sean Portrait
Eleven Madison Avenue
New York, NY 10010
919 994 6369 (telephone)
212-322-2291 (fax)
agency.loanops@credit-suisse.com
(c) if to a Lender, to it at its address (or fax number) set forth on Schedule 2.01 or in the Assignment and Acceptance, Incremental Amendment or Refinancing Amendment pursuant to which such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by fax or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 10.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 10.01. As agreed to among Holdings, the Borrower, the Administrative Agent and the applicable Lenders from time to time, notices and other communications may also be delivered by e-mail to the e-mail address of a representative of the applicable Person provided from time to time by such Person.
The Borrower hereby agrees, unless directed otherwise by the Administrative Agent or unless the electronic mail address referred to below has not been provided by the Administrative Agent to the Borrower, that it will, or will cause its Subsidiaries to, provide to the Administrative Agent all information, documents and other materials that it is obligated to furnish to the Administrative Agent pursuant to the Loan Documents or to the Lenders under Article 6, including all notices, requests, financial statements, financial and other reports, certificates and
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other information materials, but excluding any such communication that (i) is or relates to a Borrowing Request or a notice pursuant to Section 2.10, (ii) relates to the payment of any principal or other amount due under this Agreement prior to the scheduled date therefor, (iii) provides notice of any Default or Event of Default under this Agreement or any other Loan Document or (iv) is required to be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or any Borrowing or other extension of credit hereunder (all such non-excluded communications being referred to herein collectively as Communications), by transmitting the Communications in an electronic/soft medium that is properly identified in a format reasonably acceptable to the Administrative Agent to an electronic mail address as directed by the Administrative Agent. In addition, the Borrower agrees, and agrees to cause its Subsidiaries, to continue to provide the Communications to the Administrative Agent or the Lenders, as the case may be, in the manner specified in the Loan Documents but only to the extent requested by the Administrative Agent.
The Borrower hereby acknowledges that (a) the Administrative Agent will make available to the Lenders materials and/or information provided by or on behalf of the Borrower hereunder (collectively, the Borrower Materials) by posting the Borrower Materials on Intralinks or another similar electronic system (the Platform) and (b) certain of the Lenders may be public-side Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to Holdings (or any parent thereof) or the Borrower or any of their respective securities) (each, a Public Lender). The Borrower hereby agrees that (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked PUBLIC which, at a minimum, shall mean that the word PUBLIC shall appear prominently on the first page thereof; (x) by marking Borrower Materials PUBLIC, the Borrower shall be deemed to have authorized the Administrative Agent and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to Holdings (or any parent thereof) or the Borrower or any of their respective 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 10.16); (y) all Borrower Materials marked PUBLIC are permitted to be made available through a portion of the Platform designated as Public Investor; and (z) the Administrative Agent shall be entitled to treat any Borrower Materials that are not marked PUBLIC as being suitable only for posting on a portion of the Platform not marked as Public Investor. Notwithstanding the foregoing, the following Borrower Materials shall be marked PUBLIC, unless the Borrower notifies the Administrative Agent promptly that any such document contains material non-public information: (1) the Loan Documents and (2) notification of changes in the terms of the Facilities.
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 Communications 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 Holdings (or any parent thereof) or the
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Borrower or any of their respective securities for purposes of United States Federal or state securities laws.
THE PLATFORM IS PROVIDED AS IS AND AS AVAILABLE. NEITHER THE ADMINISTRATIVE AGENT NOR ANY OF ITS RELATED PARTIES WARRANTS THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS OR THE ADEQUACY OF THE PLATFORM AND EACH EXPRESSLY DISCLAIMS LIABILITY FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS IS MADE BY THE ADMINISTRATIVE AGENT OR ANY OF ITS RELATED PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM. IN NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS RELATED PARTIES HAVE ANY LIABILITY TO ANY LOAN PARTY, ANY LENDER OR ANY OTHER PERSON FOR DAMAGES OF ANY KIND, WHETHER OR NOT BASED ON STRICT LIABILITY AND INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF ANY LOAN PARTYS OR THE ADMINISTRATIVE AGENTS TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY SUCH PERSON IS FOUND IN A FINAL RULING BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH PERSONS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
The Administrative Agent agrees that the receipt of the Communications by the Administrative Agent at its e-mail address set forth above shall constitute effective delivery of the Communications to the Administrative Agent for purposes of the Loan Documents. Each Lender agrees that receipt of notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform shall constitute effective delivery of the Communications to such Lender for purposes of the Loan Documents. Each Lender agrees to notify the Administrative Agent in writing (including by electronic communication) from time to time of such Lenders e-mail address to which the foregoing notice may be sent by electronic transmission and that the foregoing notice may be sent to such e-mail address.
Nothing herein shall prejudice the right of the Administrative Agent or any Lender to give any notice or other communication pursuant to any Loan Document in any other manner specified in such Loan Document.
Section 10.02. Survival of Agreement. All covenants, agreements, representations and warranties made by the Borrower or Holdings herein 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 Lenders and shall survive the making by the Lenders of the Loans, regardless of any investigation made by the Lenders or on their behalf or that any Agent or Lender may have had notice of any Default or Event of Default
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at the time of any Credit Extension, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid and so long as the Commitments have not been terminated. The provisions of Sections 3.01, 3.04, 3.05 and 10.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent or any Lender.
Section 10.03. Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower, each other Loan Party party hereto on the Closing Date, Holdings and the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto.
Section 10.04. Successors and Assigns. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Borrower, Holdings, the Administrative Agent, the Collateral Agent or the Lenders that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of the Loans at the time owing to it), with the prior written consent of the Administrative Agent (not to be unreasonably withheld or delayed); provided, however, that (i) if the approval of the Borrower is required for any such assignment pursuant to the definition of Eligible Assignee, then the Borrower must also give its prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed), (ii) the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall be in an integral multiple of, and not less than, $1,000,000 (or, if less, the entire remaining amount of such Lenders Commitment or Loans of the relevant Class); provided that simultaneous assignments by two or more Related Funds shall be combined for purposes of determining whether the minimum assignment requirement is met, (iii) the parties to each assignment shall (A) execute and deliver to the Administrative Agent an Assignment and Acceptance via an electronic settlement system acceptable to the Administrative Agent or (B) if previously agreed with the Administrative Agent, manually execute and deliver to the Administrative Agent an Assignment and Acceptance, and, in each case, shall pay to the Administrative Agent a processing and recordation fee of $3,500; provided that (x) simultaneous assignments by two or more Related Funds shall require the payment of a single processing and recordation fee of $3,500 and (y) such processing and recordation fee may be waived or reduced in the sole discretion of the Administrative Agent, and (iv) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire (in which the assignee shall
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designate one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Loan Parties and their Related Parties or their respective securities) will be made available and who may receive such information in accordance with the assignees compliance procedures and applicable Laws, including Federal and state securities laws) and all applicable tax forms. Upon acceptance and recording pursuant to paragraph (e) of this Section 10.04, from and after the effective date specified in each Assignment and Acceptance, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an 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 10.05.
(c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim and the outstanding balances of its Term Loans without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Acceptance, (ii) except as set forth in (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto, or the financial condition of the Borrower or any Subsidiary or the performance or observance by the Borrower or any Subsidiary of any of its obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is an Eligible Assignee legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement and the other Loan Documents, together with copies of the most recent financial statements referred to in Section 5.05 or delivered pursuant to Section 6.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon the Administrative Agent, the Collateral Agent, such assigning Lender 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 this Agreement; (vi) such assignee appoints and authorizes the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Administrative Agent and the Collateral Agent, respectively, by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender.
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(d) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of and the interest on the Loans owing to, each Lender pursuant to the terms hereof from time to time (the Register). The entries in the Register shall be conclusive absent manifest error and the Borrower, the Administrative Agent, the Collateral 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, the Collateral Agent and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of, and consent to, a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above, if applicable, and the written consent of the Administrative Agent and, if required, the Borrower, to such assignment and any applicable tax forms, the Administrative Agent shall promptly (i) accept such Assignment and Acceptance and (ii) record the information contained therein in the Register. No assignment shall be effective unless it has been recorded in the Register as provided in this paragraph (e).
(f) Each Lender may without the consent of the Borrower or the Administrative Agent sell participations to one or more banks or other Persons in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided, however, that (i) such Lenders obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other Persons shall be entitled to the benefit of the cost protection provisions contained in Sections 3.01, 3.04 and 3.05 to the same extent as if they were Lenders (but with respect to any particular participant, to no greater extent than the Lender that sold the participation to such participant and only if such participant has complied with the requirements of such provisions as if it were a Lender) and (iv) 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, and such Lender shall retain the sole right to enforce the obligations of the Borrower relating to the Loans and to approve any amendment, modification or waiver of any provision of this Agreement (provided that the agreement or instrument pursuant to which such Lender has sold a participation may provide that such Lender shall not agree to the following amendments without the consent of such participating bank or Person hereunder: amendments, modifications or waivers decreasing any fees payable to such participating bank or Person hereunder or the amount of principal of or the rate at which interest is payable on the Loans in which such participating bank or Person has an interest, extending any scheduled principal payment date or date fixed for the payment of interest on the Loans in which such participating bank or Person has an interest, increasing or extending the Commitments in which such participating bank or Person has an interest, releasing all or substantially all of the Guarantors (other than in connection with the sale of any such Guarantor in a transaction permitted by Section 7.05) or
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releasing all or substantially all of the Collateral or the Term Priority Collateral)). To the extent permitted by law, each participating bank or other Person also shall be entitled to the benefits of Section 10.06 as though it were a Lender, provided such participating bank or other Person agrees to be subject to Section 2.15 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 amounts (and interest thereon) of each participants interest in the Loans or other Obligations under this Agreement (the Participant Register). The entries in the Participant Register shall be conclusive absent manifest error, and the Borrower, the Lenders and each Agent 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 notice to the contrary.
(g) Any Lender or participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 10.04, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure of information designated by the Borrower as confidential, each such assignee or participant or proposed assignee or participant shall execute an agreement whereby such assignee or participant shall agree (subject to customary exceptions) to preserve the confidentiality of such confidential information on terms no less restrictive than those applicable to the Lenders pursuant to Section 10.16.
(h) Any Lender may at any time assign all or any portion of its rights under this Agreement to secure extensions of credit to such Lender or in support of obligations owed by such Lender; provided that no such assignment shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto.
(i) Notwithstanding anything to the contrary contained herein, any Lender (a Granting Lender) may grant to a special purpose funding vehicle (an SPV), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPV to make any Loan, (ii) if an SPV elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof and (iii) the Granting Lender shall for all purposes remain the Lender hereunder. The making of a Loan by an SPV hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPV shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPV, it will not institute against, or join any other Person in instituting against, such SPV any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any
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State thereof. In addition, notwithstanding anything to the contrary contained in this Section 10.04, any SPV may (i) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrower and Administrative Agent) providing liquidity and/or credit support to or for the account of such SPV to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPV.
(j) Neither Holdings nor the Borrower (except as expressly permitted by clause (ii) of Section 7.04(d)) shall assign or delegate any of its rights or duties hereunder without the prior written consent of the Administrative Agent and each Lender, and any attempted assignment without such consent shall be null and void.
(k) Any Lender may, at any time, assign all or a portion of its rights and obligations under this Agreement in respect of its Term Loans to any Affiliated Lender on a non-pro rata basis through (x) Dutch Auctions open to all Lenders on a pro rata basis in accordance with the Auction Procedures or (y) open market purchases, subject to the following limitations:
(i) each Affiliated Lender shall represent and warrant as of the date of any such purchase and assignment, that neither the Sponsor nor any of its Affiliates nor any of their respective directors or officers has any material non-public information with respect to Holdings, the Borrower or any of their Subsidiaries or securities that has not been disclosed to the assigning Lender (other than because such assigning Lender does not wish to receive material non-public information with respect to Holdings, the Borrower and their respective Subsidiaries or securities) prior to such date to the extent such information could reasonably be expected to have a material effect upon, or otherwise be material, to a Term Lenders decision to assign Term Loans to such Affiliated Lender;
(ii) Affiliated Lenders will not be entitled to receive, and 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, and will not attend or participate in, meetings attended solely by the Lenders and the Administrative Agent, other than the right to receive notices of Borrowings, notices of prepayments and other administrative notices in respect of its Loans or Commitments required to be delivered to Lenders pursuant to Article 2; and
(iii) the aggregate principal amount of Term Loans held at any one time by Affiliated Lenders may not exceed 20% of the aggregate principal amount of all Term Loans (including any Incremental Term Loans and Other Term Loans) outstanding at such time under this Agreement.
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(l) Notwithstanding anything in Section 10.08 or the definition of Required Lenders or Required Class Lenders to the contrary, for purposes of determining whether the Required Lenders or Required Class 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 10.08(d), 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, Collateral Agent or any Lender to undertake any action (or refrain from taking any action) with respect to or under any Loan Document, all Term Loans (or Commitments in respect thereof) held by any Affiliated Lenders shall be deemed to be not outstanding for all purposes of calculating whether the Required Lenders or Required Class Lenders have taken any actions.
(m) So long as no Default has occurred or is continuing or would result therefrom, any Lender may, at any time, assign all or a portion of its rights and obligations under this Agreement in respect of its Term Loans to Holdings or the Borrower on a non-pro rata basis solely through Dutch Auctions open to all Lenders on a pro rata basis in accordance with the Auction Procedures, subject to the following limitations and other provisions:
(i) Holdings and the Borrower shall represent and warrant as of the date of any such purchase and assignment that neither Holdings nor the Borrower nor any of their respective directors or officers has any material non-public information with respect to Holdings, the Borrower or any of their Subsidiaries or securities that has not been disclosed to the assigning Lender (other than because such assigning Lender does not wish to receive material non-public information with respect to Holdings, the Borrower and their respective Subsidiaries or securities) prior to such date to the extent such information could reasonably be expected to have a material effect upon, or otherwise be material, to a Term Lenders decision to assign Term Loans to Holdings or the Borrower as applicable;
(ii) Holdings and the Borrower will not be entitled to receive, and 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, and will not attend or participate in, meetings or conference calls attended solely by the Lenders and the Administrative Agent;
(iii) borrowings shall not be made under the ABL Credit Agreement to directly or indirectly fund the purchase or assignment;
(iv) any Term Loans purchased by Holdings or the Borrower shall be automatically and permanently cancelled immediately upon acquisition by Holdings or the Borrower;
(v) notwithstanding anything to the contrary contained herein (including in the definitions of Consolidated Net Income and Consolidated EBITDA) any non-cash gains in respect of cancellation of indebtedness resulting from the cancellation of
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any Term Loans purchased by Holdings or the Borrower shall be excluded from the determination of Consolidated Net Income and Consolidated EBITDA; and
(vi) the cancellation of Term Loans in connection with a Dutch Auction shall not constitute a voluntary or mandatory prepayment for purposes of Section 2.12 or 2.13, but the face amount of Term Loans cancelled as provided for in clause (iv) above shall be applied on a pro rata basis to the remaining scheduled installments of principal due in respect of the applicable Class of Term Loans.
Section 10.05. Expenses; Indemnity. (a) The Borrower and Holdings agree, jointly and severally, (i) if the Closing Date occurs, to pay or reimburse the Administrative Agent, the Collateral Agent, the Syndication Agent (as defined in the Existing Credit Agreement), the Documentation Agent (as defined in the Existing Credit Agreement) and the Arrangers for all reasonable out-of-pocket costs and expenses incurred in connection with the preparation, negotiation, syndication and execution of this Agreement and the other Loan Documents, and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby (including all Attorney Costs which shall be limited to Davis Polk & Wardwell LLP (and one local counsel in each applicable jurisdiction for each group and, in the event of a conflict of interest, one additional counsel of each type to similarly situated parties)) and (ii) from and after the Closing Date, to pay or reimburse the Administrative Agent, the Collateral Agent, the Syndication Agent (as defined in the Existing Credit Agreement), the Documentation Agent (as defined in the Existing Credit Agreement), the Arrangers and each Lender for all reasonable and documented out-of-pocket costs and expenses incurred in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of any rights or remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any legal proceeding, including any proceeding under any Debtor Relief Law, and including all respective Attorney Costs which shall be limited to Attorney Costs of one counsel to the Administrative Agent, Arrangers and the Lenders (and one local counsel in each applicable material jurisdiction for each group and, in the event of any conflict of interest, one additional counsel of each type to similarly situated parties)). The foregoing costs and expenses shall include all reasonable search, filing, recording and title insurance charges and fees related thereto, and other reasonable out-of-pocket expenses incurred by any Agent.
(b) Whether or not the transactions contemplated hereby are consummated, from and after the Closing Date, the Loan Parties shall, jointly and severally, indemnify and hold harmless the Administrative Agent, the Collateral Agent, each Lender, each Arranger and their respective Affiliates, and the directors, officers, employees, partners, agents, trustees and other representatives of each of the foregoing (collectively the Indemnitees) from and against any and all losses, damages, claims, liabilities and expenses (including Attorney Costs which shall be limited to Attorney Costs of one counsel to the Administrative Agent, Arrangers and the Lenders (and, if reasonably necessary, one local counsel in each applicable jurisdiction and, in the event of any actual conflict of interest, one additional counsel for each type of similarly situated affected parties)) of any kind or nature whatsoever which may at any time be imposed on,
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incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (i) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the Transactions or the other transactions contemplated thereby, (ii) any Commitment or Loan or the use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or Release of Hazardous Materials at, on, under or from any property or facility currently or formerly owned, leased or operated by the Loan Parties or any Subsidiary, or any Environmental Liability related in any way to any Loan Parties or any Subsidiary 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 (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the Indemnified Liabilities) in all cases, whether or not caused by or arising, in whole or in part, out of the negligence of an Indemnitee; provided that, notwithstanding the foregoing, such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, damages, claims, liabilities and expenses resulted from (x) the gross negligence, bad faith or willful misconduct of such Indemnitee or of any affiliate, director, officer, employee, counsel, agent or attorney-in-fact of such Indemnitee, as determined by the final non-appealable judgment of a court of competent jurisdiction, (y) a material breach of its obligations under the Loan Documents by such Indemnitee or of any affiliate, director, officer, employee, counsel, agent or attorney-in-fact of such Indemnitee as determined by the final non-appealable judgment of a court of competent jurisdiction or (z) any dispute solely among the Indemnitees other than (1) any claim against an Indemnitee in its capacity or in fulfilling its role as Administrative Agent, Collateral Agent, Arranger or similar role and (2) any claim arising out of any act or omission of the Borrower or any of its Affiliates. No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information transmission systems in connection with this Agreement. In the case of a claim, investigation, litigation or other proceeding to which the indemnity in this Section 10.05 applies, such indemnity shall be effective whether or not such claim, investigation, litigation or proceeding is brought by any Loan Party, any Subsidiary of any Loan Party, any Loan Partys directors, stockholders or creditors or other Affiliates or an Indemnitee or any other Person, whether or not any Indemnitee is otherwise a party thereto and whether or not any of the transactions contemplated hereunder or under any of the other Loan Documents are consummated. For the avoidance of doubt, this paragraph shall not apply with respect to Taxes that are the subject of, or excluded from, Section 3.01.
(c) To the extent that any Loan Party fails to pay any amount required to be paid by them to the Administrative Agent or the Collateral Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent or the Collateral Agent such Lenders pro rata share (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 the Collateral Agent in its capacity as such.
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For purposes hereof, a Lenders pro rata share shall be determined based upon its share of the sum of the outstanding Term Loans and unused Commitments at the time.
(d) To the extent permitted by applicable Law, (i) no Loan Party shall assert, and each hereby waives, any claim against any Indemnitee and (ii) no Indemnitee shall assert, and each hereby waives, any claim against any Loan Party, 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 or thereby, the Transactions or any Loan or the use of the proceeds thereof (whether before or after the Closing Date).
(e) The provisions of this Section 10.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitments, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, the Collateral Agent or any Lender. All amounts due under this Section 10.05 shall be payable within 10 Business Days after written demand therefor.
Section 10.06. Right of Setoff. In addition to any rights and remedies of the Lenders provided by Law, upon the occurrence and during the continuance of any Event of Default, each Lender and its Affiliates (and the Collateral Agent, in respect of any unpaid fees, costs and expenses payable hereunder) is authorized at any time and from time to time, without prior notice to any Loan Party, any such notice being waived by each Loan Party (on its own behalf and on behalf of each of its Subsidiaries), to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Lender and its Affiliates or the Collateral Agent to or for the credit or the account of the respective Loan Parties against any and all Obligations owing to such Lender and its Affiliates or the Collateral Agent hereunder or under any other Loan Document, now or hereafter existing, irrespective of whether or not such Agent or such Lender or Affiliate shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured or denominated in a currency different from that of the applicable deposit or Indebtedness. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set off and application made by such Lender; provided, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of the Administrative Agent, the Collateral Agent and each Lender under this Section 10.06 are in addition to other rights and remedies (including other rights of setoff) that the Administrative Agent, the Collateral Agent and such Lender may have at Law.
Section 10.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
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Section 10.08. Waivers; Amendment. (a) No failure or delay of the Administrative Agent, the Collateral Agent or any Lender in exercising any power or right hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Collateral Agent and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower or any other Loan Party 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 or demand on the Borrower or Holdings in any case shall entitle the Borrower or Holdings to any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except (x) in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Borrower, Holdings and the Required Lenders and (y) in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by each party thereto with the consent of the Required Lenders (provided, that amendments to the ABL Intercreditor Agreement, the First Lien Intercreditor Agreement or the Second Lien Intercreditor Agreement shall require the agreement of the Loan Parties (or any of them) only to the extent required pursuant to the terms thereof); provided, however, that no such agreement shall (i) decrease the principal amount of, or extend the maturity of or any scheduled principal payment date or date for the payment of any interest on any Loan, or waive or excuse any such payment or any part thereof (other than with respect to any default interest), or decrease the rate of interest on any Loan (other than with respect to any default interest), without the prior written consent of each Lender directly adversely affected thereby (it being understood that (x) the waiver of (or amendment to the terms of) any mandatory prepayment of the Loans shall not constitute a postponement of any date scheduled for the payment of principal or interest and (y) any change to the definition of Total Leverage Ratio or in the component definitions thereof shall not constitute a reduction or forgiveness in any rate of interest), (ii) increase or extend the Commitment of any Lender without the prior written consent of such Lender (it being understood that a waiver of any condition precedent or of any Default, mandatory prepayment or mandatory reduction of the Commitments shall not constitute an extension or increase of any Commitment of any Lender), (iii) amend or modify the pro rata requirements of Section 2.14, the provisions of Section 10.04(j) or the provisions of this Section or release all or substantially all of the Guarantors (other than in connection with the sale of such Guarantors in a transaction permitted by Section 7.04 or 7.05) or all or substantially all of the Collateral or of the Term Priority Collateral, without the prior written consent of each Lender directly adversely affected thereby (or, in the case of Section 10.04(j), each Lender), (iv) change the provisions of any Loan Document in a manner that by its terms adversely affects the rights of Lenders holding Loans of one Class differently from the rights of Lenders holding Loans of any other Class without the prior written consent of the Required Class Lenders with respect to each
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adversely affected Class, (v) modify the protections afforded to an SPV pursuant to the provisions of Section 10.04(i) without the written consent of such SPV, (vi) reduce the percentage contained in the definition of the term Required Lenders without the prior written consent of each Lender (it being understood that, with the consent of the Required Lenders (if such consent is otherwise required), additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the Term Loan Commitments on the Restatement Effective Date) or (vii) modify the definition of Required Class Lenders without the consent of the Required Class Lenders with respect to each Class of Loans or Commitments; provided further that (w) no Lender consent is required to effect a Refinancing Amendment or an Incremental Amendment or an Extension (except as expressly provided in Section 2.19, 2.20 or 2.21, as applicable) or to effect any amendment expressly contemplated by Section 7.12, (x) in connection with an amendment that addresses solely a re-pricing transaction in which any tranche of Term Loans is refinanced with a replacement tranche of term loans bearing (or is modified in a manner such that the resulting term loans bear) a lower effective yield (a Permitted Repricing Amendment), only the consent of the Lenders holding Term Loans subject to such permitted repricing transaction that will continue as a Lender in respect of the repriced tranche of Term Loans or modified Term Loans shall be required for such Permitted Repricing Amendment, (y) modifications to Section 2.14, 2.15 or any other provision requiring pro rata payments or sharing of payments in connection with (I) any buy back of Term Loans by Holdings or the Borrower pursuant to Section 10.04(m) or pursuant to any similar program that may in the future be permitted hereunder, (II) any Incremental Amendment or (III) any Extension, shall only require approval (to the extent any such approval is otherwise required) of the Required Lenders and (z) no Lender consent is required to effect any amendment or supplement to the ABL Intercreditor Agreement, the First Lien Intercreditor Agreement or the Second Lien Intercreditor Agreement (I) that is for the purpose of adding the holders of Permitted First Priority Refinancing Debt or Permitted Second Priority Refinancing Debt (or a Senior Representative with respect thereto) as parties thereto, as expressly contemplated by the terms of the ABL Intercreditor Agreement, the First Lien Intercreditor Agreement or the Second Lien Intercreditor Agreement, as applicable (it being understood that any such amendment or supplement may make such other changes to the applicable intercreditor agreement as, in the good faith determination of the Administrative Agent, are required to effectuate the foregoing and provided, that such other changes are not adverse, in any material respect, to the interests of the Lenders) or (II) that is expressly contemplated by Section 5.2(c) or the second paragraph of Section 7.4 of the ABL Intercreditor Agreement (or the comparable provisions, if any, of the First Lien Intercreditor Agreement or the Second Lien Intercreditor Agreement); provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or the Collateral Agent hereunder or under any other Loan Document without the prior written consent of the Administrative Agent or the Collateral Agent, as applicable.
(c) The Administrative Agent and the Borrower may amend any Loan Document to correct administrative errors or omissions, or to effect administrative changes that are not adverse to any Lender. Notwithstanding anything to the contrary contained herein, such
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amendment shall become effective without any further consent of any other party to such Loan Document.
(d) Notwithstanding anything in this Agreement or the other Loan Documents to the contrary, each Affiliated Lender hereby agrees that, if a proceeding under the United States Bankruptcy Code or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law shall be commenced by or against the Borrower or any other Loan Party at a time when such Lender is an Affiliated Lender, such Affiliated Lender irrevocably authorizes and empowers the Administrative Agent to vote on behalf of such Affiliated Lender with respect to the Loans held by such Affiliated Lender in any manner in the Administrative Agents sole discretion, unless the Administrative Agent instructs such Affiliated Lender to vote, in which case such Affiliated Lender shall vote with respect to the Loans held by it as the Administrative Agent directs; provided that such Affiliated Lender shall be entitled to vote in accordance with its sole discretion (and not in accordance with the direction of the Administrative Agent) in connection with any plan of reorganization to the extent any such plan of reorganization proposes to treat any Obligations held by such Affiliated Lender in a manner that is less favorable in any material respect to such Affiliated Lender than the proposed treatment of similar Obligations held by Lenders that are not Affiliates of the Borrower.
Section 10.09. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable Law (collectively the Charges), shall exceed the maximum lawful rate (the Maximum Rate) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan or participation in accordance with applicable Law, the rate of interest payable in respect of such Loan or participation hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan or participation but were not payable as a result of the operation of this Section 10.09 shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or participations or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.
Section 10.10. Entire Agreement. This Agreement, the Fee Letter and the other Loan Documents constitute the entire contract between the parties relative to the subject matter hereof. Any other previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any Person (other than the parties hereto and thereto, their respective successors and assigns permitted hereunder and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Collateral Agent and the Lenders) any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents.
Section 10.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT
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IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.11.
Section 10.12. Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
Section 10.13. 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, and shall become effective as provided in Section 10.03. Delivery of an executed signature page to this Agreement by facsimile or other electronic imaging transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.
Section 10.14. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.
Section 10.15. Jurisdiction; Consent to Service of Process. (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in the Borough of Manhattan, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, 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.
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(b) Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01. 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 10.16. Confidentiality. Each of the Administrative Agent, the Collateral Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates officers, directors, employees and agents, including accountants, legal counsel and other advisors on a need to know basis (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 or quasi-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) in connection with the exercise of any remedies hereunder or under the other Loan Documents or any suit, action or proceeding relating to the enforcement of its rights hereunder or thereunder, (e) subject to an agreement containing provisions substantially the same as those of this Section 10.16, to (i) any actual or prospective assignee of or participant in any of its rights or obligations under this Agreement and the other Loan Documents or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower or any Subsidiary or any of their respective obligations, (f) with the consent of the Borrower or (g) to the extent such Information becomes publicly available other than as a result of a breach of this Section 10.16. For the purposes of this Section, Information shall mean all information received from the Borrower or Holdings and related to the Borrower or Holdings or their business, other than any such information that was available to the Administrative Agent, the Collateral Agent or any Lender on a nonconfidential basis prior to its disclosure by the Borrower or Holdings; provided that, in the case of Information received from the Borrower or Holdings after the Closing Date, such information is clearly identified at the time of delivery as confidential or is delivered pursuant to Section 6.01, 6.02 or 6.03 hereof. Any Person required to maintain the confidentiality of Information as provided in this Section 10.16 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 its own confidential information.
Section 10.17. Lender Action. Each Lender agrees that it shall not take or institute any actions or proceedings, judicial or otherwise, for any right or remedy against any Loan Party or any other obligor under any of the Loan Documents (including the exercise of any right of setoff, rights on account of any bankers lien or similar claim or other rights of self-help), or institute any actions or proceedings, or otherwise commence any remedial procedures, with respect to any
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Collateral or any other property of any such Loan Party, unless expressly provided for herein or in any other Loan Document, without the prior written consent of the Administrative Agent. The provisions of this Section 10.17 are for the sole benefit of the Lenders and shall not afford any right to, or constitute a defense available to, any Loan Party.
Section 10.18. USA PATRIOT Act Notice. Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies Holdings and the Borrower that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies Holdings and the Borrower, which information includes the name and address of Holdings and the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify Holdings and the Borrower in accordance with the USA PATRIOT Act.
Section 10.19. Collateral And Guaranty Matters. The Lenders irrevocably agree:
(a) that any Lien on any property granted to or held by the Administrative Agent or the Collateral Agent under any Loan Document shall be automatically released (i) upon termination of all Commitments hereunder and payment in full of all Obligations (other than (x) obligations under Secured Hedge Agreements not yet due and payable and (y) contingent obligations not yet accrued or payable), (ii) at the time the property subject to such Lien is Disposed as part of or in connection with any Disposition permitted hereunder or under any other Loan Document to any Person other than a Person required to grant a Lien to the Administrative Agent or the Collateral Agent under the Loan Documents (or, if such transferee is a Person required to grant a Lien to the Administrative Agent or the Collateral Agent on such asset, at the option of the applicable Loan Party, such Lien on such asset may still be released in connection with the transfer so long as (x) the transferee grants a new Lien to the Administrative Agent or Collateral Agent on such asset substantially concurrently with the transfer of such asset, (y) the transfer is between parties organized under the laws of different jurisdictions and at least one of such parties is a Foreign Subsidiary and (z) the priority of the new Lien is the same as that of the original Lien), (iii) subject to Section 10.08, if the release of such Lien is approved, authorized or ratified in writing by the Required Lenders or (iv) if the property subject to such Lien is owned by a Guarantor, upon release of such Guarantor from its obligations under its Guaranty pursuant to Section 11.10;
(b) to release or subordinate any Lien on any property granted to or held by the Administrative Agent or the Collateral Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 7.01(u) or 7.01(w) (in the case of Section 7.01(w), to the extent required by the terms of the obligations secured by such Liens); and
(c) that any Guarantor shall be automatically released from its obligations under the Guaranty as provided in Section 11.10.
Upon request by the Administrative Agent or the Collateral Agent at any time, the Required Lenders will confirm in writing the Administrative Agents or the Collateral Agents authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guaranty pursuant to this Section 10.19. In
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each case as specified in this Section 10.19, the Administrative Agent or the Collateral Agent will (and each Lender irrevocably authorizes the Administrative Agent and the Collateral Agent to), at the Borrowers expense, execute and deliver to the applicable Loan Party such documents as the Borrower may reasonably request to evidence the release or subordination of such item of Collateral from the assignment and security interest granted under the Collateral Documents, or to evidence the release of such Guarantor from its obligations under the Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 10.19.
Section 10.20. Secured Hedge Agreements. No Hedge Bank that obtains the benefits of Section 8.04, the Guaranty or any Collateral by virtue of the provisions hereof or any Collateral Document shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and, in such case, only to the extent expressly provided in the Loan Documents. Notwithstanding any other provision of Article 9 to the contrary, the Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, Obligations arising under Secured Hedge Agreements unless the Administrative Agent has received written notice of such Obligations, together with such supporting documentation as the Administrative Agent may request, from the applicable Hedge Bank.
Section 10.21. Payments Set Aside. To the extent that any payment by or on behalf of the Borrower or any other Loan Party is made to any Agent or any Lender, or any Agent or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall, to the fullest extent possible under provisions of applicable Law, be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by any Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the applicable Federal Funds Effective Rate from time to time in effect.
Section 10.22. No Advisory or Fiduciary Responsibility.
(a) In connection with all aspects of each transaction contemplated hereby, each Loan Party acknowledges and agrees, and acknowledges its Affiliates understanding, that (i) the facilities provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arms-length commercial transaction between the Borrower and its Affiliates, on the one hand, and the Agents, the Arrangers and the Lenders, on the other hand, and the Borrower and its Affiliates are capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby
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and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof), (ii) in connection with the process leading to such transaction, each of the Agents, the Arrangers and the Lenders is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Borrower or any of its Affiliates, stockholders, creditors or employees or any other Person, (iii) none of the Agents, the Arrangers or the Lenders has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Borrower or any of its Affiliates with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether any Agent or Lender has advised or is currently advising the Borrower or any of its Affiliates on other matters) and none of the Agents, the Arrangers or the Lenders has any obligation to the Borrower or any of its Affiliates with respect to the financing transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents, (iv) the Agents, the Arrangers, the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from, and may conflict with, those of the Borrower and its Affiliates, and none of the Agents, the Arrangers or the Lenders has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship and (v) the Agents, the Arrangers and the Lenders have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and the Loan Parties have consulted their own legal, accounting, regulatory and tax advisors to the extent they have deemed appropriate. Each Loan Party hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against the Agents, the Arrangers and the Lenders with respect to any breach or alleged breach of agency or fiduciary duty under applicable Law relating to agency and fiduciary obligations.
(b) Each Loan Party acknowledges and agrees that each Lender, Arranger and any affiliate thereof may lend money to, invest in, and generally engage in any kind of business with, any of the Borrower, Holdings, any Investor, any Affiliate thereof or any other person or entity that may do business with or own securities of any of the foregoing, all as if such Lender, Arranger or Affiliate thereof were not a Lender or Arranger (or an agent or any other person with any similar role under the Facilities) and without any duty to account therefor to any other Lender, Arranger, Holdings, the Borrower, any Investor or any Affiliate of the foregoing. Each Lender, the Arrangers and any affiliate thereof may accept fees and other consideration from Holdings, the Borrower, any Investor or any Affiliate thereof for services in connection with this Agreement, the Facilities, the commitment letter or otherwise without having to account for the same to any other Lender, Arranger, Holdings, the Borrower, any Investor or any Affiliate of the foregoing.
Section 10.23. ABL Intercreditor Agreement. The Administrative Agent is authorized to enter into the ABL Intercreditor Agreement, and each of the parties hereto acknowledges that it has received a copy of the ABL Intercreditor Agreement and that the ABL Intercreditor Agreement is binding upon it. Each Lender (a) hereby consents to the subordination of the Liens on the ABL Priority Collateral securing the Obligations on the terms set forth in the ABL Intercreditor Agreement, (b) hereby agrees that it will be bound by and will take no actions
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contrary to the provisions of the ABL Intercreditor Agreement and (c) hereby authorizes and instructs the Administrative Agent to enter into the ABL Intercreditor Agreement and any amendments or supplements expressly contemplated thereby, and to subject the Liens on the ABL Priority Collateral securing the Obligations to the provisions of the ABL Intercreditor Agreement. The foregoing provisions are intended as an inducement to the ABL Secured Parties to extend credit to the borrowers under the ABL Credit Agreement and such ABL Secured Parties are intended third-party beneficiaries of such provisions and the provisions of the ABL Intercreditor Agreement. The provisions of this Section 10.23 are for the sole benefit of the Lenders and the Administrative Agent and shall not afford any right to, or constitute a defense available to, any Loan Party.
ARTICLE 11
GUARANTEE
Section 11.01. The Guarantee.
Each Guarantor hereby jointly and severally with the other Guarantors guarantees, as a primary obligor and not as a surety to each Secured Party and their respective successors and assigns, the prompt payment in full when due (whether at stated maturity, by required prepayment, declaration, demand, by acceleration or otherwise) of the principal of and interest (including any interest, fees, costs or charges that would accrue but for the provisions of (i) Title 11 of the United States Code after any bankruptcy or insolvency petition under Title 11 of the United States Code and (ii) any other Debtor Relief Laws, whether or not such items are allowed or allowable as a claim in any applicable proceeding) on the Loans made by the Lenders to, and the Term Notes (if any) issued hereunder and held by each Lender of, the Borrower, and all other Obligations from time to time owing to the Secured Parties by any other Loan Party under any Loan Document or any Secured Hedge Agreement, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the Guaranteed Obligations). The Guarantors hereby jointly and severally agree that if the Borrower or other Guarantor(s) shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Guarantors will promptly pay the same in cash, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal.
Section 11.02. Obligations Unconditional.
The obligations of the Guarantors under Section 11.01 shall constitute a guaranty of payment and to the fullest extent permitted by applicable Law, are absolute, irrevocable and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the Guaranteed Obligations of the Borrower or any other Guarantor under this Agreement, any Term Notes issued under this Agreement, or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or
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security for any of the Guaranteed Obligations, and, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or Guarantor (except for payment in full). Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantors hereunder which shall remain absolute, irrevocable and unconditional under any and all circumstances as described above:
(a) at any time or from time to time, without notice to the Guarantors, to the extent permitted by Law, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of this Agreement or the Term Notes, if any, or any other agreement or instrument referred to herein or therein shall be done or omitted;
(c) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be amended in any respect, or any right under the Loan Documents or any other agreement or instrument referred to herein or therein shall be amended or waived in any respect or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with;
(d) any Lien or security interest granted to, or in favor of, any Secured Party or Agent as security for any of the Guaranteed Obligations shall fail to be perfected; or
(e) the release of any other Guarantor pursuant to Section 11.10.
Section 11.03. Certain Waivers. Etc. The Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and, to the extent permitted by Law, all notices whatsoever, and any requirement that any Secured Party exhaust any right, power or remedy or proceed against the Borrower under this Agreement or the Term Notes issued hereunder, if any, or any other agreement or instrument referred to herein or therein, or against any other person under any other guarantee of, or security for, any of the Guaranteed Obligations. The Guarantors waive, to the extent permitted by Law, any and all notice of the creation, renewal, extension, waiver, termination or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by any Secured Party upon this Guarantee or acceptance of this Guarantee, and the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Guarantee, and all dealings between the Borrower and the Secured Parties shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guarantee. This Guarantee shall be construed as a continuing, absolute, irrevocable and unconditional guarantee of payment without regard to any right of offset with respect to the Guaranteed Obligations at any time or from time to time held by Secured Parties, and the obligations and liabilities of the Guarantors hereunder shall not be conditioned or contingent upon the pursuit by the Secured Parties or any other person at any time of any right or remedy against the Borrower or against any other person which may be or become liable in respect of all or any part of the Guaranteed Obligations or against any collateral
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security or guarantee therefor or right of offset with respect thereto. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantors and the successors and permitted assigns thereof, and shall inure to the benefit of the Secured Parties, and their respective successors and permitted assigns, notwithstanding that from time to time during the term of this Agreement there may be no Guaranteed Obligations outstanding. Each Guarantor waives any rights and defenses that are or may become available to it by reason of §§ 2787 to 2855, inclusive, and §§ 2899 and 3433 of the California Civil Code. As provided in Section 10.07, the provisions of this Article 11 shall be governed by, and construed in accordance with, the laws of the State of New York. The foregoing waivers and the provisions hereinafter set forth in this Article 11 which pertain to California law are included solely out of an abundance of caution, and shall not be construed to mean that any of the above-referenced provisions of California law are in any way applicable to this Article 11, to any other provision of this Agreement or to the Obligations.
Section 11.04. Reinstatement.
The obligations of the Guarantors under this Article 11 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower or other Loan Party in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise.
Section 11.05. Subrogation; Subordination.
Each Guarantor hereby agrees that until the payment and satisfaction in full in cash of all Guaranteed Obligations and the expiration and termination of the Commitments of the Lenders under this Agreement it shall waive any claim and shall not exercise any right or remedy, direct or indirect, arising by reason of any performance by it of its guarantee in Section 11.01, whether by subrogation or otherwise, against the Borrower or any other Guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations. Any Indebtedness of any Loan Party to any Person that is not a Loan Party permitted pursuant to Section 7.03(b) or 7.03(d) shall be subordinated to such Loan Partys Obligations in the manner set forth in the Intercompany Note evidencing such Indebtedness.
Section 11.06. Remedies.
The Guarantors jointly and severally agree that, as between the Guarantors and the Lenders, the obligations of the Borrower under this Agreement and the Term Notes issued hereunder, if any, may be declared to be forthwith due and payable as provided in Section 8.02 (and shall be deemed to have become automatically due and payable in the circumstances provided in Section 8.02) for purposes of Section 11.01, notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations
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(whether or not due and payable by the Borrower) shall forthwith become due and payable by the Guarantors for purposes of Section 11.01.
Section 11.07. Instrument for the Payment of Money.
Each Guarantor hereby acknowledges that the guarantee in this Article 11 constitutes an instrument for the payment of money, and consents and agrees that any Secured Party or Agent, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring a motion-action under New York CPLR Section 3213.
Section 11.08. Continuing Guarantee.
The guarantee in this Article 11 is a continuing guarantee of payment, and shall apply to all Guaranteed Obligations whenever arising.
Section 11.09. General Limitation on Guarantee Obligations.
In any action or proceeding involving any state corporate, limited partnership or limited liability company law, or any applicable state, federal or foreign bankruptcy, insolvency, reorganization or other Law affecting the rights of creditors generally, if the obligations of any Guarantor under Section 11.01 would otherwise be held or determined to be void, voidable, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 11.01, then, notwithstanding any other provision to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Loan Party or any other person, be automatically limited and reduced to the highest amount (after giving effect to the right of contribution established in Section 11.11) that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding.
Section 11.10. Release of Guarantors.
If, in compliance with the terms and provisions of the Loan Documents, (i) all or substantially all of the Equity Interests or property of any Subsidiary Guarantor are sold or otherwise transferred to a Person or Persons none of which is a Loan Party or (ii) any Subsidiary Guarantor becomes an Excluded Subsidiary (any such Subsidiary Guarantor, and any Subsidiary Guarantor referred to in clause (i), a Transferred Guarantor), such Transferred Guarantor shall, upon the consummation of such sale or transfer or other transaction, be automatically released from its obligations under this Agreement (including under Section 10.05 hereof) and its obligations to pledge and grant any Collateral owned by it pursuant to any Collateral Document and, in the case of a sale of all or substantially all of the Equity Interests of the Transferred Guarantor, the pledge of such Equity Interests to the Collateral Agent pursuant to the Collateral Documents shall be automatically released, and, so long as the Borrower shall have provided the Agents such certifications or documents as any Agent shall reasonably request, the Collateral Agent shall take such actions as are necessary to effect each release described in this Section 11.10 in accordance with the relevant provisions of the Collateral Documents; provided, that no
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Guarantor shall be released as provided in this paragraph if such Guarantor continues to be a guarantor in respect of the Senior Notes, any Indebtedness incurred pursuant to Section 7.03(s) or Section 7.03(w) (to the extent such Indebtedness is ABL Facility Indebtedness), any Permitted First Priority Refinancing Debt, any Permitted Second Priority Refinancing Debt, any Permitted Unsecured Refinancing Debt, any Junior Financing or any Permitted Refinancing of any of the foregoing.
When all Commitments hereunder have terminated, and all Loans or other Obligations hereunder which are accrued and payable have been paid or satisfied, this Agreement and the Guarantees made herein shall terminate with respect to all Obligations, except with respect to Obligations that expressly survive such repayment pursuant to the terms of this Agreement.
Section 11.11. Right of Contribution.
Each Guarantor hereby agrees that to the extent that a Subsidiary Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Subsidiary Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Subsidiary Guarantors right of contribution shall be subject to the terms and conditions of Section 11.05. The provisions of this Section 11.11 shall in no respect limit the obligations and liabilities of any Subsidiary Guarantor to the Administrative Agent and the Secured Parties, and each Subsidiary Guarantor shall remain liable to the Administrative Agent and the Secured Parties for the full amount guaranteed by such Subsidiary Guarantor hereunder.
Section 11.12. Additional Guarantor Waivers and Agreements.
(a) Each Guarantor understands and acknowledges that if the Collateral Agent or any other Secured Party forecloses judicially or nonjudicially against any real property security for the Obligations, that foreclosure could impair or destroy any ability that such Guarantor may have to seek reimbursement, contribution, or indemnification from the Borrower or others based on any right such Guarantor may have of subrogation, reimbursement, contribution, or indemnification for any amounts paid by such Guarantor under the Guaranty. Each Guarantor further understands and acknowledges that in the absence of this paragraph, such potential impairment or destruction of such Guarantors rights, if any, may entitle such Guarantor to assert a defense to this Guaranty based on Section 580d of the California Code of Civil Procedure as interpreted in Union Bank v. Gradsky, 265 Cal. App. 2d 40 (1968). By executing this Guaranty, each Guarantor freely, irrevocably, and unconditionally: (i) waives and relinquishes that defense and agrees that such Guarantor will be fully liable under this Guaranty even though the Collateral Agent or any other Secured Party may foreclose, either by judicial foreclosure or by exercise of power of sale, any deed of trust securing the Obligations; (ii) agrees that such Guarantor will not assert that defense in any action or proceeding which the Administrative Agent, the Collateral Agent or any other Secured Party may commence to enforce this Guaranty; (iii) acknowledges and agrees that the rights and defenses waived by such Guarantor in this Guaranty include any right or defense that such Guarantor may have or be entitled to assert based upon or arising out of any one or more of §§ 580a, 580b, 580d, or 726 of the California Code of
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Civil Procedure or § 2848 of the California Civil Code; and (iv) acknowledges and agrees that the Secured Parties are relying on this waiver in creating the Obligations, and that this waiver is a material part of the consideration which the Secured Parties are receiving for creating the Obligations.
(b) Each Guarantor waives all rights and defenses that such Guarantor may have because any of the Obligations is secured by real property. This means, among other things: (i) the Administrative Agent, the Collateral Agent and the other Secured Parties may collect from such Guarantor without first foreclosing on any real or personal property collateral pledged by the other Loan Parties; and (ii) if the Collateral Agent or any other Secured Party forecloses on any real property collateral pledged by the other Loan Parties: (A) the amount of the Obligations may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, and (B) the Administrative Agent, the Collateral Agent and the other Secured Parties may collect from such Guarantor even if the Secured Parties, by foreclosing on the real property collateral, have destroyed any right such Guarantor may have to collect from the Borrower. This is an unconditional and irrevocable waiver of any rights and defenses such Guarantor may have because any of the Obligations is secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon § 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.
(c) Each Guarantor waives any right or defense it may have at law or equity, including California Code of Civil Procedure § 580a, to a fair market value hearing or action to determine a deficiency judgment after a foreclosure.
168
Exhibit 10.10
[EXECUTION COPY]
CREDIT AGREEMENT
dated as of
November 23, 2010
among
GIRAFFE ACQUISITION CORPORATION,
which on the Closing Date shall be merged with and into
THE GYMBOREE CORPORATION
(with The Gymboree Corporation surviving such merger as the Lead Borrower),
THE OTHER BORROWERS PARTY HERETO
GIRAFFE INTERMEDIATE B, INC.,
THE OTHER FACILITY GUARANTORS PARTY HERETO FROM TIME TO TIME
THE LENDERS PARTY HERETO
and
BANK OF AMERICA, N.A.,
as Administrative Agent and Collateral Agent
and
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
as Lead Arranger and Bookrunner
SUNTRUST ROBINSON HUMPHREY, INC., and
U.S. BANK NATIONAL ASSOCIATION,
as Joint Bookrunners
U.S. BANK NATIONAL ASSOCIATION
as Syndication Agent
SUNTRUST BANK,
as Documentation Agent
TABLE OF CONTENTS
ARTICLE I |
2 | |||||
SECTION 1.01 |
Definitions | 2 | ||||
SECTION 1.02 |
Terms Generally | 66 | ||||
SECTION 1.03 |
Accounting Terms | 68 | ||||
SECTION 1.04 |
Rounding | 68 | ||||
SECTION 1.05 |
Times of Day | 68 | ||||
SECTION 1.06 |
Letter of Credit Amounts | 68 | ||||
SECTION 1.07 |
Certifications | 68 | ||||
SECTION 1.08 |
Currency Equivalents Generally | 68 | ||||
SECTION 1.09 |
Change of Currency | 69 | ||||
SECTION 1.10 |
Pro Forma Basis | 69 | ||||
ARTICLE II AMOUNT AND TERMS OF CREDIT |
71 | |||||
SECTION 2.01 |
Commitment of the Lenders | 71 | ||||
SECTION 2.02 |
Increase in Total Commitments | 72 | ||||
SECTION 2.03 |
Reserves; Changes to Reserves | 74 | ||||
SECTION 2.04 |
Making of Revolving Credit Loans | 75 | ||||
SECTION 2.05 |
Overadvances | 77 | ||||
SECTION 2.06 |
Swingline Loans | 77 | ||||
SECTION 2.07 |
Notes | 78 | ||||
SECTION 2.08 |
Interest on Revolving Credit Loans | 79 | ||||
SECTION 2.09 |
Conversion and Continuation of Revolving Credit Loans | 79 | ||||
SECTION 2.10 |
Alternate Rate of Interest for Revolving Credit Loans | 80 | ||||
SECTION 2.11 |
Change in Legality | 81 | ||||
SECTION 2.12 |
Default Interest | 81 | ||||
SECTION 2.13 |
Letters of Credit | 82 | ||||
SECTION 2.14 |
Increased Costs | 87 | ||||
SECTION 2.15 |
Termination or Reduction of Commitments | 88 | ||||
SECTION 2.16 |
Optional Prepayment of Revolving Credit Loans; Reimbursement of Lenders | 89 | ||||
SECTION 2.17 |
Mandatory Prepayment; Commitment Termination; Cash Collateral | 91 | ||||
SECTION 2.18 |
Cash Management | 93 |
SECTION 2.19 |
Fees | 96 | ||||
SECTION 2.20 |
Maintenance of Loan Account; Statements of Account | 97 | ||||
SECTION 2.21 |
Payments; Sharing of Setoff | 98 | ||||
SECTION 2.22 |
Settlement Amongst Lenders | 99 | ||||
SECTION 2.23 |
Taxes | 100 | ||||
SECTION 2.24 |
Mitigation Obligations; Replacement of Lenders | 104 | ||||
SECTION 2.25 |
Designation of Lead Borrower as Borrowers Agent | 104 | ||||
SECTION 2.26 |
Canadian Credit Facility | 105 | ||||
SECTION 2.27 |
Extensions of Revolving Credit Commitments, Etc. | 106 | ||||
SECTION 2.28 |
Obligations of the Lenders Several | 108 | ||||
SECTION 2.29 |
Cash Collateral Generally | 108 | ||||
ARTICLE III REPRESENTATIONS AND WARRANTIES |
109 | |||||
SECTION 3.01 |
Existence, Qualification and Power; Compliance with Laws | 109 | ||||
SECTION 3.02 |
Authorization; No Contravention | 109 | ||||
SECTION 3.03 |
Governmental Authorization; Other Consents | 110 | ||||
SECTION 3.04 |
Binding Effect | 110 | ||||
SECTION 3.05 |
Financial Statements; No Material Adverse Effect | 110 | ||||
SECTION 3.06 |
Litigation | 112 | ||||
SECTION 3.07 |
No Default | 112 | ||||
SECTION 3.08 |
Ownership of Property; Liens | 112 | ||||
SECTION 3.09 |
Environmental Compliance | 112 | ||||
SECTION 3.10 |
Taxes | 114 | ||||
SECTION 3.11 |
ERISA; Plan Compliance | 114 | ||||
SECTION 3.12 |
Subsidiaries; Equity Interests | 115 | ||||
SECTION 3.13 |
Margin Regulations; Investment Company Act | 115 | ||||
SECTION 3.14 |
Disclosure | 115 | ||||
SECTION 3.15 |
Intellectual Property; Licenses, Etc, | 116 | ||||
SECTION 3.16 |
Solvency | 116 | ||||
SECTION 3.17 |
Subordination of Junior Financing | 116 | ||||
SECTION 3.18 |
Labor Matters | 117 | ||||
SECTION 3.19 |
Compliance with Laws and Agreements | 117 | ||||
SECTION 3.20 |
Security Documents | 117 | ||||
ARTICLE IV CONDITIONS |
118 |
SECTION 4.01 |
Conditions of Effectiveness of Credit Agreement and Conditions Precedent to Each Revolving Credit Loan and Each Letter of Credit on the Closing Date | 118 | ||||
SECTION 4.02 |
Conditions Precedent to Each Revolving Credit Loan and Each Letter of Credit after the Closing Date | 123 | ||||
ARTICLE V AFFIRMATIVE COVENANTS |
124 | |||||
SECTION 5.01 |
Financial Statements | 124 | ||||
SECTION 5.02 |
Certificates; Other Information | 126 | ||||
SECTION 5.03 |
Notices | 129 | ||||
SECTION 5.04 |
Payment of Taxes, Etc. | 130 | ||||
SECTION 5.05 |
Preservation of Existence, Etc. | 130 | ||||
SECTION 5.06 |
Maintenance of Properties | 130 | ||||
SECTION 5.07 |
Maintenance of Insurance | 131 | ||||
SECTION 5.08 |
Compliance with Laws | 132 | ||||
SECTION 5.09 |
Books and Records | 132 | ||||
SECTION 5.10 |
Inspection Rights | 132 | ||||
SECTION 5.11 |
Covenant to Become a Loan Party and Give Security | 134 | ||||
SECTION 5.12 |
Compliance with Environmental Laws | 136 | ||||
SECTION 5.13 |
Further Assurances and Post-Closing Conditions | 136 | ||||
SECTION 5.14 |
Designation of Subsidiaries | 137 | ||||
SECTION 5.15 |
Information Regarding Collateral | 137 | ||||
SECTION 5.16 |
Physical Inventories | 137 | ||||
SECTION 5.17 |
Use of Proceeds of Credit Extensions | 137 | ||||
SECTION 5.18 |
Covenant Regarding Management Investment | 138 | ||||
SECTION 5.19 |
Covenant Regarding Certain Accounting Systems | 138 | ||||
SECTION 5.20 |
Pension Plans | 138 | ||||
ARTICLE VI NEGATIVE COVENANTS |
139 | |||||
SECTION 6.01 |
Liens | 139 | ||||
SECTION 6.02 |
Investments | 143 | ||||
SECTION 6.03 |
Indebtedness | 146 | ||||
SECTION 6.04 |
Fundamental Changes | 149 | ||||
SECTION 6.05 |
Dispositions | 151 | ||||
SECTION 6.06 |
Restricted Payments | 155 |
SECTION 6.07 |
Change in Nature of Business | 158 | ||||
SECTION 6.08 |
Transactions with Affiliates | 159 | ||||
SECTION 6.09 |
Burdensome Agreements | 160 | ||||
SECTION 6.10 |
Accounting Changes | 161 | ||||
SECTION 6.11 |
Prepayments, Etc., of Indebtedness | 161 | ||||
SECTION 6.12 |
Equity Interests of the Lead Borrower and Restricted Subsidiaries | 162 | ||||
SECTION 6.13 |
Amendment of Material Documents | 162 | ||||
SECTION 6.14 |
Designated Account | 163 | ||||
SECTION 6.15 |
Minimum Consolidated Fixed Charge Coverage Ratio | 163 | ||||
ARTICLE VII EVENTS OF DEFAULT |
163 | |||||
SECTION 7.01 |
Events of Default | 163 | ||||
SECTION 7.02 |
Remedies Upon Event of Default | 167 | ||||
SECTION 7.03 |
Exclusion of Immaterial Subsidiaries | 167 | ||||
SECTION 7.04 |
Application of Proceeds | 168 | ||||
SECTION 7.05 |
Lead Borrowers Right to Cure | 169 | ||||
ARTICLE VIII THE ADMINISTRATIVE AGENT |
169 | |||||
SECTION 8.01 |
Appointment of Administrative Agent | 169 | ||||
SECTION 8.02 |
Appointment of Collateral Agent | 170 | ||||
SECTION 8.03 |
Reserved | 170 | ||||
SECTION 8.04 |
Sharing of Excess Payments | 170 | ||||
SECTION 8.05 |
Agreement of Applicable Lenders | 171 | ||||
SECTION 8.06 |
Liability of Agents | 171 | ||||
SECTION 8.07 |
Notice of Default | 172 | ||||
SECTION 8.08 |
Credit Decisions | 172 | ||||
SECTION 8.09 |
Reimbursement and Indemnification | 173 | ||||
SECTION 8.10 |
Rights of Agents | 173 | ||||
SECTION 8.11 |
Notice of Transfer | 174 | ||||
SECTION 8.12 |
Successor Agents | 174 | ||||
SECTION 8.13 |
Relation Among the Lenders | 174 | ||||
SECTION 8.14 |
Reports and Financial Statements | 174 | ||||
SECTION 8.15 |
Agency for Perfection | 175 | ||||
SECTION 8.16 |
Delinquent Lender | 176 |
SECTION 8.17 |
Collateral Matters. | 177 | ||||
SECTION 8.18 |
Syndication Agent, Documentation Agent, and Arranger | 178 | ||||
SECTION 8.19 |
Intercreditor Agreements | 179 | ||||
ARTICLE IX MISCELLANEOUS |
179 | |||||
SECTION 9.01 |
Amendments, Etc. | 179 | ||||
SECTION 9.02 |
Notices and Other Communications; Facsimile Copies | 182 | ||||
SECTION 9.03 |
No Waiver; Cumulative Remedies | 184 | ||||
SECTION 9.04 |
Attorney Costs and Expenses | 184 | ||||
SECTION 9.05 |
Indemnification by the Lead Borrower | 184 | ||||
SECTION 9.06 |
Payments Set Aside | 186 | ||||
SECTION 9.07 |
Successors and Assigns | 186 | ||||
SECTION 9.08 |
Confidentiality | 190 | ||||
SECTION 9.09 |
Setoff | 191 | ||||
SECTION 9.10 |
Interest Rate Limitation | 191 | ||||
SECTION 9.11 |
Counterparts | 191 | ||||
SECTION 9.12 |
Integration | 192 | ||||
SECTION 9.13 |
Severability | 192 | ||||
SECTION 9.14 |
Governing Law | 192 | ||||
SECTION 9.15 |
Waiver of Right to Trial by Jury | 193 | ||||
SECTION 9.16 |
Binding Effect | 193 | ||||
SECTION 9.17 |
Judgment Currency | 193 | ||||
SECTION 9.18 |
Lender Action | 194 | ||||
SECTION 9.19 |
USA PATRIOT ACT, ETC.; PROCEEDS OF CRIME ACT | 194 | ||||
SECTION 9.20 |
No Advisory or Fiduciary Responsibility | 194 | ||||
SECTION 9.21 |
Foreign Asset Control Regulations | 195 | ||||
SECTION 9.22 |
Survival | 195 | ||||
SECTION 9.23 |
Press Releases and Related Matters | 196 | ||||
SECTION 9.24 |
Additional Waivers | 196 | ||||
SECTION 9.25 |
Intercreditor Agreement | 199 | ||||
SECTION 9.26 |
Assumption by Company | 199 |
EXHIBITS
Exhibit A-1: |
Form of Assignment and Acceptance (Tranche A) | |
Exhibit A-2: |
Form of Assignment and Acceptance (FILO) | |
Exhibit B: |
Form of Customs Broker Agreement | |
Exhibit C: |
Form of Notice of Borrowing | |
Exhibit D: |
Form of Revolving Credit Note | |
Exhibit E: |
Form of Swingline Note | |
Exhibit F: |
Form of Joinder | |
Exhibit G: |
Form of Credit Card Notification | |
Exhibit H: |
Form of Compliance Certificate | |
Exhibit I: |
Form of Borrowing Base Certificate | |
Exhibit J: |
Form of Solvency Certificate | |
Exhibit K-1 |
Form of Ropes & Gray LLP Legal Opinion | |
Exhibit K-2 |
Form of Holland & Knight LLP Legal Opinion | |
Exhibit L |
Form of Foreign Lender Certificate |
SCHEDULES
Schedule 1.01: |
Lenders and Commitments | |
Schedule 1.01(a): |
Existing Letters of Credit | |
Schedule 2.18(b): |
Credit Card Arrangements | |
Schedule 2.18(c): |
Blocked Accounts | |
Schedule 3.01: |
Organization Information | |
Schedule 3.05(b): |
Financial Performance Projections | |
Schedule 3.08(b)(i): |
Owned Real Estate | |
Schedule 3.08(b)(ii): |
Leased Real Estate | |
Schedule 3.09(b): |
Environmental Matters | |
Schedule 3.09(d): |
Environmental Investigation | |
Schedule 3.10: |
Taxes | |
Schedule 3.11: |
ERISA and Other Pension Matters | |
Schedule 3.12: |
Subsidiaries; Equity Interests | |
Schedule 3.15: |
Intellectual Property | |
Schedule 4.01(c): |
Local Counsel Opinions | |
Schedule 5.02(f): |
Reporting Requirements | |
Schedule 5.02: |
Lead Borrowers Website | |
Schedule 5.07: |
Insurance | |
Schedule 5.13: |
Post-Closing Security Documents | |
Schedule 5.14: |
Unrestricted Subsidiaries | |
Schedule 6.01: |
Permitted Encumbrances | |
Schedule 6.02: |
Permitted Investments | |
Schedule 6.03: |
Existing Indebtedness | |
Schedule 6.05: |
Permitted Dispositions | |
Schedule 6.08: |
Affiliate Transactions | |
Schedule 6.09: |
Burdensome Agreements |
CREDIT AGREEMENT
This CREDIT AGREEMENT dated as of November 23, 2010, is among GIRAFFE ACQUISITION CORPORATION, a Delaware corporation (which on the Closing Date shall be merged with and into THE GYMBOREE CORPORATION, a Delaware corporation (the Company), with the Company surviving such merger as the lead borrower (the Lead Borrower)), the other Borrowers party hereto from time to time, GIRAFFE INTERMEDIATE B, INC., a Delaware corporation (Holdings), and the other Facility Guarantors party hereto from time to time, the Lenders (such term and each other capitalized term used but not defined in this introductory statement having the meaning given it in Article I), and BANK OF AMERICA, N.A., as administrative agent (in such capacity, including any successor thereto, the Administrative Agent) and as collateral agent (in such capacity, including any successor thereto, the Collateral Agent) for the Lenders.
W I T N E S S E T H:
Pursuant to, and in accordance with, the Merger Agreement, Giraffe Acquisition Corporation, a Delaware corporation (Merger Sub), organized by the Sponsor and a wholly-owned direct subsidiary of Holdings, intends to acquire all of the Shares pursuant to a series of transactions in which, on the Closing Date (i) Merger Sub will acquire, for a purchase price of $65.40 per share in cash, those Shares that have been validly tendered and not withdrawn and accepted for payment (the Tendered Shares) pursuant to the Tender Offer (the Tender Consideration), (ii) if necessary to effect a short-form merger under the Delaware General Corporation Law, Merger Sub will acquire from the Company pursuant to the Top-Up Option (as defined in the Merger Agreement), for a purchase price of $65.40 per share (the Top-Up Consideration), the lowest number of Shares that, when combined with the Tendered Shares and any other Shares then owned directly or indirectly by Holdings and Merger Sub, will constitute one share more than 90% of the total Shares outstanding after giving effect to the Top-Up Option and (iii) Merger Sub will be merged with and into the Company with the Company being the surviving corporation (the Merger), and pursuant to the Merger each Share not acquired in the Tender Offer (other than Dissenting Shares (as defined in the Merger Agreement), Shares held by the Company in treasury and Shares held by subsidiaries of the Company) will be converted into the right to receive $65.40 in cash (the Merger Consideration and, together with the Tender Consideration and the Top-Up Consideration, the Share Consideration).
The total cash required to finance the Share Consideration, to refinance or repay, redeem, defease or otherwise discharge the existing third party indebtedness of the Company and its subsidiaries under the Existing Credit Agreement (the Refinancing) and to pay related fees and expenses is approximately $1,745,000,000 (the Aggregate Consideration). In order to fund the Aggregate Consideration, (i) the Investors will directly or indirectly make the Equity Contribution to Merger Sub (through Holdings), (ii) the Merger Sub will issue $400,000,000 of its Senior Notes due 2018 (the Senior Notes) on the Closing Date or into escrow prior to the Closing Date (it being understood that, pursuant to the Merger and a supplemental indenture, the obligations of Merger Sub in respect of the Senior Notes shall be assumed by the Lead Borrower on the Closing Date), (iii) the Merger Sub will borrow term loans under the Term Loan Facility on the Closing Date, in an aggregate principal amount not in excess of $820,000,000 (it being
1
understood that, pursuant to the Merger, the obligations of Merger Sub in respect of such Loans shall be assumed by Lead Borrower on the Closing Date) and (iv) the Merger Sub will enter into this Agreement and make borrowings hereunder on the Closing Date (subject to the terms and conditions hereof) in an amount not to exceed the Maximum Closing Date Borrowing Amount.
The Lenders are willing to extend such credit to the Borrowers on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows:
ARTICLE I
SECTION 1.01 Definitions.
As used in this Agreement, the following terms have the meanings specified below:
ABL Priority Collateral has the meaning set forth in the Intercreditor Agreement.
ACH means automated clearing house transfers.
Accommodation Payment has the meaning provided in SECTION 9.24.
Account(s) 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, or (c) arising out of the use of a credit or charge card or information contained on or for use with the card. The term Account does not include (a) rights to payment evidenced by chattel paper or an instrument, (b) commercial tort claims, (c) deposit accounts, (d) investment property, or (e) letter-of-credit rights or letters of credit.
Account Debtor means the customer of a Loan Party who is obligated on or under an Account.
Acquisition means, with respect to a specified Person, (a) an Investment in or a purchase of a fifty percent (50%) or greater interest in the Capital Stock of any other Person, (b) a purchase or acquisition of all or substantially all of the assets of any other Person, (c) a purchase or acquisition of a Real Estate portfolio or Stores from any other Person or assets constituting a business unit, line of business or division of any other Person, or (d) any merger, amalgamation or consolidation of such Person with any other Person or other transaction or series of transactions resulting in the acquisition of all or substantially all of the assets, or a fifty percent (50%) or greater interest in the Capital Stock of, any Person, in each case in any transaction or group of transactions which are part of a common plan.
Additional Commitment Lender shall have the meaning provided in SECTION 2.02(a).
Adjusted LIBO Rate means, with respect to any LIBO Borrowing for any Interest Period, an interest rate per annum equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. The Adjusted LIBO Rate will be adjusted automatically as to
2
all LIBO Borrowings then outstanding as of the effective date of any change in the Statutory Reserve Rate.
Adjustment Date has the meaning provided in clause (b) of the definition of Applicable Margin.
Administrative Agent has the meaning provided in the preamble to this Agreement.
Advisory Fees means management, monitoring, consulting, transaction and advisory fees (including termination fees) and related indemnities and expenses paid or accrued pursuant to the Sponsor Management Agreement.
Affiliate means, 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.
Agents means collectively, the Administrative Agent and the Collateral Agent.
Aggregate Consideration shall have the meaning assigned to such term in the introductory statement to this Agreement.
Agreement means this Credit Agreement, as modified, amended, supplemented or restated, and in effect from time to time.
Applicable Law means as to any Person: (a) any and all federal, state, provincial, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, codes, ordinances, decrees, permits, concessions, grants, franchises, licenses, agreements, governmental restrictions or other requirements having the force of law; and (b) all court orders, decrees, judgments, injunctions, enforceable notices, binding agreements and/or rulings, in each case of or by any Governmental Authority which has jurisdiction over such Person, or any property of such Person.
Applicable Lenders means the Required Lenders, all Lenders or affected Lenders, in each case as applicable.
Applicable Margin means:
(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) On the first day of each Fiscal Quarter (each, an Adjustment Date), commencing with the Fiscal Quarter beginning on July 31, 2011, the Applicable Margin shall be determined from such pricing grid based upon Average Daily Availability Percentage for the most recently ended Fiscal Quarter immediately preceding such Adjustment Date.
3
Level |
Average Daily Availability Percentage |
Tranche A LIBO Applicable Margin |
Tranche A Prime Rate Applicable Margin |
FILO
LIBO Applicable Margin |
FILO Prime Rate Applicable Margin |
|||||||||||||
I |
Greater than 66% | 2.25 | % | 1.25 | % | 3.75 | % | 2.75 | % | |||||||||
II |
Less than or equal to 66% but greater than or equal to 33% | 2.50 | % | 1.50 | % | 4.00 | % | 3.00 | % | |||||||||
III |
Less than 33% | 2.75 | % | 1.75 | % | 4.25 | % | 3.25 | % |
Applicable Unused Fee Rate means:
(a) From and after the Closing Date until the first Fee Adjustment Date, the percentage per annum set forth in Level I of the fee grid below; and
(b) On the first day of each Fiscal Quarter (each, a Fee Adjustment Date), commencing with the Fiscal Quarter beginning on May 1, 2011, the applicable percentage per annum set forth below determined by reference to the Average Daily Used Commitment Percentage with respect to the Tranche A Commitments or the FILO Commitments, as the case may be, for the most recently ended Fiscal Quarter immediately preceding such Fee Adjustment Date:
Pricing Level |
Average Daily Used Commitment Percentage |
Applicable Unused Fee Rate |
||||
I |
Less than 33% | 0.625 | % | |||
II |
Greater than or equal to 33% but less than or equal to 66% | 0.50 | % | |||
III |
Greater than 66% | 0.375 | % |
Appraised Value means the net appraised recovery value of the Borrowers Inventory as set forth in the Borrowers stock 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 Bank has the meaning specified in clause (iii) of the definition of Cash Equivalents.
Approved Fund means, with respect to any Credit Party, any Fund that is administered or managed by (a) such Credit Party, (b) an Affiliate of such Credit Party, or (c) an entity or an Affiliate of an entity that administers or manages such Credit Party.
Arranger means MLPF&S, in its capacity as lead arranger and bookrunner.
Assignment and Acceptance means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by SECTION 9.07), and accepted by the Administrative Agent, in substantially the form of Exhibit A-1 or Exhibit A-2, as applicable, or any other form approved by the Administrative Agent.
4
Assignment Taxes shall have the meaning given to such term in SECTION 2.23(b).
Attributable Indebtedness means, on any date, in respect of any Capitalized Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP as in effect on the Closing Date.
Audited Financial Statements means the audited consolidated balance sheet of the Company and its consolidated subsidiaries for the fiscal years ending January 30, 2010, January 31, 2009 and February 2, 2008, and the related consolidated statements of income, stockholders equity and cash flows of the Company and its consolidated Subsidiaries.
Availability means the lesser of (a) and (b), where:
(a) is the result of:
(i) The Revolving Credit Ceiling,
Minus
(ii) The aggregate outstanding amount of Credit Extensions to, or for the account of, the Borrowers; and
(b) is the result of the following, as applicable:
(i) if the FILO Commitments have been terminated, the result of:
(A) The Tranche A Borrowing Base, as determined from the most recent Borrowing Base Certificate (delivered by the Lead Borrower to the Administrative Agent pursuant to SECTION 5.01(e) hereof (as may be adjusted from time to time pursuant to SECTION 2.03 hereof));
Minus
(B) The aggregate outstanding amount of Credit Extensions to, or for the account of, the Borrowers; or
(ii) as long as the FILO Commitments are outstanding, the result of:
(A) The FILO Borrowing Base, as determined from the most recent Borrowing Base Certificate (delivered by the Lead Borrower to the Administrative Agent pursuant to SECTION 5.01(e) hereof (as may be adjusted from time to time pursuant to SECTION 2.03 hereof)),
Minus
(B) The aggregate outstanding amount of Credit Extensions to, or for the account of, the Borrowers.
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Availability Reserves means, without duplication of any other Reserves or items that are otherwise addressed or excluded through eligibility criteria, such reserves as the Administrative Agent, from time to time determines in its Permitted Discretion (a) to reflect any impediments to the realization upon the Collateral included in the Tranche A Borrowing Base or the FILO Borrowing Base (including, without limitation, claims and liabilities that the Administrative Agent determines will need to be satisfied in connection with the realization upon such Collateral), (b) to reflect events, conditions, contingencies or risks which adversely affect any component of the Tranche A Borrowing Base or the FILO Borrowing Base, the Collateral or the validity or enforceability of this Agreement or the other Loan Documents or any of the material rights or remedies of the Secured Parties hereunder or thereunder, and (c) to reflect any restrictions in the Senior Note Documents or the Term Loan Facility on the incurrence of Indebtedness by the Loan Parties, but only to the extent that such restrictions reduce, or with the passage of time could reduce, the amounts available to be borrowed hereunder (including, without limitation as a result of the Loan Parties receipt of net proceeds from asset sales) in order for the Loan Parties to comply with the Senior Note Documents or the Term Loan Facility. Availability Reserves shall include, without limitation, and without duplication, the Cash Management Reserves and Bank Product Reserves.
Average Daily Availability Percentage for any period, the average of the percentages calculated for each day during such period by dividing (a) Availability by (b) the lesser of (i) the FILO Borrowing Base (or if the FILO Commitments have been terminated, the Tranche A Borrowing Base) and (ii) the Revolving Credit Ceiling.
Average Daily Used Commitment Percentage for any period, the average of the percentages calculated for each day during such period by dividing (a) as to the Tranche A Lenders, (i) the sum of (A) the principal amount of Tranche A Loans (other than Swingline Loans) of the Borrowers then outstanding, and (B) the then Letter of Credit Outstandings by (ii) the then aggregate Tranche A Commitments; and (b) as to the FILO Lenders, (i) the principal amount of FILO Loans of the Borrowers then outstanding by (ii) the then aggregate FILO Commitments.
Bank of America means Bank of America, N.A., a national banking association, and its Subsidiaries and Affiliates.
Bank Products means, collectively, (a) any services or facilities (other than Cash Management Services) provided to any Loan Party or any of its Subsidiaries by any Lender or any Affiliate of a Lender on account of (i) credit cards, (ii) purchase cards, and (iii) merchant services constituting a line of credit, and (b) any Swap Contracts provided to any Loan Party or any of its Subsidiaries by any Swap Contract Secured Party, designated by the Lead Borrower at the time such Swap Contract is entered into or a reasonable period thereafter as being Obligations under this Agreement, provided that (x) any Bank Product for the benefit of any Foreign Subsidiary shall name a Borrower as the party thereto and (y) any Swap Contract provided by the Administrative Agent or its Affiliates shall automatically be Obligations under this Agreement and no designation shall be required on the part of the Lead Borrower.
Bank Product Reserves means such reserves as the Administrative Agent, from time to time after the occurrence and during the continuation of a Cash Dominion Event, determines in
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its Permitted Discretion as being appropriate to reflect the reasonably anticipated liabilities and obligations of the Loan Parties with respect to Bank Products then provided or outstanding.
Bankruptcy Code means Title 11 of the United States Code (11 U.S.C. Section 101 et seq.) as now or hereafter in effect, or any successor thereto.
Blocked Account has the meaning provided in SECTION 2.18(c).
Blocked Account Agreement has the meaning provided in SECTION 2.18(c).
Blocked Account Banks means the banks with whom Material DDAs are maintained and with whom a Blocked Account Agreement has been, or is required to be, executed in accordance with the terms hereof.
Borrower Materials has the meaning given to such term in the last paragraph of SECTION 5.02.
Borrower Notice shall have the meaning given to such term in the definition of Collateral and Guarantee Requirement.
Borrowers means, collectively, the Lead Borrower, the Borrowers identified on the signature pages hereto and each other Person (other than an Excluded Subsidiary) who becomes a Borrower hereunder in accordance with the terms of this Agreement. For the avoidance of doubt, the Lead Borrower may cause any Restricted Subsidiary that is a wholly-owned Domestic Subsidiary to become a Borrower hereunder by causing such Restricted Subsidiary to execute a joinder to this Agreement and the other Loan Documents and taking such other actions, and delivering such other documents, agreements and certificates as shall reasonably be requested by the Administrative Agent, including under applicable know your customer and anti-money laundering rules and regulations, including without limitation the USA PATRIOT Act, and any applicable items described in SECTION 5.11(a), and any such Restricted Subsidiary shall, after such conditions have been satisfied, be treated as a Borrower hereunder for all purposes.
Borrowing means (a) the incurrence of Revolving Credit Loans (other than Swingline Loans) of a single Type, on a single date and having, in the case of LIBO Loans, a single Interest Period, or (b) a Swingline Loan.
Borrowing Base Certificate has the meaning provided in SECTION 5.01(e).
Borrowing Request means a request by the Lead Borrower on behalf of any of the Borrowers for a Borrowing in accordance with SECTION 2.04.
Breakage Costs has the meaning provided in SECTION 2.16(c).
Business Day means any day that is not a Saturday, Sunday or other day on which commercial banks in Boston, Massachusetts and New York, New York are authorized or required by law to remain closed (or are in fact closed), provided, however, that when used in connection with a LIBO Loan, the term Business Day shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.
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Canadian Credit Facility shall have the meaning given to such term in SECTION 2.26.
Canadian Subsidiary means any Subsidiary that is organized under the laws of Canada or any province thereof.
Capital Expenditures means, for any period, the aggregate of (a) all amounts that would be reflected as additions to property, plant or equipment on a Consolidated statement of cash flows of the Lead Borrower and its Restricted Subsidiaries in accordance with GAAP and (b) the value of all assets under Capitalized Leases incurred by the Lead Borrower and its Restricted Subsidiaries during such period; provided that the term Capital Expenditures shall not include (i) any additions to property and equipment and other capital expenditures made with the proceeds of any equity securities issued or capital contributions received by any Loan Party or any Subsidiary, (ii) expenditures made in connection with the replacement, substitution, restoration or repair of assets to the extent financed with (x) insurance proceeds paid on account of the loss of or damage to the assets being replaced, substituted, restored or repaired or (y) awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced, (iii) the purchase price of equipment that is purchased substantially concurrently with the trade-in of existing equipment to the extent that the gross amount of such purchase price is reduced by the credit granted by the seller of such equipment for the equipment being traded in at such time, (iv) the purchase of plant, property or equipment to the extent financed with the proceeds of Dispositions that are not required to be applied to prepay the Obligations or the Term Loan Facility or any obligations under any Permitted Refinancing thereof, (v) expenditures that are accounted for as capital expenditures by the Lead Borrower or any Restricted Subsidiary and that actually are paid for by a Person other than the Lead Borrower or any Restricted Subsidiary and for which none of the Lead Borrower or any Restricted Subsidiary has provided or is required to provide or incur, directly or indirectly, any consideration or obligation to such Person or any other Person (whether before, during or after such period) other than rent and similar or related obligations or (vi) expenditures that constitute Permitted Acquisitions or other Investments permitted hereunder (but the term Capital Expenditures shall include all expenditures made with the proceeds of such Investments by the recipient thereof that would otherwise constitute Capital Expenditures).
Capitalized Leases means all leases that have been or should be, in accordance with GAAP as in effect on the Closing Date, recorded as capitalized leases; provided that for all purposes hereunder the amount of obligations under any Capitalized Lease shall be the amount thereof accounted for as a liability in accordance with GAAP as in effect on the Closing Date.
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, without limitation, 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.
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Cash Collateral Account means an interest bearing account established by the Loan Parties with the Collateral Agent, for its own benefit and the benefit of the other Secured Parties, under the sole and exclusive dominion and control of the Collateral Agent, in the name of the Collateral Agent or as the Collateral Agent shall otherwise direct, in which deposits are required to be made in accordance with SECTION 2.13(j).
Cash Dominion Event means either (a) the occurrence and continuance of any Specified Default, or (b) the failure of the Borrowers to maintain Availability at least equal to the greater of (i) fifteen percent (15%) of the lesser of (A) the then FILO Borrowing Base (or, if the FILO Commitments have been terminated, the then Tranche A Borrowing Base) and (B) the then Revolving Credit Ceiling, and (ii) $25,000,000, in each case of this clause (b), for five (5) consecutive Business Days. For purposes of this Agreement, the occurrence of a Cash Dominion Event shall be deemed continuing (unless the Administrative Agent otherwise agrees in its reasonable discretion that the circumstances surrounding such Specified Default cease to exist) (a) so long as such Specified Default is continuing or has not been waived, and/or (b) if the Cash Dominion Event arises as a result of the Borrowers failure to achieve Availability as required under clause (b) above, until Availability has exceeded the amount required by clause (b) above for thirty (30) consecutive days, in which case a Cash Dominion Event shall no longer be deemed to be continuing for purposes of this Agreement, provided that a Cash Dominion Event may not be so cured on more than three (3) occasions in any period of 365 consecutive days.
Cash Equivalents means any of the following types of Investments, to the extent owned by Holdings, the Lead Borrower or any Restricted Subsidiary:
(a) Dollars, Australian Dollars, Canadian Dollars and euros;
(b) in the case of any Foreign Subsidiary, such local currencies held by them from time to time in the ordinary course of business and not for speculation;
(c) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of issuance thereof;
(d) investments in commercial paper maturing within 270 days from the date of issuance thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moodys;
(e) investments in demand deposits, certificates of deposit, bankers acceptances and time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, the Administrative Agent or any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000 and that issues (or the parent of which issues) commercial paper rated at least Prime 1
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(or the then equivalent grade) by Moodys or A 1 (or the then equivalent grade) by S&P;
(f) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (c) above and entered into with a financial institution satisfying the criteria of clause (e) above;
(g) investments in money market funds within the meaning of Rule 2a-7 of the Investment Company Act of 1940, as amended, substantially all of whose assets are invested in investments of the type described in clauses (a) through (e) above; and
(h) other short-term investments utilized by Foreign Subsidiaries in accordance with normal investment practices for cash management in investments of a type analogous to the foregoing.
Cash Management Reserves means such reserves as the Administrative Agent, from time to time after the occurrence and during the continuation of a Cash Dominion Event, determines in its Permitted Discretion as being appropriate to reflect the reasonably anticipated liabilities and obligations of the Loan Parties with respect to Cash Management Services then provided or outstanding.
Cash Management Services means any one or more of the following types of services or facilities provided to any Loan Party or any of its Subsidiaries by any Lender or any Affiliate of a Lender: (a) ACH transactions, (b) treasury and/or cash management services, including, without limitation, controlled disbursement services, depository, overdraft and electronic funds transfer services, (c) foreign exchange facilities, (d) credit or debit cards, (e) deposit and other accounts, and (f) merchant services (other than those constituting a line of credit). For the avoidance of doubt, Cash Management Services do not include Swap Contracts.
Cash Receipts has the meaning provided in SECTION 2.18(d).
Casualty Event means any event that gives rise to the receipt by the Lead Borrower or any of its Restricted Subsidiaries of any insurance proceeds or condemnation awards in respect of any Inventory, equipment, fixed assets or Real Estate (including any improvements thereon).
CERCLA means the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq.
CERCLIS means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.
Change in Control means any of the following:
(a) at any time prior to a Qualifying IPO, one or more Permitted Holders (taken collectively) shall fail to own beneficially (within the meaning of Rule 13d-5 of the Exchange Act as in effect on the Closing Date), directly or indirectly, in the aggregate Capital Stock representing at least a majority of the aggregate voting power represented by the issued and outstanding Capital Stock of Holdings; or
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(b) at any time after a Qualifying IPO, (i) any Person (other than a Permitted Holder) or (ii) any Persons (other than one or more Permitted Holders) constituting a group (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the Closing Date) shall have, directly or indirectly, acquired beneficial ownership of Capital Stock representing 35% or more of the aggregate voting power represented by the issued and outstanding Capital Stock of Holdings and the Permitted Holders shall own, directly or indirectly, less than such Person or group of the aggregate voting power represented by the issued and outstanding Capital Stock of Holdings or (ii) during each period of twelve consecutive months, the board of directors of Holdings shall not consist of a majority of the Continuing Directors; or
(c) any Change in Control (or any comparable term) in any document pertaining to the Term Loan Facility, the Senior Notes or any other Material Indebtedness; or
(d) the failure of Holdings to own one hundred percent (100%) of the Capital Stock of the Lead Borrower.
Change in Law means (a) the adoption of any Applicable Law after the Closing Date, (b) any change in any Applicable Law or in the interpretation or application thereof by any Governmental Authority after the Closing Date or (c) compliance by any Credit Party (or, for purposes of SECTION 2.14, by any lending office of such Credit Party or by such Credit Partys holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the Closing Date applicable to the Loan Parties. Notwithstanding anything herein to the contrary, the Dodd Frank Wall Street Reform and Consumer Protection Act, and all requests, regulations, rules, guidelines and directives promulgated thereunder, shall be deemed to have been adopted after the Closing Date, regardless of the date enacted or adopted.
Closing Date means November 23, 2010.
Code means the Internal Revenue Code of 1986 and the Treasury regulations promulgated thereunder, as amended from time to time.
Collateral means any and all Collateral, Pledged Collateral or words of similar intent as defined in any applicable Security Document.
Collateral Access Agreement means an agreement reasonably satisfactory in form and substance to the Collateral Agent executed by (a) a bailee or other Person in possession of Collateral, including, without limitation, any warehouseman and (b) a landlord of Real Estate leased by any Loan Party (including, without limitation, any warehouse or distribution center), pursuant to which such Person (i) acknowledges the Collateral Agents Lien on the Collateral, (ii) releases or subordinates such Persons Liens in the Collateral held by such Person or located on such Real Estate, (iii) agrees to furnish the Collateral Agent with access to the Collateral in such Persons possession or on the Real Estate for the purposes of conducting a Liquidation, and (iv) makes such other agreements with the Collateral Agent as the Collateral Agent may reasonably require.
Collateral Agent has the meaning provided in the preamble to this Agreement.
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Collateral and Guarantee Requirement means, at any time, the requirement that:
(a) on the Closing Date, the Administrative Agent and the Collateral Agent shall have received each Security Document to the extent required to be delivered on the Closing Date pursuant to SECTION 4.01(a) and SECTION 4.01(e), subject to the limitations and exceptions of this Agreement, duly executed by each Loan Party party thereto;
(b) at all times on and after the Closing Date, the Obligations be secured by a perfected security interest in (i) all Capital Stock of (x) the Lead Borrower and (y) each Subsidiary of Holdings directly owned by any Loan Party and (ii) all intercompany debt directly owned by any Loan Party, in each case subject to exceptions and limitations otherwise set forth in this Agreement and the Security Documents (to the extent appropriate in the applicable jurisdiction);
(c) at all times on and after the Closing Date, the Obligations be secured by a perfected security interest in, and mortgage lien on, substantially all tangible and intangible assets of the Lead Borrower and each Restricted Subsidiary that is a Loan Party (including Capital Stock and intercompany debt, accounts, inventory, equipment, investment property, contract rights, IP Rights, other general intangibles, Material Real Estate and proceeds of the foregoing), in each case, subject to exceptions and limitations otherwise set forth in this Agreement and the Security Documents (to the extent appropriate in the applicable jurisdiction);
(d) subject to limitations and exceptions of this Agreement (for the avoidance of doubt, including the limitations and exceptions set forth in the proviso to SECTION 4.01(e)) and the Security Documents, to the extent a security interest in and mortgage lien on any Material Real Estate is required under SECTION 4.01 or SECTION 5.11 (together with any Material Real Estate that is subject to a Mortgage on the Closing Date, each, a Mortgaged Property), the Collateral Agent shall have received (i) counterparts of a Mortgage with respect to such Mortgaged Property duly executed and delivered by the record owner of such property in form suitable for filing or recording in all filing or recording offices that the Collateral Agent may reasonably deem necessary or desirable in order to create a valid and subsisting perfected Lien on the property and/or rights described therein in favor of the Collateral Agent for the benefit of the Secured Parties, and evidence that all filing and recording taxes and fees have been paid or otherwise provided for in a manner reasonably satisfactory to the Collateral Agent (it being understood that if a mortgage tax will be owed on the entire amount of the indebtedness evidenced hereby, then the amount secured by the Mortgage shall be limited to 100% of the fair market value of the property at the time the Mortgage is entered into if such limitation results in such mortgage tax being calculated based upon such fair market value), (ii) fully paid policies of title insurance (or marked-up title insurance commitments having the effect of policies of title insurance) on the Mortgaged Property (the Mortgage Policies) issued by a nationally recognized title insurance company reasonably acceptable to the Collateral Agent in form and substance and in an amount reasonably acceptable to the Collateral Agent (not to exceed 100% of the fair market value of the Real Estate (or interest therein, as applicable) covered thereby), insuring the Mortgages to be valid subsisting Liens on the property described therein, free and clear of all Liens other than Liens permitted pursuant to SECTION 6.01 each of which shall (A) to the extent reasonably necessary, include such reinsurance arrangements (with provisions for direct access, if reasonably necessary) as shall be reasonably acceptable to the Collateral Agent,
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(B) contain a tie-in or cluster endorsement, if available under applicable law (i.e., policies which insure against losses regardless of location or allocated value of the insured property up to a stated maximum coverage amount), (C) have been supplemented by such endorsements (or where such endorsements are not available, opinions of special counsel, architects or other professionals reasonably acceptable to the Collateral Agent) as shall be reasonably requested by the Collateral Agent (including endorsements on matters relating to usury, first loss, last dollar, zoning, contiguity, revolving credit (if available after the applicable Loan Party uses commercially reasonable efforts), doing business, non-imputation, public road access, variable rate, environmental lien, subdivision, mortgage recording tax, separate tax lot and so-called comprehensive coverage over covenants and restrictions), (iii) either (1) an American Land Title Association/American Congress of Surveying and Mapping (ALTA/ACSM) form of survey for which all charges have been paid, dated a date, containing a certification and otherwise being in form and substance reasonably satisfactory to the Collateral Agent or (2) such documentation as is sufficient to omit the standard survey exception to coverage under the Mortgage Policy with respect to such Mortgaged Property and affirmative endorsements reasonably requested by the Collateral Agent, including same as survey and comprehensive endorsements, (iv) legal opinions, addressed to the Collateral Agent and the Secured Parties, reasonably acceptable to the Collateral Agent as to such matters as the Collateral Agent may reasonably request, and (v) in order to comply with the Flood Laws, the following documents (the Pre-Close Flood Documents): (A) a completed standard life of loan flood hazard determination form (a Flood Determination Form); (B) if any of the improvement(s) to the improved Material Real Property is located in a special flood hazard area, a notification thereof to the Lead Borrower (Borrower Notice) and (if applicable) notification to the Lead Borrower that flood insurance coverage under the National Flood Insurance Program (NFIP) is not available because the community in which the property is located does not participate in the NFIP; (C) documentation evidencing the Lead Borrowers receipt of the Borrower Notice (e.g., countersigned Borrower Notice, return receipt of certified U.S. Mail, or overnight delivery); and (D) if the Borrower Notice is required to be given and flood insurance is available in the community in which the property is located, a copy of one of the following: the flood insurance policy, the Lead Borrowers application for a flood insurance policy plus proof of premium payment, a declaration page confirming that flood insurance has been issued, or such other evidence of flood insurance reasonably satisfactory to the Collateral Agent (any of the foregoing being Evidence of Flood Insurance); and
(e) after the Closing Date, each Restricted Subsidiary of the Lead Borrower that is not an Excluded Subsidiary shall become a Borrower or a Facility Guarantor and signatory to this Agreement pursuant to a joinder agreement in accordance with SECTION 5.11 or SECTION 5.13; provided that notwithstanding the foregoing provisions, any Subsidiary of the Lead Borrower that Guarantees the Senior Notes, the Term Loan Facility or any Permitted Refinancing of any thereof shall be a Loan Party hereunder for so long as it Guarantees such Indebtedness.
Notwithstanding the foregoing provisions of this definition or anything in this Agreement or any other Loan Document to the contrary:
(A) the foregoing definition shall not require, unless otherwise stated in this clause (A), the creation or perfection of pledges of, security interests in, Mortgages on, or the obtaining of title insurance or taking other actions with respect to, (i) any fee owned Real Estate that is not
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Material Owned Real Estate or (ii) any leased Real Estate that is not Material Leased Real Estate, provided, that if the grant of a security interest in or Mortgage on any leased Real Estate requires the consent of a landlord, the grant of such security interest or Mortgage shall not be required if such consent shall not have been obtained notwithstanding the use by the Lead Borrower and its Restricted Subsidiaries of commercially reasonable efforts (which shall not include the provision of any economic or other material concession to such landlord to secure such consent), (iii) motor vehicles and other assets subject to certificates of title and commercial tort claims where the amount of damages claimed by the applicable Loan Party is less than $5,000,000 and letter of credit rights (it being understood that all such assets and proceeds thereof shall constitute Collateral, even though perfection beyond a UCC filing is not required hereunder, to the extent a security interest can be created therein without a specific description thereof, without delivery of a supplement to a Security Document or without the taking of any action or obtaining the consent of any Person, including any Governmental Authority), (iv) any particular asset, if the pledge thereof or the security interest therein is prohibited by Applicable Law other than to the extent such prohibition is deemed ineffective under the UCC or other Applicable Law notwithstanding such prohibition, (v) Capital Stock in any joint venture or in any Subsidiary that is not a wholly owned Subsidiary, other than proceeds thereof, but only to the extent that the creation of a security interest in such Capital Stock is prohibited or restricted by the Organization Documents of such Person or by any contractual restriction contained in any agreement with third party holders of the other Capital Stock in such Person which holders are not Affiliates of the Lead Borrower (except to the extent that any such prohibition or restriction is deemed ineffective under the UCC or other applicable law), (vi) any rights of a Loan Party arising under or evidenced by any contract, lease, instrument, license or other agreement to the extent the pledges thereof and security interests therein are prohibited or restricted by such contract, lease, instrument, license or other agreement, other than proceeds and receivables thereof, except to the extent the pledge of such rights is deemed effective under the UCC or other Applicable Law or principle of equity notwithstanding such prohibition or restriction, or such prohibition or restriction is deemed ineffective under the UCC or other Applicable Law or principle of equity, (vii) licenses and any other property and assets to the extent that the Collateral Agent may not validly possess a security interest therein under Applicable Laws (including, without limitation, rules and regulations of any Governmental Authority) or the pledge or creation of a security interest in which would require governmental consent, approval, license or authorization (except that cash proceeds of dispositions thereof in accordance with Applicable Law (including, without limitation, rules and regulations of any Governmental Authority) shall constitute Collateral), provided that Collateral shall include to the maximum extent permitted by Applicable Law all rights incident or appurtenant to such licenses, property and assets (except to the extent any Lien on such asset in favor of the Collateral Agent requires consent, approval or authorization from any Governmental Authority) and the right to receive all proceeds realized from the sale, assignment or transfer of such licenses, property and assets, (viii) IP Rights to the extent a security interest therein may not be perfected by filing of a UCC financing statement and/or a filing in the United States Patent and Trademark Office or the United States Copyright Office and (ix) any particular assets if, in the reasonable judgment of the Administrative Agent or the Collateral Agent evidenced in writing, determined in consultation with the Lead Borrower, the burden, cost or consequences of creating or perfecting such pledges or security interests in such assets is excessive in relation to the practical benefits to be obtained therefrom by the Lenders under the Loan Documents;
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(B) (i) the foregoing definition shall not require control agreements (except as provided under SECTION 2.18) or, except with respect to Capital Stock or Indebtedness represented or evidenced by certificates or instruments and except as provided under SECTION 2.18 hereof, perfection by control with respect to any Collateral; (ii) no actions in any non-U.S. jurisdiction or required by the laws of any non-U.S. jurisdiction shall be required in order to create any security interests in assets located or titled outside of the U.S. or to perfect such security interests (it being understood that there shall be no security agreements or pledge agreements governed under the laws of any non-U.S. jurisdiction); and (iii) except to the extent that perfection and priority may be achieved (x) by the filing of a financing statement under the UCC with respect to any Borrower or Facility Guarantor, (y) with respect to Real Estate and the recordation of Mortgages in respect thereof, as contemplated by clauses (A) above or (z) with respect to Capital Stock or Indebtedness, by the delivery of certificates or instruments representing or evidencing such Capital Stock or Indebtedness along with appropriate undated instruments of transfer executed in blank, the Loan Documents shall not contain any requirements as to perfection or priority with respect to any assets or property described in clause (A) above and this clause (B);
(C) the Collateral Agent in its discretion may grant extensions of time for the creation or perfection of security interests in, and Mortgages on, or obtaining of title insurance or taking other actions with respect to, particular assets or any other compliance with the requirements of this definition where it reasonably determines in writing, in consultation with the Lead Borrower, that the creation or perfection of security interests and Mortgages on, or obtaining of title insurance or taking other actions, or any other compliance with the requirements of this definition cannot be accomplished without undue delay, burden or expense by the time or times at which it would otherwise be required by this Agreement, or the Security Documents; provided that on or prior to the Closing Date, (i) the Collateral Agent shall have received UCC financing statements in appropriate form for filing under the UCC in the jurisdiction of incorporation or organization of each Loan Party, and (ii) Term Loan Agent shall have received (subject to the Intercreditor Agreement) any certificates or instruments representing or evidencing Equity Interests of (x) the Lead Borrower and (y) each wholly owned Domestic Subsidiary of the Lead Borrower or any Loan Party that is not excluded from the Collateral, in each case accompanied by instruments of transfer and stock powers undated and endorsed in blank; and
(D) Liens required to be granted from time to time pursuant to the Collateral and Guarantee Requirement shall be subject to exceptions and limitations set forth in this Agreement and the Security Documents. The Collateral and Guarantee Requirement shall be subject to SECTION 5.13(c).
(E) For so long as the Term Loan Facility or any Permitted Refinancing thereof is outstanding, the Loan Parties shall only be required to grant Liens with respect to any Term Priority Collateral, to perfect the Collateral Agents security interest in any Term Priority Collateral or to take any other actions or deliver any documents with respect to such grant or perfection, to the extent that comparable actions have been taken or documents have been delivered to the Term Loan Agent (or any agent or trustee with respect to any Permitted Refinancing of the Term Loan Facility) with respect to such Term Priority Collateral.
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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 a Borrower or a Restricted Subsidiary in the ordinary course of business of such Borrower or Restricted Subsidiary.
Commitment shall mean, with respect to each Lender, the aggregate commitments of such Lender hereunder to make Credit Extensions (including Tranche A Loans and FILO Loans) to the Borrowers in the amount set forth opposite its name on Schedule 1.1 hereto or as may subsequently be set forth in the Register from time to time, as the same may be increased or reduced from time to time pursuant to SECTIONS 2.02 and 2.15 of this Agreement.
Commitment Increase shall have the meaning provided in SECTION 2.02(a).
Commitment Increase Date shall have the meaning provided in SECTION 2.02(e).
Commitment Percentage shall mean, with respect to each Lender, that percentage of the Commitments of all Lenders hereunder to make Credit Extensions to the Borrowers, in the amount set forth opposite such Lenders name on Schedule 1.1 hereto or as may subsequently be set forth in the Register from time to time, as the same may be increased or reduced from time to time pursuant to SECTIONS 2.02 and 2.15 of this Agreement, or if the Commitments have been terminated, such percentage as calculated immediately prior to such termination.
Compliance Certificate has the meaning provided in SECTION 5.02(b).
Company shall have the meaning assigned to such term in the preamble to this Agreement.
Concentration Account has the meaning provided in SECTION 2.18(d).
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 position, cash flows, or operating results of such Person and its Subsidiaries.
Consolidated Depreciation and Amortization Expense means with respect to any Person for any period, the total amount of depreciation and amortization expense, including the amortization of deferred financing fees of such Person and its Restricted Subsidiaries for such period on a Consolidated basis and otherwise determined in accordance with GAAP.
Consolidated EBITDA means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period
(a) increased (without duplication of either (1) any item described in any other clause, below, or (2) any item excluded in the calculation of Consolidated Net Income) by:
(i) provision for taxes based on income or profits or capital, including, without limitation, state, franchise and similar taxes (such as the Pennsylvania capital tax and Texas margin tax) and foreign withholding taxes of such Person
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paid or accrued during such period to the extent the same were deducted (and not added back) in computing Consolidated Net Income; plus
(ii) Consolidated Interest Expense of such Person for such period plus (A) amounts excluded from Consolidated Interest Expense as set forth in clauses (i) through (vii) of the definition thereof, to the extent the same were deducted (and not added back) in calculating such Consolidated Net Income and (B) to the extent not reflected in Consolidated Interest Expense, letter of credit fees and bank fees and costs of surety bonds in connection with financing activities (whether amortized or immediately expensed); plus
(iii) Consolidated Depreciation and Amortization Expense of such Person for such period to the extent the same were deducted (and not added back) in computing Consolidated Net Income; plus
(iv) any non-cash charges, including (i) any write offs or write downs, (ii) equity based awards compensation expense, (iii) losses on sales, disposals or abandonment of, or any impairment charges or asset write off, related to intangible assets, long-lived assets and investments in debt and equity securities, (iv) all losses from investments recorded using the equity method, and (v) other non-cash charges, non-cash expenses or non-cash losses reducing Consolidated Net Income for such period (provided that if any such non-cash charges referred to in clauses (i) through (v) of this clause represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period); plus
(v) the amount of any minority interest expense consisting of Subsidiary income attributable to minority equity interests of third parties in any non-wholly-owned Subsidiary deducted (and not added back) in such period in calculating Consolidated Net Income; plus
(vi) Advisory Fees paid or accrued in such period to the Sponsors to the extent otherwise permitted hereunder and deducted (and not added back) in such period in computing Consolidated Net Income; plus
(vii) the amount of net cost savings, operating expense reductions and synergies (other than with respect to Specified Transactions) projected by the Lead Borrower in good faith to be realized as a result of specified actions (1) taken during the period for which Consolidated EBITDA is being determined (EBITDA Determination Period) (but in any event taken no later than 24 months after the Closing Date) or (2) committed or expected, prior to or during the EBITDA Determination Period, to be taken during such period or thereafter (but in any event taken no later than 24 months after the Closing Date) (calculated on a Pro Forma Basis as though such cost savings operating expense reductions and synergies had been realized on the first day of such period), net of the amount
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of actual benefits realized during such period from such actions; provided that (w) such cost savings, operating expense reductions and synergies are reasonably identifiable, quantifiable and factually supportable in the good faith judgment of the Lead Borrower, (x) such actions are taken, committed to be taken or expected to be taken within 24 months after the Closing Date, (y) no cost savings operating expense reductions and synergies, operating expense reductions and synergies shall be added pursuant to this clause (vii) to the extent duplicative of any expenses or charges otherwise added to Consolidated EBITDA, whether through a pro forma adjustment or otherwise, for such period and (z) the aggregate amount of such cost savings operating expense reductions and synergies do not exceed in the aggregate the greater of (A) $30,000,000 and (B) 10.0% of Consolidated EBITDA in any four consecutive Fiscal Quarters; provided further that projected amounts (and not yet realized) may no longer be added in calculating Consolidated EBITDA pursuant to this clause (a)(vii) to the extent occurring more than four full fiscal quarters after the specified action taken in order to realize such projected cost savings; plus
(viii) any costs or expense incurred by the Lead Borrower or a Restricted Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such cost or expenses are funded with cash proceeds contributed to the capital of the Lead Borrower or net cash proceeds of an issuance of Capital Stock of the Lead Borrower (other than Disqualified Capital Stock); plus
(ix) any net loss from disposed or discontinued operations; plus
(x) cash receipts (or any netting arrangements resulting in reduced cash expenditures) not representing EBITDA or Net Income in any period to the extent non-cash gains relating to such income were deducted in the calculation of Consolidated EBITDA pursuant to clause (b) below for any previous period,
(b) decreased by (without duplication)
(i) non-cash gains increasing Consolidated Net Income of such Person for such period, excluding any non-cash gains to the extent they represent the reversal of an accrual or reserve for a potential cash item that reduced Consolidated EBITDA in any prior period and any non-cash gains with respect to cash actually received in such period or received in a prior period so long as such cash did not increase EBITDA in such prior period; plus
(ii) any net income from disposed or discontinued operations; and
(c) increased or decreased by (without duplication), as applicable, any adjustments resulting from the application of FASB Interpretation No. 45 (Guarantees).
Notwithstanding anything to the contrary contained herein, for purposes of determining Consolidated EBITDA under this Agreement for any period that includes any of the fiscal
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quarters ended October 30, 2010, July 31, 2010 and May 1, 2010, Consolidated EBITDA for such fiscal quarters shall be $74,400,000, $33,386,000 and $63,250,000, respectively.
Consolidated Fixed Charge Coverage Ratio means, with respect to the Lead Borrower and its Restricted Subsidiaries for any period, the ratio of (a) (i) Consolidated EBITDA for such period, plus (ii) Net Proceeds of capital contributions received or Permitted Equity Issuances made during such period to the extent used to make payments on account of Debt Service Charges or Taxes, minus (iii) Capital Expenditures paid in cash during such period and which are not financed with Net Proceeds of Permitted Indebtedness (other than the Obligations) or equity issuances during such period, minus (iv) federal, state and foreign income Taxes paid in cash (net of cash refunds received) during such period to (b) the sum of (i) Debt Service Charges payable in cash during such period plus (ii) Restricted Payments permitted by SECTION 6.06(k) paid in cash to the holders of Capital Stock of the Lead Borrower during such period (but excluding Restricted Payments to the extent funded by an issuance by the Lead Borrower of Permitted Indebtedness, a Permitted Equity Issuance or a capital contribution to the Lead Borrower).
Consolidated Interest Expense means, with respect to the Lead Borrower and its Restricted Subsidiaries on a Consolidated basis for any period, determined in accordance with GAAP, (a) total interest expense payable in cash (including that attributable to obligations with respect to Capitalized Leases in accordance with GAAP in effect on the Closing Date but excluding any imputed interest as a result of purchase accounting) of the Lead Borrower and its Restricted Subsidiaries on a Consolidated basis with respect to all outstanding Indebtedness of the Lead Borrower and its Restricted Subsidiaries, including, without limitation, the Obligations and all commissions, discounts and other fees and charges owed with respect thereto, but excluding (i) any non-cash interest or deferred financing costs, (ii) any amortization or write-down of deferred financing fees, debt issuance costs, discounted liabilities, commissions, fees and expenses, (iii) the accretion or accrual of discounted liabilities, (iv) all non-recurring cash interest expense including liquidated damages for failure to timely comply with registration rights obligations and any non-recurring expense or loss attributable to the early extinguishment or conversion of Indebtedness, (v) in connection with the determination of the Consolidated Fixed Charge Coverage Ratio for any purpose other than clause (vi) below, any expensing of bridge, commitment and other financing fees, (vi) in connection with the determination of the Consolidated Fixed Charge Coverage Ratio for the purpose of determining the amount available for Restricted Payments under SECTION 6.06 and for prepayments of Indebtedness under SECTION 6.11, any expensing of bridge, commitment and other financing fees only to the extent reasonably approved in good faith by the Administrative Agent (which approval for purposes of SECTION 6.06 and SECTION 6.11 only, shall not be required if Availability at the time of determination and after giving effect to the Specified Payment, is greater than or equal to the lesser of (x) twenty percent (20.00%) of the then FILO Borrowing Base (or if the FILO Commitments have been terminated, the then Tranche A Borrowing Base) or (y) the then Revolving Credit Ceiling), and (vii) penalties and interest related to Taxes, and reduced by interest income received or receivable in cash for such period. For purposes of the foregoing, interest expense of the Lead Borrower and its Restricted Subsidiaries shall be determined after giving effect to any net payments made or received by such Persons with respect to interest rate Swap Contracts.
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Consolidated Net Income means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP; provided, however, that, without duplication,
(a) any after-tax effect of extraordinary, non-recurring or unusual gains or losses (less all fees and expenses relating thereto) or expenses; Transaction Expenses to the extent incurred on or prior to December 31 2011; Public Company Costs; severance; relocation costs; integration costs; pre-opening, opening, consolidation and closing costs for facilities (including Stores); signing, retention or completion bonuses; transition costs; costs incurred in connection with acquisitions after the Closing Date; restructuring costs; and curtailments or modifications to pension and post-retirement employee benefit plans shall be excluded; provided that in connection with the determination of the Consolidated Fixed Charge Coverage Ratio for the purpose of determining the amount available for Restricted Payments under SECTION 6.06 and for prepayments of Indebtedness under SECTION 6.11, any such items which are cash gains, losses, costs or expenses shall be excluded only to the extent reasonably approved in good faith by the Administrative Agent (which approval for purposes of SECTION 6.06 and SECTION 6.11 shall not be required if Availability at the time of determination and after giving effect to the Specified Payment, is greater than or equal to the lesser of (x) twenty percent (20.00%) of the then FILO Borrowing Base (or if the FILO Commitments have been terminated, the then Tranche A Borrowing Base) or (y) the then Revolving Credit Ceiling);
(b) the Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period,
(c) any net after-tax gains or losses on disposal of disposed, abandoned or discontinued operations shall be excluded,
(d) any after-tax effect of gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions other than in the ordinary course of business, as determined in good faith by the Lead Borrower, shall be excluded,
(e) the Net Income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Lead Borrower shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) to the referent Person or a Restricted Subsidiary thereof in respect of such period by such Person,
(f) solely for the purpose of determining the amount available for Restricted Payments under SECTION 6.06 and for prepayments of Indebtedness under SECTION 6.11, the Net Income for such period of any Restricted Subsidiary (other than any Borrower or Facility Guarantor) shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary or
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its stockholders, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived, provided that Consolidated Net Income of the Lead Borrower will be increased by the amount of dividends or other distributions or other payments actually paid in cash (or to the extent converted into cash) to the Lead Borrower or a Restricted Subsidiary thereof in respect of such period, to the extent not already included therein,
(g) effects of fair value adjustments (including the effects of such adjustments pushed down to the Lead Borrower and its Restricted Subsidiaries) in the merchandise inventory, property and equipment, goodwill, intangible assets, deferred revenue and debt line items in such Persons consolidated financial statements pursuant to GAAP resulting from the application of purchase accounting in relation to the Transactions or any consummated acquisition or the amortization or write-off or removal of revenue otherwise recognizable of any amounts thereof, net of taxes, shall be excluded or included in the case of lost revenue from fair value adjustments made to any deferred revenue or deferred credit accounts,
(h) any after-tax effect of income (loss) from the early extinguishment or conversion of Indebtedness or Swap Contracts or other derivative instruments shall be excluded, provided that in connection with the determination of the Consolidated Fixed Charge Coverage Ratio for the purpose of determining the amount available for Restricted Payments under SECTION 6.06 and for prepayments of Indebtedness under SECTION 6.11, any such items shall be excluded only to the extent reasonably approved in good faith by the Administrative Agent (which approval for purposes of SECTION 6.06 and SECTION 6.11 shall not be required if Availability at the time of determination and after giving effect to the Specified Payment, is greater than or equal to the lesser of (x) twenty percent (20.00%) of the then FILO Borrowing Base (or if the FILO Commitments have been terminated, the then Tranche A Borrowing Base) or (y) the then Revolving Credit Ceiling),
(i) any impairment charge or asset write-up, write-off or write-down, in each case, pursuant to GAAP and the amortization of intangibles arising pursuant to GAAP shall be excluded,
(j) any non-cash compensation charge or expense, including any such charge or expense arising from the grant of stock appreciation or similar rights, stock options, restricted stock or other equity-incentive programs and any cash charges associated with the rollover, acceleration or payment of management equity in connection with the Transactions shall be excluded,
(k) any fees and expenses incurred during such period, or any amortization or write-off thereof for such period, in connection with any Acquisition, Investment, Dispositions, issuance or repayment of Indebtedness, issuance of Capital Stock, refinancing transaction or amendment or modification of any debt instrument (in each case, including any such transaction consummated prior to the Closing Date and any such transaction undertaken but not completed) and any charges or non-recurring merger costs incurred during such period as a result of any such transaction shall be excluded, provided that in connection with the determination of the Consolidated Fixed Charge Coverage Ratio for the purpose of determining the amount available for Restricted Payments under SECTION 6.06 and for prepayments of Indebtedness under SECTION 6.11, any such items which are cash fees, expenses, charges or costs shall be excluded
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only to the extent reasonably approved in good faith by the Administrative Agent (which approval for purposes of SECTION 6.06 and SECTION 6.11 shall not be required if Availability at the time of determination and after giving effect to the Specified Payment, is greater than or equal to the lesser of (x) twenty percent (20.00%) of the then FILO Borrowing Base (or if the FILO Commitments have been terminated, the then Tranche A Borrowing Base) or (y) the then Revolving Credit Ceiling),
(l) any net gain or loss resulting from currency translation gains or losses related to currency remeasurements of Indebtedness (including any net loss or gain resulting from hedge agreements for currency exchange risk) and any foreign currency translation gains or losses shall be excluded,
(m) any unrealized net gains and losses resulting from Swap Contracts and the application of Statement of Financial Accounting Standards No. 133 shall be excluded, and
(n) accruals and reserves that are established or adjusted within twelve months after the Closing Date that are so required to be established as a result of the Transactions in accordance with GAAP or changes as a result of adoption or modification of accounting policies in accordance with GAAP shall be excluded.
In addition, to the extent not already included in the Net Income of such Person and its Restricted Subsidiaries, notwithstanding anything to the contrary in the foregoing, Consolidated Net Income shall include the amount of proceeds received from business interruption insurance and reimbursements of any expenses and charges that are covered by indemnification or other reimbursement provisions in connection with any Permitted Investment or any sale, conveyance, transfer or other disposition of assets permitted under this Agreement.
Continuing Directors means the directors of Holdings on the Closing Date, and each other director, if, in each case, such other directors nomination for election to the board of directors of Holdings is recommended by a majority of the then Continuing Directors or such other director receives the vote of the Sponsor in his or her election by the stockholders of Holdings.
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. The terms Controlling and Controlled have meanings correlative thereto.
Cost means the cost of the Loan Parties Inventory as determined in accordance with the Lead Borrowers accounting policies as in effect on the Closing Date and as reported on the Loan Parties stock ledger, as such policy may be modified with the consent of the Administrative Agent, whose consent will not be unreasonably withheld.
Credit Card Advance Rate means ninety percent (90%).
Credit Card Notifications has the meaning provided in SECTION 2.18(c).
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Credit Extensions as of any day, shall be equal to the sum of (a) the principal balance of all Revolving Credit Loans (including Swingline Loans) then outstanding, and (b) the then amount of the Letter of Credit Outstandings.
Credit Party means (a) the Lenders, (b) the Agents and their respective Affiliates and branches, (c) each Issuing Bank, (d) the Arranger and its Affiliates and branches and (e) the successors and permitted assigns of each of the foregoing.
Credit Party Expenses means, without limitation, all of the following to the extent incurred in connection with this Agreement and the other Loan Documents: (a) all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Collateral Agent and the Arranger, including the reasonable fees, charges and disbursements of one counsel for the Administrative Agent, the Collateral Agent and their Affiliates, taken as a whole (plus one local counsel in each other relevant jurisdiction to the extent reasonably necessary), outside consultants for the Administrative Agent and the Collateral Agent consisting of one inventory appraisal firm and one commercial finance examination firm in connection with the preparation and administration of the Loan Documents, the syndication of the credit facilities provided for herein, or any amendments, modifications or waivers requested by a Loan Party of the provisions hereof or thereof (whether or not any such amendments, modifications or waivers shall be consummated), (b) all reasonable out-of-pocket expenses incurred by any Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (c) all reasonable out-of-pocket expenses incurred by the Administrative Agent or the Collateral Agent and, subject to the proviso below, any Lender and their respective Affiliates and branches, including the reasonable fees, charges and disbursements of one counsel for the Administrative Agent, the Collateral Agent and their Affiliates, taken as a whole (plus one local counsel in each other relevant jurisdiction to the extent reasonably necessary), and outside consultants for the Administrative Agent and the Collateral Agent (including, without limitation, inventory appraisal firms and commercial finance examination firms) in connection with the enforcement and protection of their rights in connection with the Loan Documents, including all such out-of-pocket expenses incurred during any workout, restructuring or related negotiations in respect of such Revolving Credit Loans or Letters of Credit; provided that the Lenders, the Administrative Agent or the Collateral Agent or Affiliates of the Administrative Agent or the Collateral Agent shall be entitled to reimbursement for no more than one counsel representing all such Credit Parties (absent a conflict of interest in which case the Credit Parties may engage and be reimbursed for additional counsel in each relevant jurisdiction to the affected Credit Parties similarly situated taken as a whole). Credit Party Expenses shall not include the allocation of any overhead expenses of any Credit Party.
Customer Credit Liabilities means, at any time, the aggregate remaining balance reflected on the books and records of the Loan Parties at such time of (a) outstanding gift certificates and gift cards of the Loan Parties entitling the holder thereof to use all or a portion of the gift certificate or gift card to pay all or a portion of the purchase price for any Inventory, and (b) outstanding merchandise credits and customer deposits of the Loan Parties.
Customs Broker Agreement means an agreement in substantially the form attached hereto as Exhibit B (or such other form as may be reasonably satisfactory to the Administrative Agent) among a Loan Party, a customs broker or other carrier, and the Collateral Agent, in which
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the customs broker or other carrier acknowledges that it has control over and holds the documents evidencing ownership of, or other shipping documents relating to, the subject Inventory or other property for the benefit of the Collateral Agent, and agrees, upon notice from the Collateral Agent (which notice shall be delivered only upon the occurrence and during the continuance of an Event of Default), to hold and dispose of the subject Inventory and other property solely as directed by the Collateral Agent.
DDAs means any checking or other demand deposit account maintained by the Loan Parties. All funds in such DDAs shall be conclusively presumed to be Collateral and proceeds of Collateral and the Agents or the Lenders shall have no duty to inquire as to the source of the amounts on deposit in the DDAs.
Debt Service Charges means, for any period, the sum of (a) Consolidated Interest Expense required to be paid or paid in cash, plus (b) scheduled principal payments made or required to be made on account of Indebtedness for borrowed money, including the full amount of any non-recourse Indebtedness (after giving effect to any prepayments paid in cash that reduce the amount of such required payments) (excluding the Obligations and any AHYDO Amount as defined in the indenture for the Senior Notes, but including, without limitation, obligations with respect to Capitalized Leases) for such period, plus (c) scheduled mandatory payments on account of Disqualified Capital Stock (whether in the nature of dividends, redemption, repurchase or otherwise) required to be made during such period, in each case determined in accordance with GAAP.
Default means any event or condition described in SECTION 7.01 that constitutes an Event of Default or that upon notice, lapse of any cure period set forth in SECTION 7.01, or both, would, unless cured or waived, become an Event of Default.
Default Rate has the meaning provided in SECTION 2.12.
Delinquent Lender has the meaning provided in SECTION 8.16.
Deteriorating Lender means any Delinquent Lender or any Lender as to which the Administrative Agent and either of the Issuing Bank or the Swingline Lender reasonably determines that such Lender has defaulted in fulfilling its obligations under one or more other syndicated credit facilities.
Designated Account has the meaning provided in SECTION 2.18(d).
Disbursement Accounts has the meaning provided in SECTION 2.18(g).
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 Capital Stock 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.
Disqualified Capital Stock means any Capital Stock which, by its terms (or by the terms of any security or other Capital Stock into which it is convertible or for which it is
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exchangeable), is putable or exchangeable, or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Capital Stock (other than Disqualified Capital Stock)), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of all Obligations and the termination of the Commitments), (b) is redeemable at the option of the holder thereof (other than solely for Capital Stock (other than Disqualified Capital Stock)), in whole or in part, (c) provides for the scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Capital Stock that would constitute Disqualified Capital Stock, in each case, prior to the date that is ninety-one (91) days after the then Latest Maturity Date.
Documentation Agent means SunTrust Bank, in its capacity as Documentation Agent.
Documents has the meaning assigned to such term in the Security Agreement.
Dollars or $ refers to lawful money of the United States of America.
Domestic Subsidiary means any Subsidiary that is organized under the laws of the United States, any state thereof or the District of Columbia The term Domestic Subsidiary shall exclude (x) Gymboree Island, LLC, a Puerto Rico entity, and (y) Gymboree, Inc. (a corporation organized under the laws of the province of New Brunswick)/Gymboree Canada, Inc. (a Delaware corporation), a dual status entity.
Eligible Assignee means a commercial bank, insurance company, or company engaged in the business of making commercial loans or a commercial finance company, which Person, together with its Affiliates, has a combined capital and surplus in excess of $1,000,000,000, or any Affiliate of any Credit Party under common control with such Credit Party, or an Approved Fund of any Credit Party, provided that in any event, Eligible Assignee shall not include (x) any Loan Party, (y) any natural person or (z) any member of the Sponsor Group or any of their respective Affiliates; provided further that, members of the Sponsor Group may make purchases of Loans to the extent that, after giving effect thereto, the members of the Sponsor Group, collectively, would not hold in the aggregate more than 20% of the then outstanding Credit Extensions and provided still further that, any member of the Sponsor Group that holds Credit Extensions shall be subject to the restrictions contained in the definition of Sponsor Lender Limitations.
Eligible Credit Card Receivables means, as of any date of determination, Accounts due to a Borrower or a Subsidiary Facility Guarantor from major credit card and debit card processors (including, but not limited to, JCB, VISA, Mastercard, American Express, Diners Club, DiscoverCard, Interlink, NYCE, Star/Mac, Tyme, Pulse, Accel, AFF, Shazam, CU244, Alaska Option and Maestro) as arise in the ordinary course of business and which have been earned by performance and that are not excluded as ineligible by virtue of one or more of the criteria set forth below (without duplication of any Reserves established by the Administrative Agent). None of the following shall be deemed to be Eligible Credit Card Receivables:
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(a) Accounts due from major credit card and debit card processors that have been outstanding for more than five (5) Business Days from the date of sale, or for such longer period(s) as may be approved by the Administrative Agent in its Permitted Discretion;
(b) Accounts due from major credit card and debit card processors with respect to which a Borrower or a Subsidiary Facility Guarantor does not have good, valid and marketable title thereto, free and clear of any Lien (other than Liens granted to the Collateral Agent for its own benefit and the benefit of the other Secured Parties pursuant to the Security Documents, Liens in favor of the Term Loan Agent and/or any other agent or trustee under the Term Loan Facility or any Permitted Refinancing thereof, and Permitted Encumbrances);
(c) Accounts due from major credit card and debit card processors that are not subject to a first priority security interest in favor of the Collateral Agent for its own benefit and the benefit of the other Secured Parties (other than Permitted Encumbrances having priority by operation of Applicable Law over the Lien of the Collateral Agent) (the foregoing not being intended to limit the ability of the Administrative Agent to change, establish or eliminate any Reserves in its Permitted Discretion on account of any such Liens);
(d) Accounts due from major credit card and debit card processors which are disputed, or with respect to which a claim, counterclaim, offset or chargeback (other than chargebacks in the ordinary course by the credit card processors) has been asserted, by the related credit card processor (but only to the extent of such dispute, counterclaim, offset or chargeback);
(e) Except as otherwise approved by the Administrative Agent, Accounts due from major credit card and debit card processors as to which the credit card processor or debit card processor has the right under certain circumstances to require a Borrower or a Subsidiary Facility Guarantor to repurchase the Accounts from such credit card or debit card processor;
(f) Except as otherwise approved by the Administrative Agent, Accounts arising from any private label credit card program of a Borrower or a Subsidiary Facility Guarantor; and
(g) Accounts due from major credit card and debit card processors (other than JCB, Visa, Mastercard, American Express, Diners Club, DiscoverCard, Interlink, NYCE, Star/Mac, Tyme, Pulse, Accel, AFF, Shazam, CU244, Alaska Option and Maestro) which the Administrative Agent determines in its Permitted Discretion and upon notice to the Lead Borrower to be unlikely to be collected.
Eligible In-Transit Inventory means, as of any date of determination, without duplication of other Eligible Inventory or Eligible Letter of Credit Inventory, Inventory of a Borrower or a Subsidiary Facility Guarantor which meets the following criteria, as determined from time to time by the Administrative Agent in its Permitted Discretion: (a) such Inventory
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has been shipped from any foreign location for receipt by a Borrower or a Subsidiary Facility Guarantor within sixty (60) days of the date of determination and has not yet been received by a Borrower or a Subsidiary Facility Guarantor, (b) the purchase order for such Inventory is in the name of a Borrower or a Subsidiary Facility Guarantor and title has passed to a Borrower or a Subsidiary Facility Guarantor, (c) either (i) such Inventory is subject to a negotiable document of title, in form reasonably satisfactory to the Administrative Agent, which shall, except as otherwise agreed by the Administrative Agent in its Permitted Discretion, have been endorsed to the Administrative Agent or an agent acting on its behalf or (ii) such Inventory is evidenced by a non-negotiable document of title in form reasonably acceptable to the Administrative Agent, or other shipping document reasonably acceptable to the Administrative Agent, which names a Borrower or a Subsidiary Facility Guarantor as consignee, (d) from and after the date that is ninety (90) days after the Closing Date, (i) each relevant freight carrier, freight forwarder, customs broker, shipping company or other Person in possession of such Inventory and/or the documents relating to such Inventory, in each case, as reasonably requested by Administrative Agent, shall have entered into a Customs Broker Agreement and (ii) as reasonably requested by the Administrative Agent, the documents relating to such Inventory shall be in the possession of the Administrative Agent or an agent (or sub-agent) acting on its behalf, (e) except as otherwise agreed by the Administrative Agent in its Permitted Discretion, as to which payment in full has been made by a Borrower or a Subsidiary Facility Guarantor or as to which such Borrowers or such Subsidiary Facility Guarantors payment obligations are fully covered by a Letter of Credit which has been provided by such Borrower to the vendor of such Inventory (or an agent which shall provide payment in respect of such Inventory), in each case, pursuant to such arrangements as shall be reasonably satisfactory to the Administrative Agent, (f) such Inventory is insured in accordance with the provisions of this Agreement and the other Loan Documents, including, without limitation marine cargo insurance, (g) such Inventory is subject, to the reasonable satisfaction of the Administrative Agent, to a first priority perfected security interest in and lien upon such Inventory in favor of the Administrative Agent (except for any possessory lien upon such goods in the possession of a freight carrier or shipping company securing only the freight charges for the transportation of such goods to such Borrower or Subsidiary Facility Guarantor), and (h) such Inventory is not excluded from the definition of Eligible Inventory; provided that the Administrative Agent may, in its Permitted Discretion and upon notice to the Lead Borrower, exclude any particular Inventory from the definition of Eligible In-Transit Inventory in the event that the Administrative Agent determines in its Permitted Discretion and upon notice to the Lead Borrower that such Inventory is subject to any Persons right or claim which is (or is capable of being) senior to, or pari passu with, the Lien of the Administrative Agent (such as, without limitation, a right of reclamation or stoppage in transit), as applicable, or may otherwise adversely impact the ability of the Collateral Agent to realize upon such Inventory. Eligible In-Transit Inventory shall not include Inventory accounted for as in transit by the Lead Borrower by virtue of such Inventorys being in transit between the Loan Parties locations or in storage trailers at Loan Parties locations; rather such Inventory shall be treated as Eligible Inventory if it satisfies the conditions therefor.
Eligible Inventory means, as of any date of determination, items of Inventory of a Borrower or a Subsidiary Facility Guarantor that are finished goods, merchantable and readily saleable to the public in the ordinary course that are not excluded as ineligible by virtue of one or more of the criteria set forth below (without duplication of any Reserves established by the Administrative Agent) and which Inventory does not constitute Eligible Letter of Credit
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Inventory or Eligible In-Transit Inventory. None of the following shall be deemed to be Eligible Inventory:
(a) Inventory with respect to which a Borrower or a Subsidiary Facility Guarantor does not have good, valid and marketable title thereto, free and clear of any Lien (other than Liens granted to the Collateral Agent for its own benefit and the benefit of the other Secured Parties pursuant to the Security Documents, Liens in favor of the Term Loan Agent and/or any other agent or trustee under the Term Loan Facility or any Permitted Refinancing thereof, and Permitted Encumbrances (other than those described in SECTION 6.01(k)(ii))), or is leased by or is on consignment to a Borrower or a Subsidiary Facility Guarantor, or that is not solely owned by a Borrower or a Subsidiary Facility Guarantor;
(b) Inventory (other than any Eligible In-Transit Inventory) that (i) is not located in the United States of America, (ii) at a location that is not owned or leased by a Borrower or a Subsidiary Facility Guarantor, except to the extent that a Borrower or a Subsidiary Facility Guarantor has furnished the Collateral Agent with (A) any UCC financing statements, registration statements or other filings that the Collateral Agent may reasonably determine to be necessary to perfect its security interest in such Inventory at such location, and (B) unless otherwise agreed by the Administrative Agent (such agreement not to be unreasonably withheld), a Collateral Access Agreement executed by the Person owning any such location on terms reasonably acceptable to the Collateral Agent or (iii) is located at a play and music location or owned by Gymboree Play Programs, Inc.;
(c) Inventory that represents goods which (i) are damaged, defective, seconds, or otherwise unmerchantable, (ii) are to be returned to the vendor and which is no longer reflected in a Borrowers or a Subsidiary Facility Guarantors stock ledger, (iii) are special-order items, work in process, raw materials, or that constitute spare parts, shipping materials or supplies used or consumed in a Borrowers or a Subsidiary Facility Guarantors business, or (iv) are bill and hold goods;
(d) Except as otherwise agreed by the Administrative Agent in its Permitted Discretion, Inventory that represents goods that do not conform in all material respects to the representations and warranties contained in this Agreement or any of the Security Documents;
(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 benefit of the other Secured Parties (subject only to Permitted Encumbrances having priority by operation of Applicable Law);
(f) Inventory which consists of samples, labels, bags, packaging materials, and other similar non-merchandise categories (for greater clarity, display models are not deemed a non-merchandise category);
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(g) Inventory as to which casualty insurance in compliance with the provisions of SECTION 5.07 hereof is not in effect;
(h) Inventory which has been sold but not yet delivered or Inventory to the extent that a Borrower or a Subsidiary Facility Guarantor has accepted a deposit therefor and which is no longer reflected in a Borrowers or a Subsidiary Facility Guarantors stock ledger; and
(i) Inventory acquired in a Permitted Acquisition, unless the Administrative Agent shall have received or conducted (A) appraisals, from appraisers reasonably satisfactory to the Administrative Agent, of such Inventory to be acquired in such Acquisition and (B) such other due diligence as the Administrative Agent may reasonably require, all of the results of the foregoing to be reasonably satisfactory to the Administrative Agent. As long as the Administrative Agent has received reasonable prior notice of such Permitted Acquisition and the Borrowers and the Subsidiary Facility Guarantors reasonably cooperate (and cause the Person being acquired to reasonably cooperate) with the Administrative Agent, the Administrative Agent shall use reasonable best efforts to complete such due diligence and a related appraisal on or prior to the closing date of such Permitted Acquisition.
Eligible Letter of Credit Inventory means, as of any date of determination thereof, a Commercial Letter of Credit issued under this Agreement which supports the purchase of Inventory, (i) which Inventory does not constitute Eligible Inventory or Eligible In-Transit Inventory and for which no documents of title have then been issued; (ii) which Inventory when the purchase thereof is completed would otherwise constitute Eligible In-Transit Inventory, (iii) which Commercial Letter of Credit has an expiry, subject to the proviso hereto, that is 120 days or less from the date of determination, provided that ninety percent (90%) of the maximum Stated Amount of all such Commercial Letters of Credit shall not, at any time, have an initial expiry greater than ninety (90) days after the original date of issuance of such Commercial Letters of Credit, and (iv) 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 a Borrower or a Subsidiary Facility Guarantor or the Collateral Agent as consignee of such Inventory; provided that the Administrative Agent may, in its Permitted Discretion and upon notice to the Lead Borrower, exclude any particular Inventory from the definition of Eligible Letter of Credit Inventory in the event the Administrative Agent reasonably determines that such Inventory is subject to any Persons right or claim which is (or is capable of being) senior to, or pari passu with, the Lien of the Collateral Agent (such as, without limitation, a right of reclamation or stoppage in transit) or may otherwise adversely impact the ability of the Collateral Agent to realize upon such Inventory.
Eligible Trade Receivables means an Account owing to a Borrower or a Subsidiary Facility Guarantor that arises in the ordinary course of business from the sale of goods or rendition of services, is payable in Dollars and are not excluded as ineligible by one or more of the criteria set forth below. No Account shall be an Eligible Trade Receivable if:
(a) it is unpaid for more than 30 days after the original due date, or more than 60 days after the original invoice date;
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(b) 30% or more of the Accounts owing by the Account Debtor are not Eligible Trade Receivables under the foregoing clause;
(c) when aggregated with other Accounts owing by the Account Debtor, it exceeds 10% of the aggregate Eligible Trade Receivables (or such higher percentage as the Administrative Agent may, in its Permitted Discretion, establish for the Account Debtor from time to time) (it being understood that ineligibility shall be limited to the amount of such excess);
(d) it does not conform in all material respects with representations and warranties contained in the Loan Documents;
(e) it is owing by a creditor or supplier (unless such Person has waived any right of setoff in a manner reasonably acceptable to the Administrative Agent), or is otherwise subject to a potential offset, counterclaim, dispute, deduction, discount, recoupment, reserve, defense, chargeback, credit or allowance (but in each case, ineligibility shall be limited to the amount thereof);
(f) a proceeding under the Bankruptcy Code or other insolvency proceeding has been commenced by or against the Account Debtor; or the Account Debtor has failed, has suspended or ceased doing business, is liquidating, dissolving or winding up its affairs, or is not solvent; or the relevant Borrower or Subsidiary Facility Guarantor is not able to bring suit or enforce remedies against the Account Debtor through judicial process;
(g) the Account Debtor is organized or has its principal offices or assets outside the United States, unless such Account is backed by a letter of credit reasonably acceptable to the Administrative Agent (which issued by a bank reasonably acceptable to the Administrative Agent) and such letter of credit is subject to a first priority perfected Lien in favor of the Collateral Agent;
(h) it is owing by a Government Authority, unless the Account Debtor is the United States or any department, agency or instrumentality thereof and the Account has been assigned to Collateral Agent in compliance with the Assignment of Claims Act;
(i) it is not subject to a duly perfected, first priority Lien in favor of Agent, or is subject to any other Lien (other than a Lien in favor of the Term Loan Agent and/or an agent or trustee under the Term Loan Facility or any Permitted Refinancing thereof (subject to the Intercreditor Agreement) and Permitted Encumbrances);
(j) the goods giving rise to it have not been delivered to and accepted by the Account Debtor, the services giving rise to it have not been accepted by the Account Debtor, or it otherwise does not represent a final sale;
(k) it is evidenced by chattel paper or an instrument of any kind, or has been reduced to judgment;
(l) its payment has been extended, the Account Debtor has made a partial payment, or it arises from a sale on a cash-on-delivery basis;
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(m) it arises from (x) a sale to an Affiliate (including Holdings and its Restricted Subsidiaries, but excluding any other portfolio company of the Sponsor (subject to the requirements of SECTION 6.08(b)), (y) a sale on a bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval, consignment, or other repurchase or return basis, or (z) a sale to a Person for personal, family or household purposes;
(n) it represents a progress billing or retainage, or relates to services for which a performance, surety or completion bond or similar assurance has been issued;
(o) it includes a billing for interest, fees or late charges, but ineligibility shall be limited to the extent thereof;
(m) it represents a construction allowance; or
(n) except as otherwise agreed by the Administrative Agent, it is an Account that arises from the sale of gift cards.
In calculating delinquent portions of Accounts under clauses (a) and (b), credit balances more than 90 days old will be excluded.
Environmental Laws means all Applicable Laws relating to pollution, the protection of the environment, natural resources, or, to the extent relating to exposure to Hazardous Materials, human health or to the release of any materials into the environment, including those related to Hazardous Materials, air emissions and discharges to waste or public systems.
Environmental Liability means any liability, contingent or otherwise (including, without limitation, any liability for damages, natural resource damage, costs of environmental remediation, administrative oversight costs, fines, penalties or indemnities), of any Loan Party 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.
Equity Contribution means the cash contributions made on the Closing Date by the Sponsor to Merger Sub (indirectly through Holdings and one or more direct or indirect parents thereof and in exchange for common equity in Holdings or a direct or indirect parent thereof) in an aggregate amount equal to, when combined with the Management Investment (after giving effect to the making of the Management Investment after the Closing Date as contemplated by the definition of Management Investment), at least 30% of the Aggregate Consideration.
ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time and the regulations promulgated thereunder.
ERISA Affiliate means any trade or business (whether or not incorporated) that, together with Lead Borrower, is treated as a single employer under Section 414(b) or (c) of the
31
Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
ERISA Event means in the case of a Plan or Multiemployer Plan subject to ERISA, (a) any reportable event, as defined in Section 4043 of ERISA with respect to a Plan (other than an event for which the notice is waived); (b) the existence with respect to any Plan of an accumulated funding deficiency (as defined in Section 412 of the Code or Section 302 of ERISA) that would reasonably be expected to result in a Material Adverse Effect, whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Lead Borrower or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Lead Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Lead Borrower or any ERISA Affiliate of any liability that would reasonably be expected to result in a Material Adverse Effect with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Lead Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Lead Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability that would reasonably be expected to result in a Material Adverse Effect or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.
Event of Default has the meaning provided in SECTION 7.01.
Evidence of Flood Insurance shall have the meaning given to such term in the definition of Collateral and Guarantee Requirement.
Excess Amount has the meaning provided in SECTION 2.13(f).
Excess Swingline Loans has the meaning provided in SECTION 2.22(b).
Exchange Act means the Securities Exchange Act of 1934, as amended.
Excluded Subsidiary means (a) any Subsidiary that is not a wholly owned Subsidiary of a Loan Party, (b) any Subsidiary of the Lead Borrower that does not have total assets or annual revenues in excess of $20,000,000 individually; provided that the aggregate amount of assets or annual revenues of subsidiaries constituting Excluded Subsidiaries pursuant to this clause (b) shall not at any time exceed $20,000,000, (c) any Subsidiary that is prohibited by Applicable Law or contractual obligations existing on the Closing Date (or, in the case of any newly acquired Subsidiary, in existence at the time of acquisition but not entered into in contemplation thereof) from Guaranteeing the Obligations or if Guaranteeing the Obligations would require governmental (including regulatory) consent, approval, license or authorization, (d) any other Subsidiary with respect to which, in the reasonable judgment of the Administrative Agent, in consultation with the Lead Borrower, the burden or cost or other consequences (including any material adverse tax consequences) of providing a Guarantee of the Obligations shall be excessive in view of the benefits to be obtained by the Lenders therefrom, (e) any Foreign Subsidiary of the Lead Borrower or of any other direct or indirect Domestic Subsidiary
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or Foreign Subsidiary, (f) any Unrestricted Subsidiary, (g) any special purpose securitization vehicle (or similar entity), (h) any direct or indirect Domestic Subsidiary (x) that is treated as a disregarded entity for federal income tax purposes and (y) substantially all of the assets of which is the Capital Stock of a Foreign Subsidiary and (i) any Domestic Subsidiary that is a Subsidiary of a Foreign Subsidiary that is a controlled foreign corporation within the meaning of Section 957 of the Code.
Excluded Taxes means, with respect to any Credit Party or any other recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder, (a) income or franchise Taxes imposed on (or measured by) its gross or net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or imposed as a result of any present or former connection between the jurisdiction imposing such Tax and such recipient other than a connection arising solely as a result of such recipient having performed its obligations or received payment hereunder or under any Loan Document, or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits Taxes imposed by the United States of America or any similar Tax imposed by any other jurisdiction in which any Borrower or Facility Guarantor, as applicable, is located, (c) other than with respect to any Credit Party that is an assignee pursuant to a request by a Borrower under SECTION 2.24, any United States Tax that is imposed on amounts payable to such Credit Party at the time it becomes a party to this Agreement (or, in the case of a Foreign Lender, designates a New Lending Office other than the designation of a New Lending Office pursuant to SECTION 2.24), 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 Borrowers with respect to such Tax pursuant to SECTION 2.23(a), (d) Taxes attributable to a failure to comply with SECTION 2.23(e), (e) Taxes imposed by a jurisdiction as a result of any connection between such party and such jurisdiction other than any connection arising from executing, delivering, being a party to, engaging in any transactions pursuant to, performing its obligations under, or enforcing any Loan Document, or (f) any Tax to the extent imposed as a result of a Credit Partys (i) failure to comply with the applicable requirements of FATCA in such a way so as to reduce such Tax to zero or (ii) election under Section 1471(b)(3) of the Code.
Existing Credit Agreement means that certain credit agreement dated as of August 11, 2003 by and between the Company and Bank of America, as lender, as amended.
Existing Letters of Credit means each of the letters of credit and bankers acceptances issued or deemed issued under the Existing Credit Agreement (including, without limitation, the Existing Letters of Credit are set forth on Schedule 1.01(a) hereto).
Extended Commitments has the meaning provided in SECTION 2.27(a).
Extending Lenders has the meaning provided in SECTION 2.27(a).
Extension has the meaning provided in SECTION 2.27(a).
Extension Offer has the meaning provided in SECTION 2.27(a).
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Facility Guarantee means any Guarantee of the Obligations executed by any of the Loan Parties in favor of the Agents and the other Secured Parties.
Facility Guarantors means any Person (other than a Borrower) executing a Facility Guarantee, but in all events shall not include the Excluded Subsidiaries. As of the Closing Date, Holdings is the Facility Guarantor. For the avoidance of doubt, the Lead Borrower may cause any Restricted Subsidiary to become a Facility Guarantor hereunder by causing such Restricted Subsidiary to execute a joinder to this Agreement and the other Loan Documents and taking such other actions, and delivering such other documents, agreements and certificates as shall reasonably be requested by the Administrative Agent, including under applicable know your customer and anti-money laundering rules and regulations, including without limitation the USA PATRIOT Act, and any applicable items described in SECTION 5.11(a), and any such Restricted Subsidiary shall be treated as a Facility Guarantor hereunder for all purposes.
FATCA shall mean Sections 1471 through 1474 of the Code, as in effect on the date hereof, and any applicable Treasury regulation promulgated thereunder or published administrative guidance implementing such Sections whether in existence on the Closing Date or promulgated or published thereafter.
FCCR Initial Test Date means the date upon which an FCCR Trigger Event occurs.
FCCR Test Period means, for any date of determination under this Agreement, the most recent period of four consecutive Fiscal Quarters of the Lead Borrower ended on or prior to such date.
FCCR Trigger Event means, at any time, the failure of the Borrowers to maintain Availability at least equal to the greater of (i) twelve and one-half percent (12.5%) of the lesser of (A) the then FILO Borrowing Base (or, if the FILO Commitments have been terminated, the then Tranche A Borrowing Base) and (B) the then Revolving Credit Ceiling, and (ii) $20,000,000. For purposes of this Agreement, the occurrence of a FCCR Trigger Event shall be deemed continuing until Availability has exceeded the amount required by the first sentence of this definition for thirty (30) consecutive days, in which case a FCCR Trigger Event shall no longer be deemed to be continuing for purposes of this Agreement.
Federal Funds Effective Rate means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Effective 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 Effective Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent.
Fee Letter means the Fee Letter dated November 16, 2010 by and among Merger Sub, Bank of America, Merrill Lynch, Pierce, Fenner & Smith Incorporated and the other parties
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thereto, as amended, amended and restated supplemented or replaced and in effect from time to time.
FILO Borrowing Base means, at any time of calculation, an amount equal to:
(a) the face amount of Eligible Credit Card Receivables of the Loan Parties multiplied by the Credit Card Advance Rate;
plus
(b) the face amount of Eligible Trade Receivables of the Loan Parties multiplied by the Trade Receivables Advance Rate;
plus
(c) the Cost of Eligible Inventory of the Loan Parties (other than Eligible In-Transit Inventory), net of Inventory Reserves, multiplied by the Inventory Advance Rate for the FILO Borrowing Base multiplied by the Appraised Value of Eligible Inventory of the Loan Parties;
plus
(d) the Cost of Eligible In-Transit Inventory of the Loan Parties, net of Inventory Reserves, multiplied by the Inventory Advance Rate for the FILO Borrowing Base multiplied by the Appraised Value of Eligible In-Transit Inventory of the Loan Parties;
plus
(e) with respect to any Eligible Letter of Credit Inventory, (i) until the date that (x) the Lead Borrower has updated its internal accounting systems and controls so that they are capable of accurately distinguishing (without duplication) between items of Inventory which constitute Eligible Inventory and items of Inventory which constitute Eligible Letter of Credit Inventory, (y) the Lead Borrower has provided evidence reasonably satisfactory to the Administrative Agent of the satisfaction of the condition set forth in the preceding clause (x) and (z) the Administrative Agent has consented to the application of clause (e)(ii) hereof (which consent shall not be unreasonably withheld), the Interim Eligible Letter of Credit Inventory, net of Interim Letter of Credit Inventory Reserves, multiplied by the Inventory Advance Rate for the FILO Borrowing Base multiplied by the Appraised Value of Eligible Letter of Credit Inventory; and (ii) from and after the date that (A) the Lead Borrower has updated its internal accounting systems so that they are capable of accurately tracking distinguishing (without duplication) between items of Inventory which constitute Eligible Inventory and items of Inventory which constitute Eligible Letter of Credit Inventory, (B) the Lead Borrower has provided evidence reasonably satisfactory to the Administrative Agent of the satisfaction of the condition set forth in the preceding clause (A), and (C) the Administrative Agent has consented to the application of this clause (e)(ii) (which consent shall not be unreasonably withheld), the lesser of (x) the Cost of such Eligible Letter of Credit
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Inventory, net of Inventory Reserves, multiplied by the Inventory Advance Rate for the FILO Borrowing Base for such Inventory when completed, multiplied by the Appraised Value of such Eligible Letter of Credit Inventory or (y) the Stated Amount of the Letter of Credit relating to such Eligible Letter of Credit Inventory, multiplied by the Inventory Advance Rate for the FILO Borrowing Base, multiplied by the Appraised Value of such Eligible Letter of Credit Inventory;
minus
(f) the then amount of all Availability Reserves and any other Reserves taken in accordance with Section 2.03(b).
FILO Commitment shall mean, with respect to each FILO Lender, the commitment of such FILO Lender hereunder set forth as its FILO Commitment opposite its name on Schedule 1.1 hereto or as may subsequently be set forth in the Register from time to time, as the same may be reduced from time to time pursuant to this Agreement. On the Closing Date, the aggregate FILO Commitments are $12,000,000.
FILO Commitment Percentage shall mean, with respect to each FILO Lender, that percentage of the FILO Commitments of all Lenders hereunder to make FILO Loans to the Borrowers in the amount set forth opposite its name on Schedule 1.1 hereto or as may subsequently be set forth in the Register from time to time, as the same may be reduced from time to time pursuant to SECTION 2.15, or if the FILO Commitments have been terminated, such percentage as calculated immediately prior to such termination.
FILO Credit Extensions means FILO Loans and, if then applicable, the Excess Amount of Letters of Credit issued hereunder.
FILO Lender means each Lender which holds a FILO Commitment and any other Person who becomes a FILO Lender in accordance with the provisions of this Agreement.
FILO Loan means, collectively, the Revolving Credit Loans made by the FILO Lenders pursuant to SECTION 2.01(a)(vi).
Financial Performance Projections means (i) the projected Consolidated balance sheets, statements of income, and cash flows of the Lead Borrower and its Restricted Subsidiaries, (ii) the projected FILO Borrowing Base and Tranche A Borrowing Base and (iii) Availability forecasts, in each case, prepared by Holdings and the Lead Borrower (x) on a monthly basis for the twelve full Fiscal Months ended after the Closing Date, (y) on an annual basis through the term of this Agreement and (z) giving effect to the Transactions.
Financial Officer means, with respect to any Loan Party, the chief financial officer, chief accounting officer, treasurer, assistant treasurer, controller or assistant controller of such Loan Party.
Fiscal Month means any fiscal month of any Fiscal Year, which month shall generally consist of either four (4) or five (5) weeks and shall generally end on the last Saturday of each
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calendar month in accordance with the fiscal accounting calendar of the Lead Borrower and its Subsidiaries.
Fiscal Quarter means any fiscal quarter of any Fiscal Year, which quarters shall generally consist of thirteen (13) weeks or fourteen (14) weeks and shall generally end on the last Saturday of each April, July, October and January of such Fiscal Year in accordance with the fiscal accounting calendar of the Lead Borrower and its Subsidiaries.
Fiscal Year means any period of twelve (12) consecutive months ending on the Saturday closest to January 31 of any calendar year.
Flood Determination Form shall have the meaning given to such term in the definition of Collateral and Guarantee Requirement.
Flood Laws means the National Flood Insurance Reform Act of 1994 and related legislation (including the regulations of the Board).
Foreign Lender means any Lender that is organized under the laws of a jurisdiction other than the United States of America or any State thereof or the District of Columbia.
Foreign Subsidiary means any Subsidiary that is organized under the laws of a jurisdiction other than the United States of America or any State thereof or the District of Columbia. For greater certainty, each of (a) Gymboree Island, LLC, an entity organized under the laws of Puerto Rico, and (b) Gymboree, Inc. (a corporation organized under the laws of the province of New Brunswick)/Gymboree Canada, Inc. (a Delaware corporation), a dual status entity, shall be a Foreign Subsidiary for the purposes of the Loan Documents (other than for the purposes of a pledge of Gymboree, Inc.s Equity Interest by the Loan Parties).
FRB means the Board of Governors of the Federal Reserve System of the United States of America.
Fronting Fee shall have the meaning set forth in SECTION 2.19(e) hereof.
Fund means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
GAAP means generally accepted accounting principles in the United States of America, as in effect from time to time; provided, however, that if the Lead Borrower notifies the Administrative Agent that the Lead 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 on the operation of such provision (or if the Administrative Agent notifies the Lead 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, 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; provided, further
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that GAAP as applied herein with respect to Attributable Indebtedness and Capitalized Leases shall be GAAP as in effect on the Closing Date.
General Intangibles has the meaning assigned to such term in the Security Agreement.
Governmental Authority means any nation or government, any state, provincial, municipal or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
Guarantee means, as to any Person, without duplication, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other monetary obligation payable or performable by another Person (the primary obligor) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other monetary obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance of such Indebtedness or other monetary obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other monetary obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other monetary obligation of any other Person, whether or not such Indebtedness or other monetary obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien); or (c) to be an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided that the term Guarantee shall not include endorsements for collection or deposit, in either case in the ordinary course of business, or customary and reasonable indemnity obligations in effect on the Closing Date or entered into in connection with any acquisition or Disposition of assets permitted under this Agreement (other than such obligations with respect to Indebtedness). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term Guarantee as a verb has a corresponding meaning.
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, mold, fungi or similar bacteria, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
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Holdings has the meaning given to such term in the preamble to this Agreement. The primary purpose of Holdings is to own one hundred percent (100%) of the Capital Stock of the Lead Borrower.
Immaterial Subsidiary means any Subsidiary of the Lead Borrower that did not, as of the last day of the most recent completed Fiscal Quarter of the Lead Borrower, have assets with a fair market value in excess of $75,000,000 and did not, as of the four quarter period ending on the last day of such Fiscal Quarter, have revenues exceeding 5% of the total revenues of the Lead Borrower and its Restricted Subsidiaries (it being agreed that all Restricted Subsidiaries affected by any event or circumstance referred to in any such clause shall be considered together, as a single consolidated Restricted Subsidiary, for purposes of determining whether the condition specified above is satisfied).
Incremental Availability means the additional amount available to be borrowed by the Borrowers based upon the difference between the FILO Borrowing Base and the Tranche A Borrowing Base, as reflected on the most recent Borrowing Base Certificate delivered by the Lead Borrower to the Administrative Agent pursuant to SECTION 5.01(e) hereof.
Indebtedness means as to any Person at a particular time, without duplication, all of the following:
(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 which may have been reimbursed or reductions) of all Letters of Credit (including Standby Letters of Credit and Commercial Letters of Credit), bankers acceptances, bank guaranties, surety bonds, performance bonds and similar instruments issued or created by or for the account of such Person;
(c) net obligations of such Person under any Swap Contract;
(d) all obligations of such Person to pay the deferred purchase price of property or services (other than (i) trade payables in the ordinary course of business, (ii) any earn-out obligation until such earn-out obligation becomes due and payable and only to the extent that the contingent consideration relating to such earn-out is not paid within 30 days after such date and (iii) liabilities accrued in the ordinary course);
(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 and mortgage, industrial revenue bond, industrial development bond and similar financings), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;
(f) all Attributable Indebtedness; and
(g) all obligations of such Person in respect of Disqualified Capital Stock;
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(h) the principal and interest portions of all rental obligations of such Person under any Synthetic Lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease in accordance with GAAP;
whether or not the foregoing would constitute indebtedness or a liability in accordance with GAAP; and
(i) to the extent not otherwise included above, 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, except to the extent such Persons liability for such Indebtedness is otherwise limited 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 Indebtedness of any Person for purposes of clause (e) that is limited in recourse to the property encumbered thereby shall be deemed to be equal to the lesser of (i) the aggregate unpaid amount of such Indebtedness and (ii) the fair market value of the property encumbered thereby as determined by such Person in good faith.
Indemnified Taxes means Taxes other than (A) Excluded Taxes and (B) Other Taxes.
Indemnitee has the meaning provided in SECTION 9.05.
Information has the meaning provided in SECTION 9.08.
Instruments has the meaning assigned to such term in the Security Agreement.
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 (and all translations, adaptations, derivations and combinations of the foregoing), indicia and other source and/or business identifiers, all of the goodwill related thereto, and all registrations and applications for registrations thereof; works of authorship and other copyrighted works (including copyrights for computer programs), and all registrations and applications for registrations thereof; inventions (whether or not patentable) and all improvements thereto; patents and patent applications, together with all continuances, continuations, divisions, revisions, extensions, reissuances, and reexaminations thereof; industrial design applications and registered industrial designs; books, records, writings, computer tapes or disks, flow diagrams, specification sheets, computer software, source codes, object codes, executable code, data, databases and other physical manifestations, embodiments or incorporations of any of the foregoing; all other intellectual property; all rights to sue and recover at law or in equity for any past, present or future infringement, dilution or misappropriation, or other violation thereof; and all common law and other rights throughout the world in and to all of the foregoing.
Intercreditor Agreement means (i) that certain Intercreditor Agreement dated as of the Closing Date by and among the Administrative Agent, the Collateral Agent and Credit Suisse
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AG, Cayman Islands Branch as administrative agent under the Term Loan Facility, and the Loan Parties, as amended, amended and restated, supplemented or otherwise modified and in effect from time to time, or (ii) any other intercreditor agreement among the Administrative Agent, the Collateral Agent and any agent or trustee with respect to the Term Loan Facility or any Permitted Refinancing thereof on terms no less favorable in any material respect to the Secured Parties than those contained in the intercreditor agreement described in clause (i) of this definition.
Interest Payment Date means (a) with respect to any Prime Rate Loan (including a Swingline Loan), the first Business Day of each calendar quarter, and (b) with respect to any LIBO Loan, the last day of the Interest Period applicable to the Borrowing of which such LIBO Loan is a part, and in the case of a LIBO Loan with an Interest Period of more than three months duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months duration been applicable to such LIBO Loan.
Interest Period means, as to each LIBO Loan, the period commencing on the date such LIBO Loan is disbursed or converted to or continued as a LIBO Loan and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is one (1), two (2), three (3) or six (6) months thereafter (or, if agreed to by all of the Lenders, seven (7) or fourteen (14) days thereafter or nine (9) or twelve (12) months thereafter or any shorter period agreed by all applicable Lenders), as selected by the Lead Borrower in its Borrowing Request; provided that:
(a) | if any Interest Period that would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding 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. |
Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period.
Interim Eligible Letter of Credit Inventory means, as of any date of determination, the result of (a) the Commercial Letter of Credit balance as determined by the Lead Borrower and the Administrative Agent in good faith using commercially reasonable methods, minus (b) the in-transit inventory balance on the general ledger of the Borrowers.
Interim Letter of Credit Inventory Reserves means, as of any date of determination, the sum of (a) the result of (i) the Commercial Letter of Credit balance as determined by the Lead Borrower and the Administrative Agent in good faith using commercially reasonable methods multiplied by seven (7), divided by (ii) sixty (60) and (b) from and after the 120 day anniversary
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of the Closing Date if the Lead Borrower has not (x) updated its internal accounting systems and controls so that they are capable of accurately distinguishing (without duplication) between items of Inventory which constitute Eligible Inventory and items of Inventory which constitute Eligible Letter of Credit Inventory, and (y) provided evidence reasonably satisfactory to the Administrative Agent of the satisfaction of the condition set forth in the preceding clause (x), such other reserves as the Administrative Agent, in its Permitted Discretion, shall impose with respect to Eligible Letter of Credit Inventory.
Inventory has the meaning assigned to such term in the Security Agreement.
Inventory Advance Rate means (a) for the Tranche A Borrowing Base, ninety percent (90%) and (b) for the FILO Borrowing Base, (x) at all times prior to the second anniversary of the Closing Date, ninety-five percent (95%) and (y) at all times on and after the second anniversary of the Closing Date, ninety-two and one-half percent (92.5%):
Inventory Reserves means such reserves as may be established from time to time by the Administrative Agent, in its Permitted Discretion, with respect to changes in the determination of the salability, at retail, of the Eligible Inventory or which reflect such other factors as negatively affect the market value of the Eligible 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 Capital Stock or debt or other securities or equity interests of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of Indebtedness of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person or (c) any other Acquisition. Notwithstanding the foregoing, neither the creation of accounts receivable, credit card receivables and debit card receivables due to a Loan Party nor the obtaining of trade credit and the deferred payment of other expenses, in each case, incurred in the ordinary course of business, nor the incurrence of contingent obligations or performance guaranties in the ordinary course of business in respect of obligations not constituting Indebtedness, shall be deemed Investments. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment less all cash returns, cash dividends and cash distributions (or the fair market value of any non-cash returns, dividends and distributions) received by such Person).
Investor means any one of the Sponsor and the Management Stockholders.
IP Rights shall have the meaning given such term in SECTION 3.15.
ISP means, with respect to any Letter of Credit, the International Standby Practices 1998 published by the Institute of International Banking Law & Practice, Inc. (or such later version thereof as may be in effect at the time of issuance).
Issuing Bank means Bank of America and no more than one other Lender selected by the Lead Borrower which have agreed to become an Issuing Bank hereunder and have been approved by the Administrative Agent in its reasonable discretion. Any Issuing Bank may, in its
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reasonable discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term Issuing Bank shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.
Joinder Agreement shall mean an agreement, in substantially the form attached hereto as Exhibit F, pursuant to which, among other things, a Person becomes a party to, and bound by the terms of, this Agreement and/or the other Loan Documents in the same capacity and to the same extent as either a Borrower or a Facility Guarantor, as the Administrative Agent may determine.
Joint Bookrunners means, collectively, SunTrust Robinson Humphrey, Inc. and U.S. Bank National Association, in their respective capacity as Joint Bookrunners.
Junior Financing shall mean any other Indebtedness that is required to be subordinated to the Obligations pursuant to the terms of the Loan Documents. For avoidance of doubt, Subordinated Debt constitutes Junior Financing.
Landlord Lien State means any state in which a landlords claim for rent has priority by operation of Applicable Law over the lien of the Collateral Agent in any of the Collateral.
Latest Maturity Date shall mean, at any date of determination, the latest maturity or expiration date applicable to any Commitment hereunder at such time, including the latest maturity or expiration date of any Extended Commitment as extended in accordance with this Agreement from time to time.
Lead Borrower has the meaning set forth in the preamble to this Agreement.
Lease means any agreement 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.
Lenders means the Lenders having Commitments from time to time or at any time, and each assignee that becomes a party to this Agreement as set forth in SECTION 9.07 and each Additional Commitment Lender that becomes a party to this Agreement as set forth in SECTION 2.02.
Letter of Credit means (a) each Existing Letter of Credit, (b) a letter of credit that (i) is issued by an Issuing Bank pursuant to this Agreement for the account of a Borrower or a Restricted Subsidiary, (ii) constitutes a Standby Letter of Credit or Commercial Letter of Credit (and for which such Issuing Bank is not otherwise prohibited from issuing such letter of credit due to the internal general policies of such Issuing Bank), and (iii) is in form reasonably satisfactory to such Issuing Bank and (c) a bankers acceptance or time draft issued by the Issuing Bank to a beneficiary of any letter of credit described in foregoing clauses (a) or (b), in form reasonably satisfactory to such Issuing Bank.
Letter of Credit Disbursement means a payment made by any Issuing Bank to the beneficiary of, and pursuant to, a Letter of Credit.
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Letter of Credit Fees means the fees payable in respect of Letters of Credit pursuant to SECTION 2.19.
Letter of Credit Outstandings means, at any time, the sum of (a) the Stated Amount of all Letters of Credit outstanding at such time, plus, without duplication, (b) all amounts theretofore drawn or paid under Letters of Credit for which the applicable Issuing Bank has not then been reimbursed.
Letter-of-Credit Rights has the meaning assigned to such term in the Security Agreement.
Letter of Credit Sublimit means, at any time, $150,000,000, as such amount may be increased or reduced in accordance with the provisions of this Agreement. The Letter of Credit Sublimit is part of, and not in addition to, the Commitments.
LIBO Borrowing means a Borrowing comprised of LIBO Loans.
LIBO Loan shall mean any Revolving Credit Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II.
LIBO Rate means, with respect to any LIBO Borrowing for any Interest Period,
(a) the rate per annum equal to the offered rate that appears on the page of the Telerate screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or
(b) if the rate referenced in the preceding clause (a) does not appear on such page or service or such page or service shall not be available, the rate per annum equal to the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or
(c) if the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum determined by the Administrative Agent as the rate of interest 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 Borrowing being made, continued or converted by Bank of America, N.A. and with a term equivalent to such Interest Period would be offered by Bank of Americas London Branch to major banks in the London interbank eurodollar market at their request at approximately 4:00 p.m. (London time) two Business Days prior to the first day of such Interest Period.
Lien means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other
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encumbrance on title to real property, and any Capitalized Lease having substantially the same economic effect as any of the foregoing) whether or not filed, recorded or perfected under Applicable Law, and in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.
Liquidation means the exercise by the Administrative Agent or the Collateral Agent of those rights and remedies accorded to the Administrative Agent or the Collateral Agent under the Loan Documents and Applicable Law as a creditor of the Loan Parties, including (after the occurrence and during the continuation of an Event of Default) the conduct by any or all of 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 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 Account has the meaning provided in SECTION 2.20.
Loan Documents means this Agreement, the Notes, the Letters of Credit, the Fee Letter, all Borrowing Base Certificates, the Blocked Account Agreements, the Credit Card Notifications, the Security Documents, the Facility Guarantees, and the Intercreditor Agreement, each as amended and in effect from time to time.
Loan Party or Loan Parties means the Borrowers and the Facility Guarantors.
Management Investment means the equity of the Management Stockholders to be rolled over or invested in Holdings within six months of the Closing Date in connection with the Transactions, in an aggregate amount not to exceed $25,000,000.
Management Stockholders shall mean the members of management of Holdings, the Lead Borrower or any of its Subsidiaries who are investors in Holdings or any direct or indirect parent thereof.
Margin Stock has the meaning assigned to such term in Regulation U.
Master Agreement has the meaning specified in the definition of Swap Contract.
Material Adverse Effect means any event, facts, development, circumstances, or effect that, individually or in the aggregate with all other facts, events, circumstances, developments, and effects has a material adverse effect on (i) the business, operations, assets, liabilities (actual or contingent) or financial condition of the Loan Parties taken as a whole, or (ii) the validity or enforceability of this Agreement or the other Loan Documents, taken as a whole, or the rights or remedies of the Secured Parties hereunder or thereunder, taken as a whole.
Material DDA has the meaning given to such term in SECTION 2.18(c)(ii).
Material Indebtedness means Indebtedness (other than the Obligations) of the Loan Parties, individually or in the aggregate, having an aggregate principal amount exceeding $25,000,000. In any event, all Indebtedness under the Senior Notes and the Term Loan Facility
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shall be deemed Material Indebtedness, regardless of the outstanding balance thereunder from time to time.
Material Leased Real Estate means Real Estate (x) that is subject to a Lien in favor of the Term Loan Agent (or any other agent or trustee with respect to any Permitted Refinancing of the Term Loan Facility) or (y) in the event that the Term Loan Facility or any Permitted Refinancing thereof is no longer outstanding, (i) that is leased by any Loan Party, (ii) that is located in the United States and, (iii) that is used as a distribution center in connection with the business of the Lead Borrower and its Restricted Subsidiaries and (iv) the failure of which to operate could reasonably be expected to materially and adversely affect the ordinary conduct of the business of the Lead Borrower and its Restricted Subsidiaries, taken as a whole.
Material Owned Real Estate means Real Estate (x) that is subject to a Lien in favor of the Term Loan Agent (or any other agent or trustee with respect to any Permitted Refinancing of the Term Loan Facility) or (y) in the event that the Term Loan Facility or any Permitted Refinancing thereof is no longer outstanding, (i) that is owned in fee by a Loan Party, (ii) is located in the United States and (iii) has a fair market value in excess of $5,000,000, with respect to any newly acquired Real Estate, at the time of its acquisition or, with respect to any Real Estate owned by an entity that becomes a Loan Party, at the time such Person becomes a Loan Party, in each case, as reasonably estimated by the Lead Borrower in good faith.
Material Real Estate shall mean any Material Owned Real Estate or Material Leased Real Estate.
Maturity Date mean (i) November 23, 2015 or (ii) with respect to any tranche of Extended Commitments, the final maturity date as specified in the applicable Extension Offer accepted by the respective Lender or Lenders; provided that if any such day is not a Business Day, the applicable Maturity Date shall be the Business Day immediately succeeding such day.
Maximum Closing Date Borrowing Amount means the least of (i) the FILO Borrowing Base on the Closing Date (or, if the FILO Commitments have been terminated, the then Tranche A Borrowing Base on the Closing Date), (ii) the Revolving Credit Ceiling and (iii) an amount equal to (A) if the Closing Date occurs on or prior to December 31, 2010, $150,000,000 or (B) if the Closing Date occurs on or after January 1, 2011, $135,000,000.
Maximum Rate has the meaning provided in SECTION 9.10.
Merger shall have the meaning assigned to such term in the introductory statement to this Agreement.
Merger Consideration shall have the meaning assigned to such term in the introductory statement to this Agreement.
Merger Agreement means that certain Agreement and Plan of Merger, dated as of October 11, 2010, by and among Giraffe Holding, Inc., Merger Sub and the Company.
Merger Sub shall have the meaning assigned to such term in the introductory statement to this Agreement.
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Minimum Extension Condition has the meaning provided in SECTION 2.27(c).
Minority Lenders has the meaning provided in SECTION 9.01.
Moodys means Moodys Investors Service, Inc. and any successor thereto.
Mortgage Policies shall have the meaning given to such term in the definition of Collateral and Guarantee Requirement.
Mortgaged Property shall have the meaning given to such term in the definition of Collateral and Guarantee Requirement.
Mortgages means the mortgages, charge/mortgage of land, collateral mortgages, immovable hypothecs, and deeds of trust and any other security documents granting a Lien on Real Estate between the Loan Party owning the Real Estate encumbered thereby and the Collateral Agent for its own benefit and the benefit of the other Secured Parties.
MLPF&S means Merrill Lynch, Pierce, Fenner & Smith Incorporated, and its Subsidiaries and Affiliates.
Multiemployer Plan means any multiemployer plan, as defined in Section 4001(a)(3) of ERISA and subject to the provisions of Title IV of ERISA, to which any Loan Party or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.
Net Income means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Restricted Payments.
Net Proceeds means,
(a) with respect to the Disposition of any asset by the Lead Borrower or any Restricted Subsidiary or any Casualty Event, the excess, if any, of (i) the sum of cash and Cash Equivalents received in connection with such Disposition or Casualty Event (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 and, with respect to any Casualty Event, any insurance proceeds or condemnation awards in respect of such Casualty Event actually received by or paid to or for the account of the Lead Borrower or any Restricted Subsidiary) over (ii) the sum of (A) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness that is secured by the asset subject to such Disposition or Casualty Event, but only to the extent that the Lien securing such Indebtedness is senior to the Lien of the Collateral Agent and that is required to be repaid (and is timely repaid) in connection with such Disposition or Casualty Event (other than Indebtedness under the Loan Documents), (B) the out-of-pocket expenses (including attorneys fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, other expenses and brokerage, consultant and other fees) actually incurred by the Lead Borrower or such Restricted Subsidiary in connection with such Disposition or Casualty Event, (C) taxes paid or reasonably estimated to be actually payable in
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connection therewith (provided, that, if the amount of any estimated taxes exceeds the amount of taxes actually required to be paid in cash, the aggregate amount of such excess shall constitute Net Proceeds at the time such taxes are actually paid), provided that the Administrative Agent may, in its commercially reasonable discretion, establish an Availability Reserve in the amount of any taxes so deducted in calculating Net Proceeds, and (D) any reserve for adjustment in respect of (x) the sale price of such asset or assets established in accordance with GAAP and (y) any liabilities associated with such asset or assets and retained by the Lead Borrower or any Restricted Subsidiary after such sale or other Disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction and it being understood that Net Proceeds shall include any cash or Cash Equivalents (i) received upon the Disposition of any non-cash consideration received by the Lead Borrower or any Restricted Subsidiary in any such Disposition and (ii) upon the reversal (without the satisfaction of any applicable liabilities in cash in a corresponding amount) of any reserve described in clause (D) of the preceding sentence or, if such liabilities have not been satisfied in cash and such reserve is not reversed within three hundred and sixty-five (365) days after such Disposition or Casualty Event, the amount of such reserve; and
(b) with respect to the incurrence or issuance of any Capital Stock or Indebtedness by the Lead Borrower or any Restricted Subsidiary, the excess, if any, of (i) the sum of the cash received in connection with such incurrence or issuance over (ii) the sum of (a) the investment banking fees, underwriting discounts, commissions, costs and other out-of-pocket expenses and other expenses, incurred by the Lead Borrower or such Restricted Subsidiary in connection with such incurrence or issuance and (b) taxes paid or reasonably estimated to be actually payable in connection therewith, provided, that, if the amount of any such estimated taxes exceeds the amount of taxes actually required to be paid in cash in respect of such Disposition or Casualty Event, the aggregate amount of such excess shall constitute Net Proceeds at the time such taxes are actually paid.
New Lending Office shall have the meaning provided in SECTION 2.23(e)(i).
NFIP shall have the meaning given to such term in the definition of Collateral and Guarantee Requirement.
Noncompliance Notice shall have the meaning provided in SECTION 2.06(b).
Non-Core Business Segment means any business segment or separate department of the Loan Parties which contributed less than 5% of Consolidated EBITDA of the Loan Parties as of the Fiscal Year immediately prior to the date of such calculation.
Non-Extended Commitments shall have the meaning provided in SECTION 2.27(b).
Notes means, collectively, (i) Revolving Credit Notes and (ii) the Swingline Note, each as may be amended, supplemented or modified from time to time.
Not Otherwise Applied means, with reference to any amount of Net Proceeds of any transaction or event, that such amount (a) was not required to be applied to prepay the Loans pursuant to SECTION 2.17, and (b) was not previously applied in determining the permissibility
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of a transaction under the Loan Documents where such permissibility was (or may have been) contingent on receipt of such amount or utilization of such amount for a specified purpose. The Lead Borrower shall promptly notify the Administrative Agent of any application of such amount as contemplated by (b) above.
NPL means the National Priorities List under CERCLA.
Obligations means (x) advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party and its Subsidiaries arising under any Loan Document or otherwise with respect to any Revolving Credit Loan, Swingline Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including charges, interest, expenses, fees, attorneys fees, indemnities and other amounts that accrue after the commencement by or against any Loan Party or Subsidiary of any proceeding under the Bankruptcy Code or any other federal, state, or provincial bankruptcy, insolvency, receivership or similar law, naming such Person as the debtor in such proceeding, regardless of whether such charges, interest, expenses, fees, attorneys fees, indemnities and other amounts are allowed claims in such proceeding, and (y) obligations of any Loan Party and its Subsidiaries arising with respect to any Other Liabilities. Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents (and of their Subsidiaries to the extent they have obligations under the Loan Documents) include (a) the obligation (including guarantee obligations) to pay principal, interest, Letter of Credit commissions, reimbursement obligations, charges, expenses, fees, attorneys fees, indemnities and other amounts payable by any Loan Party or its Subsidiaries under any Loan Document, including charges, interest, expenses, fees, attorneys fees, indemnities and other amounts that accrue after the commencement by or against any Loan Party or Subsidiary of any proceeding under the Bankruptcy Code or any other federal, state, or provincial bankruptcy, insolvency, receivership or similar law, naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding, and (b) the obligation of any Loan Party or any of its Subsidiaries to reimburse any amount in respect of any of the foregoing that any Lender, in its sole discretion, may elect to pay or advance on behalf of such Loan Party or such Subsidiary in accordance with, and to the extent permitted, by the Loan Documents.
Organization Documents means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; (c) with respect to any unlimited liability company, the memorandum of association, and (d) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.
Other Liabilities means outstanding liabilities with respect to or arising from (a) any Cash Management Services furnished to any of the Loan Parties or any of their Subsidiaries
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and/or (b) any transaction which arises out of any Bank Product entered into with any Loan Party or any of their Subsidiaries, as each may be amended from time to time.
Other Secured Swap Providers means Credit Suisse AG, Cayman Islands Branch, Credit Suisse Securities (USA) LLC, and Morgan Stanley Capital Services Inc.
Other Taxes means any and all current or future stamp or documentary Taxes or any other excise or property Taxes, charges or similar levies in the nature of a Tax arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document, but not including, for the avoidance of doubt, any Excluded Taxes.
Overadvance means a Revolving Credit Loan, advance, or providing of credit support (such as the issuance of a Letter of Credit) to the Borrowers to the extent that, immediately after the making of such loan or advance or the providing of such credit support, Availability is less than zero.
Participant shall have the meaning provided in SECTION 9.07(d).
Payment Conditions means, at the time of determination with respect to a Specified Payment, that (a) no Event of Default then exists or would arise as a result of the entering into such transaction or the making of such payment, (b) the Pro Forma Availability Condition shall have been satisfied after giving effect to such Specified Payment, and (c) after giving effect to such Specified Payment, the Consolidated Fixed Charge Coverage Ratio, on a Pro Forma Basis for the four Fiscal Quarters most recently preceding such transaction or payment (provided that, if any such transaction or payment is to be consummated within thirty (30) days after the end of any Fiscal Quarter, such calculation shall be made with respect to the four Fiscal Quarters most recently preceding such transaction or payment for which financial statements have been required to be delivered pursuant to SECTIONS 5.01(a) and (b) hereof), is equal to or greater than (x) for all purposes other than SECTION 6.02(v) and SECTION 6.03(n), 1.10:1.00 and (y) solely for the purposes of SECTION 6.02(v) and SECTION 6.03(n), 1.00:1.00. In accordance with SECTION 5.02(i) hereof, at least five (5) Business Days prior to the making of any Specified Payment, the Loan Parties shall deliver to the Administrative Agent evidence reasonably satisfactory to the Administrative Agent that the conditions contained in clauses (b) and (c) have been satisfied.
Payment Intangibles has the meaning assigned to such term in the Security Agreement.
PBGC means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.
Permitted Acquisition means an Acquisition in which each of the following conditions are satisfied:
(a) No Event of Default then exists or would arise from the consummation of such Acquisition;
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(b) If the Acquisition is an Acquisition of Capital Stock, the Person being acquired shall become a Subsidiary of the Lead Borrower and, unless such Subsidiary is designated as an Unrestricted Subsidiary in accordance with SECTION 5.14, such Subsidiary shall (i) become a Loan Party and (ii) provide security to the Collateral Agent, in each of (i) and (ii), if and to the extent required by SECTION 5.11;
(c) Any material assets acquired shall be utilized in, and if the Acquisition involves a merger, amalgamation, consolidation or stock acquisition, the Person which is the subject of such Acquisition shall be engaged in, a business otherwise permitted to be engaged in by a Borrower under this Agreement; and
(d) The Borrowers shall have satisfied the Payment Conditions (provided that, for the purposes of this clause (d), the Consolidated Fixed Charge Coverage Ratio set forth in clause (c) of the definition of Payment Conditions shall be 1.00:1.00).
Permitted Discretion means a determination made by the Administrative Agent or the Collateral Agent (as applicable) in good faith in the exercise of its reasonable (from the perspective of an asset-based lender) business judgment.
Permitted Disposition shall have the meaning set forth in SECTION 6.05.
Permitted Encumbrances has the meaning set forth in SECTION 6.01.
Permitted Equity Issuance means any sale or issuance of any Capital Stock of Lead Borrower to the extent permitted hereunder (including any capital contribution).
Permitted Holder means any of the Investors; provided that if the Management Stockholders own beneficially or of record more than ten percent (10%) of the outstanding voting stock of Holdings in the aggregate at any time, for purposes of any determination of Permitted Holders (including pursuant to the definition of Change of Control) at such time, the Management Stockholders shall be deemed to hold ten percent (10%) of the outstanding voting stock of Holdings at such time.
Permitted Indebtedness has the meaning set forth in SECTION 6.03.
Permitted Investments has the meaning set forth in SECTION 6.02.
Permitted Overadvance means an Overadvance made by the Administrative Agent, in its reasonable discretion, which:
(a) Is made to maintain, protect or preserve the Collateral and/or the Secured Parties rights under the Loan Documents or which is otherwise for the benefit of the Secured Parties; or
(b) Is made to enhance the likelihood of, or maximize the amount of, repayment of any Obligation; or
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(c) Is made to pay any other amount chargeable to any Borrower hereunder; and
(d) Together with all other Permitted Overadvances then outstanding, shall not (i) exceed five percent (5%) of the then FILO Borrowing Base (or, if the FILO Commitments have been terminated, the then Tranche A Borrowing Base) each at the time, 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;
provided however, that the foregoing shall not (i) modify or abrogate any of the provisions of (A) SECTION 2.13(e) regarding any Lenders obligations with respect to Letter of Credit Disbursements, or (B) SECTION 2.06 and SECTION 2.22 regarding any Lenders obligations with respect to participations in Swingline Loans and settlements thereof, 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 further provided that in no event shall the Administrative Agent make an Overadvance, if after giving effect thereto, the principal amount of the Revolving Credit Extensions would exceed the aggregate of the Commitments (as in effect prior to any termination of the Commitments pursuant to SECTION 7.01 hereof).
Permitted Refinancing means, with respect to any Person, any modification, refinancing, refunding, renewal or extension of any Indebtedness of such Person; provided that (a) the principal amount (or accreted value, if applicable) thereof does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so modified, refinanced, refunded, renewed or extended except by an amount equal to unpaid accrued interest and premium thereon (including tender premiums) plus other amounts paid, and fees and expenses incurred (including upfront fees and original issue discount), in connection with such modification, refinancing, refunding, renewal or extension and by an amount equal to any existing commitments unutilized thereunder, (b) other than with respect to a Permitted Refinancing in respect of Indebtedness permitted pursuant to SECTION 6.03(e), such modification, refinancing, refunding, renewal or extension has a final maturity date equal to or later than the final maturity date of, and has 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 (except by virtue of prior amortization or prior prepayments of the Indebtedness being modified, refinanced, refunded, renewed or extended), (c) other than with respect to a Permitted Refinancing in respect of Indebtedness permitted pursuant to SECTION 6.03(e), at the time thereof, no Event of Default shall have occurred and be continuing, (d) such modification, refinancing, refunding, renewal or extension shall not include: (i) Indebtedness of a Subsidiary of the Lead Borrower that is not a Facility Guarantor or a Borrower that refinances Indebtedness of the Lead Borrower; (ii) Indebtedness of a Subsidiary of the Lead Borrower that is not a Facility Guarantor or a Borrower that refinances Indebtedness of a Facility Guarantor or a Borrower; or (iii) Indebtedness of the Lead Borrower or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary, (e) the collateral, if applicable, granted pursuant to any such refinancing Indebtedness is the same or less than the collateral under the Indebtedness being extended, renewed or replaced, (f) to the extent such Indebtedness being modified, refinanced, refunded, renewed or extended is subordinated in right of payment to the Obligations, (i) such
52
modification, refinancing, refunding, renewal or extension is subordinated in right of payment to the Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being modified, refinanced, refunded, renewed or extended, and (ii) the terms and conditions (including, if applicable, as to collateral but excluding as to subordination, interest rate, redemption premium and optional prepayment or optional redemption) of any such modified, refinanced, refunded, renewed or extended Indebtedness, taken as a whole, are not materially less favorable to the Loan Parties and/or the Lenders than the terms and conditions of the Indebtedness being modified, refinanced, refunded, renewed or extended and (g) to the extent that the holders of such Indebtedness being modified, refinanced, refunded, renewed or extended are subject to an intercreditor agreement or arrangement with the Lenders, the holders of such refinancing Indebtedness shall enter into a similar intercreditor agreement or arrangement with the Lenders on terms no less favorable to the Lenders as those contained in the intercreditor agreement or arrangement governing the Indebtedness being modified, refinanced, refunded, renewed or extended (as determined by the Administrative Agent in its reasonable discretion).
Person means any natural person, corporation, limited liability company, unlimited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
Plan means any employee pension benefit plan (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by any Loan Party or any ERISA Affiliate or to which any Loan Party 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 (5) plan years.
Platform has the meaning given to such term in the last paragraph of SECTION 5.02.
Pre-Close Flood Documents shall have the meaning given to such term in the definition of Collateral and Guarantee Requirement.
Prepayment Event means the occurrence of any of the following events:
(a) Any sale, transfer or other Disposition (including pursuant to a sale and leaseback transaction) of any Collateral (other than the transfer of any Collateral among Stores and other locations of the Loan Parties) unless the proceeds therefrom are required to be paid to the holder of a Lien on such property or asset having priority over the Lien of the Collateral Agent; or
(b) Any Casualty Event unless the proceeds therefrom are required to be paid to the holder of a Lien on such property or asset having priority over the Lien of the Collateral Agent.
Prime Rate means, as to any applicable Borrowing existing on or after the Closing Date for any day, the highest of: (a) the variable annual rate of interest then most recently announced by Bank of America, N.A. at its head office in Charlotte, North Carolina as its prime rate; (b) the Federal Funds Effective Rate in effect on such day plus one-half of one percent (0.50%) per
53
annum; or (c) the Adjusted LIBO Rate (calculated utilizing the LIBO Rate for a one-month Interest Period as determined on such day) plus one percent (1.00%) per annum; provided that, for the avoidance of doubt, the Adjusted LIBO Rate for any day shall be based on the rate determined on such day at approximately 11:00 a.m. (London time) by reference to the British Bankers Association Interest Settlement Rates for deposits in Dollars (as set forth by any service selected by the Administrative Agent in manner consistent with that described in the definition of LIBO Rate). The prime rate is a reference rate and does not necessarily represent the lowest or best rate being charged by Bank of America, N.A. to any customer. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate or the LIBO Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations thereof in accordance with the terms hereof, the Prime Rate shall be determined without regard to clauses (b) or (c), as applicable, of the first sentence of this definition, until the circumstances giving rise to such inability no longer exist. Any change in the Prime Rate due to a change in Bank of Americas prime rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective on the effective date of such change in Bank of Americas Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate, respectively.
Prime Rate Loan means any Revolving Credit Loan bearing interest at a rate determined by reference to the Prime Rate in accordance with the provisions of Article II.
Pro Forma Availability shall mean, for any date of calculation, Availability as of the date of any Specified Payment and the projected Availability at the end of each Fiscal Month during any projected six (6) Fiscal Months.
Pro Forma Availability Condition shall mean, for any date of calculation with respect to any Specified Payment, the Pro Forma Availability following, and after giving effect to, such Specified Payment, will be equal to or greater than the greater of (a) twenty percent (20%) of the lesser of (x) the then FILO Borrowing Base (or if the FILO Commitments have been terminated, the then Tranche A Borrowing Base), and (y) the then Revolving Credit Ceiling and (b) $40,000,000.
Pro Forma Balance Sheet shall have the meaning given such term in SECTION 3.05(a)(i).
Pro Forma Basis and Pro Forma Compliance shall have the meanings given such terms in SECTION 1.10.
Pro Forma Financial Statements shall have the meaning given such term in SECTION 3.05(a)(i).
Projections shall have the meaning given such term in SECTION 5.01(d).
Public Company Costs means costs relating to compliance with the Sarbanes-Oxley Act of 2002, as amended, and other expenses arising out of or incidental to the Issuers status as a public company, including costs, fees and expenses (including legal, accounting and other professional fees) relating to compliance with provisions of the Securities Act and the Exchange Act, as applicable to companies with equity securities held by the public, the rules of national
54
securities exchange companies with listed equity securities, directors compensation, fees and expense reimbursement, shareholder meetings and reports to shareholders, directors and officers insurance and other executive costs, legal and other professional fees, and listing fees in each case incurred or accrued prior to November 23, 2010.
Public Lender has the meaning given to such term in the last paragraph of SECTION 5.02.
Qualified Capital Stock means any Capital Stock that is not Disqualified Capital Stock.
Qualifying IPO means the issuance by Holdings, any direct or indirect parent thereof or the Lead Borrower of its common Capital Stock in an underwritten primary public offering (other than a public offering pursuant to a registration statement on Form S-8) pursuant to an effective registration statement filed with the SEC in accordance with the Securities Act (whether alone or in connection with a secondary public offering).
Real Estate means all Leases and all land, tenements, hereditaments and any estate or interest therein, together with the buildings, structures, parking areas, and other improvements thereon (including all fixtures), now or hereafter owned by any Loan Party, including all easements, rights-of-way, and similar rights relating thereto and all leases, tenancies, and occupancies thereof.
Refinancing shall have the meaning assigned to such term in the introductory statement to this Agreement.
Register has the meaning provided in SECTION 9.07(c).
Regulation U means Regulation U of the FRB as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Regulation X means Regulation X of the FRB as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Related Parties means, with respect to any specified Person, such Persons Affiliates and the respective partners, directors, officers, employees, agents, trustees and advisors of such Person and such Persons Affiliates.
Release has the meaning provided in Section 101(22) of CERCLA.
Reports has the meaning provided in SECTION 8.14.
Required Lenders means, at any time, Lenders (other than Delinquent Lenders) having Commitments aggregating more than fifty percent (50%) of the Total Commitments, or if the Commitments have been terminated, Lenders (other than Delinquent Lenders) whose percentage of the outstanding Credit Extensions (calculated assuming settlement and repayment of all Swingline Loans by the Lenders) aggregate more than fifty percent (50%) of all such Credit Extensions.
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Reserves means all (if any) Inventory Reserves, Availability Reserves, Cash Management Reserves, Bank Product Reserves and reserves for Customer Credit Liabilities.
Responsible Officer means the chief executive officer, president, vice president, chief financial officer, treasurer or assistant treasurer, director of treasury or other similar officer of a Loan Party and, as to any document delivered on the Closing Date, any secretary or assistant secretary of a Loan Party. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.
Restricted Payment means any dividend or other distribution (whether in cash, securities or other property) with respect to any Capital Stock of the Lead Borrower or any Restricted Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such Capital Stock, or on account of any return of capital to the Lead Borrowers or any Restricted Subsidiarys stockholders, partners or members (or the equivalent Persons thereof).
Restricted Subsidiary means any Subsidiary of Holdings other than an Unrestricted Subsidiary.
Revolving Credit Ceiling means the amount of the Total Commitments from time to time in effect. On the Closing Date, the Revolving Credit Ceiling is $225,000,000, as such amount may be increased or reduced in accordance with the terms of this Agreement.
Revolving Credit Loans means all loans at any time made by any Lender (including, without limitation, Tranche A Loans and FILO Loans) pursuant to Article II and, to the extent applicable, shall include Swingline Loans made by the Swingline Lender pursuant to SECTION 2.06.
Revolving Credit Notes means the promissory notes of the Borrowers substantially in the form of Exhibit D, each payable to a Lender, evidencing the Revolving Credit Loans made to the Borrowers.
Sarbanes-Oxley Act means the Sarbanes-Oxley Act of 2002, as amended.
S&P means Standard & Poors Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.
SEC means the Securities and Exchange Commission or any Governmental Authority succeeding to any of its principal functions.
Secured Party means (a) each Credit Party, (b) any Person providing Cash Management Services or entering into or furnishing any Bank Products to or with any Loan Party or any of their Subsidiaries, (c) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document, and (d) the successors and, subject to any limitations contained in this Agreement, assigns of each of the foregoing.
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Securities Act means the Securities Act of 1933, as amended.
Security Agreement means the Security Agreement dated as of the Closing Date among the Loan Parties and the Collateral Agent for its benefit and for the benefit of the other Secured Parties, as amended and in effect from time to time.
Security Documents means the Security Agreement, the Mortgages, the Facility Guarantee and each other security agreement, pledge agreement or other instrument or document executed and delivered pursuant to this Agreement or any other Loan Document that creates a Lien in favor of the Collateral Agent to secure any of the Obligations.
Senior Note Documents shall mean the indenture under which the Senior Notes are issued and all other instruments, agreements and other documents evidencing or governing the Senior Notes or providing for any Guarantee or other right in respect thereof.
Senior Notes shall have the meaning assigned to such term in the introductory statement to this Agreement.
Settlement Date has the meaning provided in SECTION 2.22(b).
Share Consideration shall have the meaning assigned to such term in the introductory statement to this Agreement.
Shares shall mean the shares of common stock, $0.001 par value per share, of the Company.
Shrink means Inventory identified by the Borrowers as lost, misplaced, or stolen.
Software has the meaning assigned to such term in the Security Agreement.
Specified Default means the occurrence of any Event of Default specified in SECTION 7.01(a), SECTION 7.01(b) (but only with respect to (i) SECTION 2.18(d), (ii) SECTION 2.18(e), (iii) SECTION 2.18(f), (iv) the third sentence of SECTION 2.18(h), (v) SECTION 5.01(e), (vi) SECTION 5.07 (but only with respect to casualty, loss and extended coverage policies maintained with respect to any Collateral), (vii) SECTION 5.17, (viii) SECTION 5.18, (ix) SECTION 5.19, or (x) SECTION 6.15), SECTION 7.01(d) (but only with respect to any representation made or deemed to be made by or on behalf of any Loan Party in any Borrowing Base Certificate or any Compliance Certificate), SECTION 7.01(f) or SECTION 7.01(g) hereof.
Specified Equity Contribution means any cash contribution to the common equity of the Lead Borrower and/or any purchase or investment in an Equity Interest of the Lead Borrower other than Disqualified Equity Interests.
Specified Payment means any Permitted Acquisition, Investment, loan, advance, Restricted Payment, incurrence of or payment with respect to Indebtedness or other transaction made subject to satisfaction of the Payment Conditions or any component thereof.
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Specified Representations shall mean those representations and warranties made by the Loan Parties in SECTION 3.01(a) (with respect to organizational existence only), SECTION 3.01(b)(ii), SECTION 3.02(a), SECTION 3.02(b)(i), SECTION 3.02(b)(iii), SECTION 3.04, SECTION 3.13, SECTION 3.16, and SECTION 3.20(a).
Specified Transaction shall mean any Investment that results in a Person becoming a Restricted Subsidiary or an Unrestricted Subsidiary, any Permitted Acquisition, any Disposition that results in a Restricted Subsidiary ceasing to be a Subsidiary of the Lead 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 or a Store of the Lead Borrower or a Restricted Subsidiary, in each case whether by merger, consolidation, amalgamation or otherwise.
Sponsor means any of Bain Capital Partners, LLC and its Affiliates, and any fund or partnership managed or advised by any such Person, but not including, however, any portfolio companies of any of the foregoing.
Sponsor Group means the Sponsor and the Sponsor Related Parties.
Sponsor Lender Limitations means, with respect to the Sponsor Group or any of their respective Affiliates (other than Sponsor Related Investment Funds) that becomes an assignee of any portion of the Obligations, such Person(s) shall have executed and delivered to the Administrative Agent a representation and warranty to the effect that it is not in possession of any information that has not been made available to Lenders generally that could reasonably be expected to be material to a decision to sell such Loans at the time of such assignment in form and substance reasonably satisfactory to the Administrative Agent and a waiver in form and substance reasonably satisfactory to the Administrative Agent pursuant to which such Person(s) acknowledges and agrees that (a) for purposes of any amendment, waiver or modification of any Loan Document or any plan of reorganization that does not in each case adversely affect such Person as its capacity as a Lender in any material respect as compared to other Lenders, such Person will be deemed to have voted in the same proportion as non-affiliated Lenders voting on such matter and (b) it shall have no right (i) to require the Agents or any Lender to undertake any action (or refrain from taking any action) with respect to any Loan Document, (ii) to attend any meeting with the Agents or any Lender or receive any information from the Agents or any Lender, (iii) to the benefit of any advice provided by counsel to the Agents or the other Lenders or to challenge the attorney-client privilege of the communications between the Agents, such other Lenders and such counsel, or (iv) to make or bring any claim, in its capacity as Lender, against any Agent with respect to the fiduciary duties of such Agent or Lender and the other duties and obligations of the Agents hereunder; except, that, no amendment, modification or waiver to any Loan Document shall, without the consent of the Sponsor Group or any of their respective Affiliates, deprive any such Person, as assignee, of its pro rata share of any payments to which the Lenders as a group are otherwise entitled hereunder.
Sponsor Management Agreement shall mean that certain Management Agreement, dated as of October 23, 2010, by and among Giraffe Holding, Inc., Merger Sub and Bain Capital Partners, LLC, as in effect on the Closing Date and as the same may be amended, supplemented or otherwise modified in a manner not prohibited hereunder.
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Sponsor Related Investment Funds means a Sponsor Related Party or an Affiliate thereof which is an investment vehicle that is engaged in making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course and with respect to which Bain Capital Partners, LLC and investment vehicles managed or advised by Bain Capital Partners, LLC that are not engaged primarily in making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course do not, directly or indirectly, make investment decisions for such entity.
Sponsor Related Parties means, with respect to any Person, (a) any Controlling stockholder or partner (including, in the case of an individual Person who possesses Control, the spouse or immediate family member of such Person; provided that such Person retains Control of the voting rights, by stockholders agreement, trust agreement or otherwise of the Capital Stock owned by such spouse or immediate family member) or 80% (or more) owned Subsidiary, or (b) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding a 51% or more Controlling interest of which consist of such Person and/or such Persons referred to in the immediately preceding clause (a), or (c) the limited partners of the Sponsors; provided further that Sponsor Related Parties does not include Holdings nor any Person in which Holdings holds a Controlling interest.
Standby Letter of Credit means any Letter of Credit other than a Commercial Letter of Credit.
Stated Amount means at any time the maximum amount for which a Letter of Credit may be honored.
Statutory Reserve Rate means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the FRB to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as Eurocurrency Liabilities in Regulation D of the FRB). Such reserve percentages shall include those imposed pursuant to such Regulation D. LIBO Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
Stockholders Agreement means the Stockholders Agreement, dated as of the Closing Date, by and among Giraffe Holding, Inc., Giraffe Intermediate A, Inc., Holdings, the Company, Bain Capital Fund X L.P. and the other investors from time to time party thereto, as in effect on the Closing Date and as the same may be amended, supplemented or otherwise modified in accordance with its terms.
Store means any retail store (which includes any real property, fixtures, equipment, inventory and other property related thereto) operated, or to be operated, by any Loan Party or a Restricted Subsidiary.
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Subordinated Indebtedness means Indebtedness which is expressly subordinated in right of payment to the prior payment in full of the Obligations on terms reasonably acceptable to the Administrative Agent.
Subsidiary of a Person means a corporation, partnership, joint venture, limited liability company, unlimited 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 Facility Guarantors means any Person (other than a Borrower) executing a Facility Guarantee which is a Subsidiary of the Lead Borrower, but in all events shall not include (x) the Excluded Subsidiaries and (y) Holdings. As of the Closing Date, there are no Subsidiary Facility Guarantors.
Successor Lead Borrower shall have the meaning given to such term in SECTION 6.04(g).
Supermajority Consent of the FILO Lenders means the consent of FILO Lenders (other than Delinquent Lenders) holding at least sixty-six and two-thirds percent (66.67%) of the FILO Commitments (other than FILO Commitments held by a Delinquent Lender), or if the FILO Commitments have been terminated, the consent of FILO Lenders (other than Delinquent Lenders) holding at least sixty-six and two-thirds percent (66.67%) of the outstanding FILO Loans (to the extent applicable, calculated assuming settlement and repayment of all Swingline Loans by the Lenders).
Supermajority Consent of the Lenders means the consent of Lenders (other than Delinquent Lenders) holding at least sixty-six and two-thirds percent (66.67%) of the Commitments (other than Commitments held by a Delinquent Lender), or if the Commitments have been terminated, the consent of Lenders (other than Delinquent Lenders) holding at least sixty-six and two-thirds percent (66.67%) of the outstanding Credit Extensions (calculated assuming settlement and repayment of all Swingline Loans by the Lenders).
Supporting Obligations has the meaning assigned to such term in the Security Agreement.
Swap Contract means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing),
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whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a Master Agreement), including any such obligations or liabilities under any Master Agreement.
Swap Contract Secured Parties means, with respect to any Swap Contract, collectively, (a) the Administrative Agent or an Affiliate of the Administrative Agent, (b) any Lender or any Affiliate of a Lender, (c) any Person who (i) was a Lender or an Affiliate of a Lender at the time such Swap Contract was entered into and who is no longer a Lender or an Affiliate of a Lender, and (ii) is, and at all times remains, in compliance with the provisions of SECTION 8.14(a) and (iii) agrees in writing that the Agents and the other Secured Parties shall have no duty to such Person (other than the payment of any amounts to which such Person may be entitled under SECTION 7.04) and acknowledges that the Agents and the other Secured Parties may deal with the Loan Parties and the Collateral as they deem appropriate (including the release of any Loan Party or all or any portion of the Collateral) without notice or consent from such Person, whether or not such action impairs the ability of such Person to be repaid its Other Liabilities) and agrees to be bound by SECTION 8.18, and (d) any Other Secured Swap Provider or Affiliate of any Other Secured Swap Provider who (i) is, and at all times remains, in compliance with the provisions of SECTION 8.14(a) and (ii) agrees in writing that the Agents and the other Secured Parties shall have no duty to such Person (other than the payment of any amounts to which such Person may be entitled under SECTION 7.04) and acknowledges that the Agents and the other Secured Parties may deal with the Loan Parties and the Collateral as they deem appropriate (including the release of any Loan Party or all or any portion of the Collateral) without notice or consent from such Person, whether or not such action impairs the ability of such Person to be repaid its Other Liabilities) and agrees to be bound by SECTION 8.18.
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).
Swingline Lender means Bank of America, N.A., in its capacity as lender of Swingline Loans hereunder to the Borrowers hereunder.
Swingline Loan means a Revolving Credit Loan made by the Swingline Lender to the Borrowers pursuant to SECTION 2.06.
Swingline Loan Ceiling means $30,000,000, as such amount may be increased or reduced in accordance with the provisions of this Agreement.
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Swingline Note means the promissory note of the Borrowers substantially in the form of Exhibit E, payable to the Swingline Lender, evidencing the Swingline Loans made by the Swingline Lender to the Borrowers.
Syndication Agent means U.S. Bank National Association, in its capacity as Documentation Agent.
Synthetic Lease means any lease or other agreement for the use or possession of property creating obligations which do not appear as Indebtedness on the balance sheet of the lessee thereunder but which, upon the insolvency or bankruptcy of such Person, may be characterized as Indebtedness of such lessee without regard to the accounting treatment.
Taxes means any and all current or future taxes, levies, imposts, duties (including stamp duties), deductions, charges (including ad valorem charges) or withholdings in the nature of taxes imposed by any Governmental Authority, and any and all interest and penalties related thereto.
Tender Consideration shall have the meaning assigned to such term in the introductory statement to this Agreement.
Tender Offer means a tender offer by Merger Sub to purchase for cash all of the outstanding shares of common stock of the Company, in accordance with the Tender Offer Documents.
Tender Offer Documents means (a) the Offer to Purchase for Cash, dated as of October 25, 2010, from Merger Sub to the holders of the outstanding shares of common stock of the Company and (b) all agreements and documents required to be entered into or delivered pursuant to or in connection with such Offer to Purchase for Cash or in connection with the Tender Offer.
Tender Shares shall have the meaning assigned to such term in the introductory statement to this Agreement.
Term Loan Agent means Credit Suisse AG, Cayman Islands Branch as administrative agent under the Term Loan Facility, and its successors and assigns in such capacity.
Term Loan Agreement means that certain Credit Agreement dated as of the Closing Date by and among the Lead Borrower, as borrower, Holdings and the other guarantors party thereto, Credit Suisse AG, Cayman Islands Branch as administrative agent and the lenders identified therein.
Term Loan Facility means the term loan facility established pursuant to the Term Loan Agreement, as amended, modified, or supplemented from time to time to the extent permitted pursuant to SECTION 6.13 hereof and pursuant to the Intercreditor Agreement.
Term Loan Lenders means the lenders under the Term Loan Facility.
Term Priority Collateral has the meaning set forth in the Intercreditor Agreement.
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Termination Date means the earlier to occur of (i) the Maturity Date, or (ii) the date on which the maturity of the Obligations (other than the Other Liabilities) is accelerated (or deemed accelerated) and the Commitments are irrevocably terminated (or deemed terminated) in accordance with Article VII.
Top-Up Consideration shall have the meaning assigned to such term in the introductory statement to this Agreement.
Total Commitments means the aggregate of the Commitments of all Lenders. The Total Commitments on the Closing Date are $225,000,000.
Trade Receivables Advance Rate means eighty-five percent (85%).
Tranche A Borrowing Base means, at any time of calculation, an amount equal to:
(a) the face amount of Eligible Credit Card Receivables of the Loan Parties multiplied by the Credit Card Advance Rate;
plus
(b) the face amount of Eligible Trade Receivables of the Loan Parties multiplied by the Trade Receivables Advance Rate;
plus
(c) the Cost of Eligible Inventory of the Loan Parties (other than Eligible In-Transit Inventory), net of Inventory Reserves, multiplied by the Inventory Advance Rate for the Tranche A Borrowing Base multiplied by the Appraised Value of Eligible Inventory of the Loan Parties;
plus
(d) the Cost of Eligible In-Transit Inventory of the Loan Parties, net of Inventory Reserves, multiplied by the Inventory Advance Rate for the Tranche A Borrowing Base multiplied by the Appraised Value of Eligible In-Transit Inventory of the Loan Parties;
plus
(e) with respect to any Eligible Letter of Credit Inventory, (i) until the date that (x) the Lead Borrower has updated its internal accounting systems and controls so that they are capable of accurately distinguishing (without duplication) between items of Inventory which constitute Eligible Inventory and items of Inventory which constitute Eligible Letter of Credit Inventory, (y) the Lead Borrower has provided evidence reasonably satisfactory to the Administrative Agent of the satisfaction of the condition set forth in the preceding clause (x) and (z) the Administrative Agent has consented to the application of clause (e)(ii) hereof (which consent shall not be unreasonably withheld ), the Interim Eligible Letter of Credit Inventory, net of Interim Letter of Credit Inventory
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Reserves, multiplied by the Inventory Advance Rate for the Tranche A Borrowing Base multiplied by the Appraised Value of Eligible Letter of Credit Inventory; and (ii) from and after the date that (A) the Lead Borrower has updated its internal accounting systems so that they are capable of accurately tracking distinguishing (without duplication) between items of Inventory which constitute Eligible Inventory and items of Inventory which constitute Eligible Letter of Credit Inventory, (B) the Lead Borrower has provided evidence reasonably satisfactory to the Administrative Agent of the satisfaction of the condition set forth in the preceding clause (A), and (C) the Administrative Agent has consented to the application of this clause (e)(ii) (which consent shall not be unreasonably withheld), the lesser of (x) the Cost of such Eligible Letter of Credit Inventory, net of Inventory Reserves, multiplied by the Inventory Advance Rate for the Tranche A Borrowing Base for such Inventory when completed, multiplied by the Appraised Value of such Eligible Letter of Credit Inventory or (y) the Stated Amount of the Letter of Credit relating to such Eligible Letter of Credit Inventory, multiplied by the Inventory Advance Rate for the Tranche A Borrowing Base, multiplied by the Appraised Value of such Eligible Letter of Credit Inventory;
minus
(f) the then amount of all Availability Reserves and any other Reserves taken in accordance with Section 2.03(b).
Tranche A Commitment shall mean, with respect to each Tranche A Lender, the commitment of such Tranche A Lender hereunder set forth as its Tranche A Commitment opposite its name on Schedule 1.1 hereto or as may subsequently be set forth in the Register from time to time, as the same may be increased or reduced from time to time pursuant to this Agreement. The aggregate Tranche A Commitments on the Closing Date are $213,000,000.
Tranche A Commitment Percentage shall mean, with respect to each Tranche A Lender, that percentage of the Tranche A Commitments of all Lenders hereunder to make Tranche A Loans to the Borrowers in the amount set forth opposite its name on Schedule 1.1 hereto or as may subsequently be set forth in the Register from time to time, as the same may be increased or reduced from time to time pursuant to SECTION 2.02 or SECTION 2.15, or if the Tranche A Commitments have been terminated, such percentage as calculated immediately prior to such termination.
Tranche A Credit Extensions means Tranche A Loans and Letters of Credit issued hereunder.
Tranche A Lender means each Lender which holds a Tranche A Commitment and any other Person who becomes a Tranche A Lender in accordance with the provisions of this Agreement.
Tranche A Loans means collectively, the Revolving Credit Loans (including Swingline Loans) made by the Lenders pursuant to Article II, other than FILO Loans.
Transactions means, collectively, (a) the consummation of the Tender Offer and the Merger and the other transactions contemplated by the Tender Offer Documents and the Merger
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Agreement on or prior to the Closing Date, (b) the execution and delivery by the Lead Borrower and the Subsidiaries party thereto of the Senior Note Documents and the issuance of the Senior Notes on or prior to the Closing Date, (c) the execution and delivery by the Loan Parties of the Loan Documents to which they are a party and the making of the Revolving Credit Loans and the issuance of Letters of Credit (if any) on the Closing Date, (d) the execution and delivery by Holdings, the Lead Borrower and the Subsidiaries party thereto of the Term Loan Documents and the funding under the Term Loan Facility on the Closing Date, (e) the repayment of all amounts due or outstanding under or in respect of, and the termination of the commitments under, the Existing Credit Agreement on the Closing Date and (f) the payment of the Transaction Expenses.
Transaction Expenses shall mean any fees or expenses incurred or paid by Holdings or any of its Subsidiaries in connection with the Transactions (including in connection with this Agreement and the other Loan Documents).
Type, when used in reference to any Revolving Credit Loan or Borrowing, refers to whether the rate of interest on such Revolving Credit Loan, or on the Revolving Credit Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate, the Prime Rate.
UCC means the Uniform Commercial Code as in effect from time to time in the State of New York provided, however, that if a term is defined in Article 9 of the Uniform Commercial Code differently than in another Article thereof, the term shall have the meaning set forth in Article 9; provided further that, if by reason of mandatory provisions of law, perfection, or the effect of perfection or non-perfection, of a security interest in any Collateral or the availability of any remedy hereunder is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, Uniform Commercial Code means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or availability of such remedy, as the case may be.
Unaudited Financial Statements means the unaudited consolidated balance sheets and related statements of income and cash flows of the Company and its consolidated Subsidiaries as at the end of and for the fiscal quarters ended (a) May 1, 2010, (b) July 31, 2010 and (c) if the Closing Date occurs after December 15, 2010, October 30, 2010.
Uncontrolled Cash means an amount equal $10,000,000.
Unfunded Pension Liability means, at a point in time, the excess of a Plans benefit liabilities, over the current value of that Plans assets, determined in accordance with the assumptions used for funding the Plan pursuant to applicable laws for the applicable plan year and includes any unfunded liability or solvency deficiency as determined for the purposes of the PBA.
United States and U.S. mean the United States of America.
Unrestricted Subsidiaries means (i) each Subsidiary of the Lead Borrower listed on Schedule 5.14 and (ii) any Subsidiary of the Lead Borrower designated by the board of directors
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of the Lead Borrower as an Unrestricted Subsidiary pursuant to SECTION 5.14 subsequent to the date hereof, provided that no Subsidiary may be designated as an Unrestricted Subsidiary if any of its assets are included in the calculation of the Tranche A Borrowing Base or the FILO Borrowing Base immediately prior to such Subsidiarys being designated as an Unrestricted Subsidiary.
Unused Commitment shall mean, on any day, (a) as to the Tranche A Lenders, except as provided in SECTION 2.19(b) or 2.19(c), (i) the then aggregate Tranche A Commitments, minus (ii) the sum of (A) the principal amount of Tranche A Loans (other than Swingline Loans) of the Borrowers then outstanding, and (B) the then Letter of Credit Outstandings; and (b) as to the FILO Lenders, (i) the then aggregate FILO Commitments, minus (ii) the principal amount of FILO Loans of the Borrowers then outstanding.
Unused Fee has the meaning provided in SECTION 2.19(b).
Weighted Average Life to Maturity means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (ii) the then outstanding principal amount of such Indebtedness; provided, that for purposes of determining the Weighted Average Life to Maturity of any Indebtedness that is being modified, refinanced, refunded, renewed, replaced or extended (the Applicable Indebtedness), the effects of any amortization of or prepayments made on such Applicable Indebtedness prior to the date of the applicable modification, refinancing, refunding, renewal, replacement or extension shall be disregarded.
Withdrawal Liability means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part 1 of Subtitle E of Title IV of ERISA.
SECTION 1.02 Terms Generally.
With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:
(a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words include, includes and including shall be deemed to be followed by the phrase without limitation. The word will shall be construed to have the same meaning and effect as the word shall. Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such
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Persons successors and permitted assigns, (iii) the words herein, hereof and hereunder, and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all 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, (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, (vii) all references to $ or dollars or to amounts of money and all calculations of Availability, Tranche A Borrowing Base, FILO Borrowing Base, permitted baskets and other similar matters shall be deemed to be references to the lawful currency of the United States of America, and (viii) references to knowledge of any Loan Party means the actual knowledge of a Responsible Officer.
(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) [Reserved];
(d) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.
(e) This Agreement and the other Loan Documents are the result of negotiation among, and have been reviewed by counsel to, among others, the Loan Parties and the Administrative Agent and are the product of discussions and negotiations among all parties. Accordingly, this Agreement and the other Loan Documents are not intended to be construed against the Administrative Agent or any of the Lenders merely on account of the Administrative Agents or any Lenders involvement in the preparation of such documents.
(f) For purposes of determining compliance with SECTION 6.01, SECTION 6.02, SECTION 6.03, SECTION 6.05, SECTION 6.06, SECTION 6.08, SECTION 6.09 and SECTION 6.11, in the event that any Lien, Investment, Indebtedness, Disposition, Restricted Payment, affiliate transaction, contractual obligation or prepayment of Indebtedness meets the criteria of more than one of the categories of transactions permitted pursuant to any clause of such SECTION 6.01, SECTION 6.02, SECTION 6.03, SECTION 6.05, SECTION 6.06, SECTION 6.08, SECTION 6.09 and SECTION 6.11, such transaction (or portion thereof) at any time shall be permitted under one or more of such clauses as determined by the Lead Borrower in its sole discretion at such time.
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SECTION 1.03 Accounting Terms.
(a) All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP, except as otherwise specifically prescribed herein.
(b) The principal amount of any non-interest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP.
SECTION 1.04 Rounding.
Any financial ratios required to be maintained by the Lead Borrower pursuant to this Agreement (or required to be satisfied in order for a specific action to be permitted under this Agreement) shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).
SECTION 1.05 Times of Day.
Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).
SECTION 1.06 Letter of Credit Amounts.
Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to mean the maximum face amount of such Letter of Credit after giving effect to all increases thereof contemplated by such Letter of Credit, whether or not such maximum face amount is in effect at such time.
SECTION 1.07 Certifications.
All certifications to be made hereunder by an officer or representative of a Loan Party shall be made by such person in his or her capacity solely as an officer or a representative of such Loan Party, on such Loan Partys behalf and not in such persons individual capacity.
SECTION 1.08 Currency Equivalents Generally.
(a) Any amount specified in this Agreement (other than in Article 2) or any of the other Loan Documents to be in Dollars shall also include the equivalent of such amount in any currency other than Dollars, such equivalent amount to be determined at the rate of exchange quoted by the Reuters World Currency Page for the applicable currency at 11:00 a.m. (London time) on such day (or, in the event such rate does not appear on any Reuters World Currency Page, by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Lead Borrower, or, in the absence of such agreement, such rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the
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market where its foreign currency exchange operations in respect of such currency are then being conducted, at or about 10:00 a.m. (New York City time) on such date for the purchase of Dollars for delivery two Business Days later). Notwithstanding the foregoing, for purposes of determining compliance with SECTION 6.01, SECTION 6.02, SECTION 6.03, SECTION 6.05 and SECTION 6.06, (i) any amount in a currency other than Dollars will be converted to Dollars based on the exchange rate for such currency as determined above, and (ii) no Default shall be deemed to have occurred solely as a result of changes in rates of exchange occurring after the time any transaction described in any of such Sections is consummated; provided that, for the avoidance of doubt, the foregoing provisions of this SECTION 1.08 shall otherwise apply to such Sections, including with respect to determining whether any such transaction described in such Sections may be consummated at any time under such Sections.
(b) Notwithstanding the foregoing, for purposes of determining the Fixed Charge Coverage Ratio, amounts denominated in a currency other than Dollars will be converted to Dollars at the currency exchange rates used in preparing the Lead Borrowers financial statements for the period referred to in the definition of FCCR Test Period.
SECTION 1.09 Change of Currency.
Each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time specify with the Lead Borrowers consent to appropriately reflect a change in currency of any country and any relevant market conventions or practices relating to such change in currency.
SECTION 1.10 Pro Forma Basis.
(a) Notwithstanding anything to the contrary herein, the Consolidated Fixed Charge Coverage Ratio shall be calculated in the manner prescribed by this SECTION 1.10; provided, that notwithstanding anything to the contrary in clauses (b), (c) or (d) of this SECTION 1.10, when calculating the Consolidated Fixed Charge Coverage Ratio for purposes of determining actual compliance (and not compliance on a Pro Forma Basis) with SECTION 6.15, the events described in this SECTION 1.10 that occurred subsequent to the end of the applicable FCCR Test Period shall not be given pro forma effect.
(b) For purposes of calculating the Consolidated Fixed Charge Coverage Ratio, Specified Transactions (and the incurrence or repayment of any Indebtedness in connection therewith) that have been made (i) during the applicable FCCR Test Period or (ii) subsequent to such FCCR Test Period and prior to or simultaneously with the event for which the calculation of the Consolidated Fixed Charge Coverage 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 FCCR Test Period. If since the beginning of any applicable FCCR Test Period any Person that subsequently became a Restricted Subsidiary or was merged, amalgamated or consolidated with or into the Lead Borrower or any of its Restricted Subsidiaries since the beginning of such FCCR Test Period shall have made any Specified Transaction that would have required adjustment pursuant to this SECTION 1.10, then the Consolidated Fixed Charge Coverage Ratio shall be calculated to give pro forma effect thereto in accordance with this SECTION 1.10.
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(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 Lead Borrower and may include, for the avoidance of doubt, the amount of cost savings, operating expense reductions and synergies projected by the Lead 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, operating expense reductions and synergies had been realized on the first day of such period and as if such cost savings, operating expense reductions and synergies were realized during the entirety of such period) relating to such Specified Transaction, net of the amount of actual benefits realized during such period from such actions; provided, that (A) such amounts are reasonably identifiable, quantifiable and factually supportable in the good faith judgment of the Lead Borrower, (B) such actions are taken, committed to be taken or expected to be taken no later than 24 months after the date of such Specified Transaction, (C) any cost savings, operating expense reductions and synergies that are not actually realized during such period may no longer be added pursuant to this clause (c) after the end of the fourth full fiscal quarter ending after the date of such Specified Transaction, and (D) 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. Notwithstanding the foregoing, (A) all pro forma adjustments under this clause (c) shall not increase pro forma Consolidated EBITDA by more than 10% for any FCCR Test Period and (B) no pro forma adjustments under this clause (c) shall be made in respect of the Transactions (the foregoing not being intended to limit the operation of paragraph (a)(vii) of the definition of Consolidated EBITDA).
(d) In the event that the Lead 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 calculation of the Consolidated Fixed Charge Coverage Ratio (in each case, other than Indebtedness incurred or repaid under this Agreement in the ordinary course of business for working capital purposes), (i) during the applicable FCCR Test Period or (ii) subsequent to the end of the applicable FCCR Test Period and prior to or simultaneously with the event for which the calculation of the Consolidated Fixed Charge Coverage Ratio is made, then the Consolidated Fixed Charge Coverage 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 first day of the applicable FCCR Test Period. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date of the event for which the calculation of the Consolidated Fixed Charge Coverage Ratio is made had been the applicable rate for the entire period (taking into account any hedging obligations applicable to such Indebtedness). Interest on a Capitalized Lease shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Lead Borrower to be the rate of interest implicit in such Capitalized Lease in accordance with GAAP. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a London interbank offered rate, or other rate, shall be determined to have been based upon the rate actually chosen, or if none, then based upon such optional rate chosen as the Lead Borrower or Restricted Subsidiary may designate.
(e) Whenever any provision of this Agreement requires the Lead Borrower to be in compliance on a Pro Forma Basis (or in Pro Forma Compliance) with a specified Consolidated Fixed Charge Coverage Ratio in connection with any action to be taken the Lead Borrower hereunder, the
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Lead Borrower shall deliver to the Administrative Agent a certificate of a Responsible Officer setting forth in reasonable detail the calculations demonstrating such compliance.
ARTICLE II
Amount and Terms of Credit
SECTION 2.01 Commitment of the Lenders.
(a) Each Lender, severally and not jointly with any other Lender, agrees, upon the terms and subject to the conditions herein set forth, to make Credit Extensions to or for the benefit of the Borrowers, on a revolving basis, subject in each case to the following limitations:
(i) The aggregate outstanding amount of the Credit Extensions to the Borrowers shall not at any time cause Availability to be less than zero;
(ii) Letters of Credit shall be available from the Issuing Banks to the Borrowers and their Restricted Subsidiaries, provided that the Borrowers shall not at any time permit the aggregate Letter of Credit Outstandings at any time to exceed the Letter of Credit Sublimit; and provided further that any Letter of Credit issued for the benefit of any Foreign Subsidiary shall be issued naming the Lead Borrower as the account party on any such Letter of Credit but such Letter of Credit may contain a statement that it is being issued for the benefit of such Foreign Subsidiary;
(iii) No Lender shall be obligated to make any Credit Extension to the Borrowers in excess of such Lenders Tranche A Commitment or FILO Commitment, as applicable;
(iv) The aggregate outstanding amount of the Tranche A Credit Extensions shall not exceed the lesser of the Tranche A Commitments or the Tranche A Borrowing Base;
(v) The aggregate outstanding amount of the FILO Credit Extensions shall not exceed the lesser of the FILO Commitments or Incremental Availability;
(vi) The Lead Borrower shall not request, and the Tranche A Lenders shall be under no obligation to fund, any Tranche A Loan unless the Borrowers have borrowed the full amount of the lesser of the FILO Commitments or Incremental Availability (to the extent that such FILO Commitments have not been terminated). Except as otherwise provided in SECTION 2.13(f), all FILO Credit Extensions shall be FILO Loans and all Letters of Credit and Swingline Loans shall constitute Tranche A Credit Extensions; and
(vii) Subject to all of the other provisions of this Agreement, Revolving Credit Loans to the Borrowers that are repaid may be reborrowed prior to the Termination Date.
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(b) Except as provided in SECTION 2.01(a)(vi), each Borrowing of Revolving Credit Loans to the Borrowers (other than Swingline Loans) shall be made by the Lenders pro rata in accordance with their respective Tranche A Commitments or FILO Commitments, as applicable. The failure of any Lender to make any Revolving Credit Loan to the Borrowers shall neither relieve any other Lender of its obligation to fund its Revolving Credit Loan to the Borrowers in accordance with the provisions of this Agreement nor increase the obligation of any such other Lender.
SECTION 2.02 Increase in Total Commitments.
(a) Increase of Tranche A Commitments. At any time and from time to time on or after the Closing Date, so long as no Default or Event of Default exists or would arise therefrom, but without duplication of any increase permitted pursuant to SECTION 2.02(c) hereof, the Lead Borrower shall have the right to request an increase of the aggregate of the then outstanding Tranche A Commitments by an amount not to exceed in the aggregate $75,000,000. The Administrative Agent and the Lead Borrower shall determine the effective date of such requested increase and any such requested increase shall be first made available to all Tranche A Lenders on a pro rata basis. To the extent that, on or before the tenth day following such request for an increase hereunder, such Tranche A Lenders decline to increase their Tranche A Commitments, or decline to increase their Tranche A Commitments to the amount requested by the Lead Borrower, the Lead Borrower may arrange (or request the Administrative Agent, the Arranger or any of its respective Affiliates to arrange) for other Persons to become a Tranche A Lender hereunder and to issue commitments in an amount equal to the amount of the increase in the Tranche A Commitments requested by the Lead Borrower and not accepted by the existing Tranche A Lenders (each such increase by either means, a Commitment Increase, and each Person issuing, or Lender increasing, its Tranche A Commitment, an Additional Commitment Lender), provided, however, that (i) no Tranche A Lender shall be obligated to provide a Commitment Increase as a result of any such request by the Lead Borrower, (ii) any Additional Commitment Lender which is not an existing Tranche A Lender shall be subject to the approval of the Administrative Agent, the Issuing Banks, the Swingline Lender and the Lead Borrower (which approval shall not be unreasonably withheld), and (iii) without the consent of the Administrative Agent, at no time shall the Tranche A Commitment of any Additional Commitment Lender under this Agreement be less than $5,000,000. Each Commitment Increase shall be in a minimum aggregate amount of at least $25,000,000 and in integral multiples of $5,000,000 in excess thereof. Each Additional Commitment Lender agreeing to provide a Commitment Increase pursuant to this SECTION 2.02(a) shall be on the same terms and with the same maturity as provided for the Lenders other than any upfront, underwriting, arrangement or similar fees as the Lead Borrower and the Persons participating in the Commitment Increase (and the arrangement thereof) shall agree.
(b) Reserved.
(c) Increase of Tranche A Commitments after Termination of FILO Commitments. At the time of any reduction or termination of the FILO Commitments as set forth in SECTION 2.15(c) hereof, but without duplication of any increase permitted pursuant to SECTION 2.02(a) hereof, the FILO Commitments so reduced or terminated may be added, in whole or in part, at the Lead Borrowers option, to the then outstanding Tranche A Commitments and shall thereafter become part of the Tranche A Commitments, and the Tranche A Commitments of the Lenders whose FILO Commitments are being so reduced or terminated shall be automatically increased by the amount so reduced or terminated.
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(d) Conditions to Effectiveness of each Commitment Increase. No Commitment Increase shall become effective unless and until each of the following conditions has been satisfied or waived:
(i) The Borrowers, the Administrative Agent, and any Additional Commitment Lender shall have executed and delivered a joinder to the Loan Documents in such form as the Administrative Agent shall reasonably require;
(ii) The Borrowers shall have paid such fees and other compensation to the Additional Commitment Lenders and MLPF&S as the Lead Borrower and such Additional Commitment Lenders and MLPF&S shall agree; provided, that MLPF&S shall only be entitled to a fee or compensation, or to agree to the fees and compensation paid by the Lead Borrower under this clause (ii), if it has arranged the Commitment Increase;
(iii) If requested by the Administrative Agent, the Borrowers shall deliver to the Administrative Agent and the Lenders an opinion or opinions, in form and substance reasonably satisfactory to the Administrative Agent, from counsel to the Borrowers and dated such date;
(iv) A Revolving Credit Note (to the extent requested) will be issued at the Borrowers expense, to each such Additional Commitment Lender, to be in conformity with requirements of SECTION 2.07 (with appropriate modification) to the extent necessary to reflect the new Tranche A Commitment of each Additional Commitment Lender;
(v) The Borrowers and each Additional Commitment Lender shall have delivered such other instruments, documents and agreements as the Administrative Agent may reasonably have requested in order to effectuate the foregoing; and
(vi) All representations and warranties contained in this Agreement and the other Loan Documents or otherwise made in writing in connection herewith or therewith shall be true and correct in all material respects on and as of the effective date of each Commitment Increase with the same effect as if made on and as of such date, other than representations and warranties that relate solely to an earlier date, which shall be true and correct in all material respects as of such earlier date, provided that any representation and warranty which is qualified as to materiality, Material Adverse Effect or similar language shall be true and correct in all respects on such respective dates.
(e) Notification by Administrative Agent. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Commitment Increase (with each date of such effectiveness being referred to herein as a Commitment Increase Date), and at such time (i) the Tranche A Commitments under, and for all purposes of, this Agreement shall be increased by the aggregate amount of such Commitment Increases, (ii) Schedule 1.1 shall be deemed modified, without further action, to reflect the revised Tranche A Commitment Percentages and Commitment
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Percentages of the relevant Tranche A Lenders, and (iii) this Agreement shall be deemed amended, without further action, to the extent necessary to reflect such increased Tranche A Commitments.
(f) Other Provisions. In connection with Commitment Increases hereunder, the Lenders and the Borrowers agree that, notwithstanding anything to the contrary in this Agreement, (i) the Borrowers shall, in coordination with the Administrative Agent, (x) repay outstanding Tranche A Loans of certain Tranche A Lenders, and obtain Tranche A Loans from certain other Tranche A Lenders (including the Additional Commitment Lenders), or (y) take such other actions as reasonably may be required by the Administrative Agent, in each case to the extent necessary so that all of the Tranche A Lenders effectively participate in each of the outstanding Tranche A Loans pro rata on the basis of their Tranche A Commitment Percentages (determined after giving effect to any increase in the Tranche A Commitments pursuant to this SECTION 2.02), and (ii) the Borrowers shall pay to the Tranche A Lenders any costs of the type referred to in SECTION 2.16(c) in connection with any repayment and/or Tranche A Loans required pursuant to preceding clause (i). Without limiting the obligations of the Borrowers provided for in this SECTION 2.02, the Administrative Agent and the Tranche A Lenders agree that they will use their commercially reasonable efforts to attempt to minimize the costs of the type referred to in SECTION 2.16(c) which the Borrowers would otherwise incur in connection with the implementation of an increase in the Tranche A Commitments. In connection with any Commitment Increase hereunder, upon the request of the Lead Borrower, the Letter of Credit Sublimit may be increased with the approval of the Issuing Banks and the Administrative Agent by an amount not to exceed the amount of such Commitment Increase.
SECTION 2.03 Reserves; Changes to Reserves.
(a) The initial Inventory Reserves and Availability Reserves as of the Closing Date are the following:
(i) Shrink (an Inventory Reserve): An amount equal to the shrink reserve maintained by the Loan Parties in their general ledger, consistent with past practices.
(ii) Landlord Lien Reserve (an Availability Reserve): An amount equal to all past due rent for all of the Borrowers leased locations plus one (1) months rent for all of (A) the Borrowers leased locations in the states of Washington, Virginia and Pennsylvania, and (B) all of the Borrowers distribution centers or warehouses, other than, in each case, such locations, distribution centers or warehouses with respect to which the Administrative Agent has received a Collateral Access Agreement in form and substance reasonably satisfactory to the Administrative Agent.
(iii) Customer Credit Liabilities (an Availability Reserve): As of any date, an amount equal to fifty percent (50%) of the Customer Credit Liabilities.
(iv) Purchase Price Variance (an Inventory Reserve): an amount equal to the reserve maintained by the Loan Parties in their general ledger, consistent with past practices.
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(v) LCM Inventory Reserve (an Inventory Reserve): a lower of cost or market reserve in an amount equal to the reserve maintained by the Loan Parties in their general ledger, consistent with past practices.
(vi) Unreconciled Variance to G/L (an Inventory Reserve): an amount equal to any unreconciled variance between the Loan Parties general ledger and the stock ledger that results in a higher stock ledger inventory balance relative to the general ledger inventory balance.
(vii) The Interim Letter of Credit Inventory Reserves.
(b) The Administrative Agent may hereafter establish additional Reserves or change any of the foregoing Reserves, in its Permitted Discretion; provided that such Reserves shall not be established or changed except upon not less than six (6) Business Days notice to the Lead Borrower (during which period the Administrative Agent shall be available to discuss any such proposed Reserve with the Lead Borrower and the Borrowers may take such action as may be required so that the event, condition or matter that is the basis for such Reserve no longer exists, in a manner and to the extent reasonably satisfactory to the Administrative Agent); provided further that no such prior notice shall be required for changes to any Reserves resulting solely by virtue of mathematical calculations of the amount of the Reserve in accordance with the methodology of calculation previously utilized (such as, but not limited to, rent and Customer Credit Liabilities). The amount of any Reserve established by the Administrative Agent shall have a reasonable relationship to the event, condition or other matter that is the basis for the Reserve. Notwithstanding anything herein to the contrary, Reserves shall not duplicate eligibility criteria contained in the definition of Eligible Credit Card Receivables, Eligible In-Transit Inventory, Eligible Inventory, Eligible Letter of Credit Inventory, Eligible Trade Receivables or reserves or criteria deducted in computing the Appraised Value of Eligible Inventory.
SECTION 2.04 Making of Revolving Credit Loans.
(a) Except as set forth in SECTION 2.09, SECTION 2.10 and SECTION 2.11, Revolving Credit Loans (other than Swingline Loans) shall be either Prime Rate Loans or LIBO Loans as the Lead Borrower on behalf of the Borrowers may request (which request shall substantially be made in the form attached hereto as Exhibit C) subject to and in accordance with this SECTION 2.04. All Swingline Loans shall be only Prime Rate Loans. All Revolving Credit Loans made pursuant to the same Borrowing shall, unless otherwise specifically provided herein, be Revolving Credit Loans of the same Type. Each Lender may fulfill its Commitment with respect to any Revolving Credit Loan by causing any lending office of such Lender to make such Revolving Credit Loan; provided, however, that any such use of a lending office shall not affect the obligation of the Borrowers to repay such Revolving Credit Loan in accordance with the terms of the applicable Revolving Credit Note. Each Lender shall, subject to its overall policy considerations, use reasonable efforts to select a lending office which will not result in the payment of increased costs by the Borrowers. Subject to the other provisions of this SECTION 2.04 and the provisions of SECTION 2.10 and SECTION 2.11, Borrowings of Revolving Credit Loans of more than one Type may be incurred at the same time, but in any event no more than ten (10) Borrowings of LIBO Loans may be outstanding at any time.
(b) The Lead Borrower shall give the Administrative Agent (x) two (2) Business Days prior telephonic notice (thereafter confirmed in writing) of each Borrowing of LIBO Loans, and
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(y) prior telephonic notice (thereafter confirmed in writing) of each Borrowing of Prime Rate Loans by the Borrowers on the same Business Day requested for such Borrowing. Any such notice, to be effective, must be received by the Administrative Agent not later than 1:00 p.m. on the second Business Day in the case of LIBO Loans, and not later than 1:00 p.m. on the same Business Day in the case of Prime Rate Loans, prior to or on, as the case may be, the date on which such Borrowing is to be made. Such notice shall be irrevocable (except to the extent set forth in SECTION 2.10 or SECTION 2.11 hereof), shall contain disbursement instructions and shall specify: (i) whether the Borrowing then being requested is to be a Borrowing of Prime Rate Loans or LIBO Loans and, if LIBO Loans, the Interest Period with respect thereto, provided that all initial Revolving Credit Loans to be made on the Closing Date shall be Prime Rate Loans; (ii) the amount of the proposed Borrowing (which shall be in an integral multiple of $1,000,000, but not less than $5,000,000 in the case of LIBO Loans); and (iii) the date of the proposed Borrowing (which shall be a Business Day). If no election of Interest Period is specified in any such notice for a Borrowing of LIBO Loans, such notice shall be deemed a request for an Interest Period of one (1) month. If no election is made as to the Type of Revolving Credit Loan, such notice shall be deemed a request for Borrowing of Prime Rate Loans. The Administrative Agent shall promptly notify each Lender of its proportionate share of such Borrowing, the date of such Borrowing, the Type of Borrowing being requested and the Interest Period or Interest Periods applicable thereto, as appropriate. On the borrowing date specified in such notice, each Lender shall make its share of the Borrowing available at the office of the Administrative Agent at 100 Federal Street, Boston, Massachusetts 02110 (or such other place as the Administrative Agent may request) no later than 3:00 p.m., in immediately available funds. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any 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 this SECTION 2.04 and may, in reliance upon such assumption, make available to the Borrowers a corresponding amount. In the event a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrowers severally agree to pay to the Administrative Agent, forthwith on demand such corresponding amount, with interest thereon for each day from and including the date such amount is made available to the Borrowers to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, or (ii) in the case of the Borrowers, the interest rate applicable to Prime Rate Loans determined by reference to the Prime Rate. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lenders Revolving Credit Loan included in such Borrowing. Upon receipt of the funds made available by the Lenders to fund any borrowing hereunder, the Administrative Agent shall disburse such funds in the manner specified in the notice of borrowing delivered by the Lead Borrower and shall use reasonable efforts to make the funds so received from the Lenders available to the Borrowers no later than 5:00 p.m.
(c) Notwithstanding anything to the contrary herein contained, all Revolving Credit Loans to the Borrowers shall be FILO Loans (without regard to minimum or integral amounts for such Loans) until the outstanding principal amount of such Revolving Credit Loans equal the lesser of Incremental Availability or the then FILO Commitments. If any FILO Loan is prepaid in part pursuant to SECTION 2.16(b), any Revolving Credit Loans to the Borrowers thereafter requested shall be FILO Loans until the maximum principal amount of FILO Loans outstanding equals the lesser of
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Incremental Availability or FILO Commitments and thereafter all Revolving Credit Loans shall be Tranche A Loans.
(d) To the extent not paid by the Borrowers when due (after taking into consideration any applicable grace period), the Administrative Agent, without the request of the Lead Borrower, may advance any interest or fee payable pursuant to SECTION 2.19 or other payment to which any Credit Party is entitled from the Loan Parties pursuant hereto, any other Loan Document or any other Obligations, and may charge the same to the Loan Account notwithstanding that an Overadvance may result thereby; provided that the Administrative Agent may not charge amounts owing in respect of Other Liabilities to the Loan Account to the extent that an Overadvance may result thereby. The Administrative Agent shall advise the Lead Borrower of any such advance or charge promptly after the making thereof. 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 2.17(a) or SECTION 2.17(b). Any amount which is added to the principal balance of the Loan Account as provided in this SECTION 2.04(d) shall bear interest at the interest rate then and thereafter applicable to Prime Rate Loans determined by reference to the Prime.
SECTION 2.05 Overadvances.
(a) None of the Administrative Agent, the Collateral Agent and the Lenders shall have any obligation to make any Revolving Credit Loan (including, without limitation, any Swingline Loan) or to provide any Letter of Credit if an Overadvance would result.
(b) The Administrative Agent may, in its discretion, make Permitted Overadvances to the Borrowers without the consent of the Lenders and each Lender shall be bound thereby. Any Permitted Overadvances may constitute Swingline Loans. The making of a Permitted Overadvance is for the benefit of the Borrowers and shall constitute a Revolving Credit Loan and an Obligation. Each Lender shall participate in each Permitted Overadvance (including each Permitted Overadvance made under SECTION 2.06(a) through the settlement thereof pursuant to SECTION 2.22). The obligation of each Lender to participate in each Permitted Overadvance shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Administrative Agent, any Issuing Bank, the Swingline Lender, the Borrower or any other Person for any reason whatsoever, (ii) the occurrence or continuance of a Default, or (iii) any other occurrence, event or condition (including the failure to satisfy any condition set forth in SECTION 4.02). 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, nor shall the making of any such Permitted Overadvance modify or abrogate the Borrowers obligations under SECTION 2.17(a) and SECTION 2.17(b) hereof.
(c) The making by the Administrative Agent of a Permitted Overadvance shall not modify or abrogate any of the provisions of (i) SECTION 2.13(g) regarding the Lenders obligations to purchase participations with respect to Letter of Credit Disbursements, or (ii) SECTION 2.06 and SECTION 2.22 regarding the Lenders obligations with respect to participations in Swingline Loans and settlements thereof.
SECTION 2.06 Swingline Loans.
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(a) The Swingline Lender is authorized by the Lenders to, and may in its sole discretion make, Swingline Loans at any time (subject to SECTION 2.06(b)) to the Borrowers up to the amount of the sum of (i) the Swingline Loan Ceiling, upon a notice of Borrowing from Lead Borrower received by the Administrative Agent and the Swingline Lender (which notice, at the Swingline Lenders discretion, may be submitted prior to 3:00 p.m. on the Business Day on which such Swingline Loan is requested), plus (ii) any Permitted Overadvances; provided that the Swingline Lender shall not be obligated to make any Swingline Loan. Swingline Loans shall be Prime Rate Loans bearing interest with reference to the Prime Rate and shall be subject to periodic settlement with the Lenders under SECTION 2.22 below. The Lead Borrower may request, and the Swingline Lender may make, a Swingline Loan notwithstanding that the Borrowers have not borrowed the full amount of the lesser of the FILO Commitments or Incremental Availability at the time of such request. Any Swingline Loan advanced by the Swingline Lender is made in reliance on the agreements of the other Lenders set forth in this Agreement.
(b) The Lead Borrowers request for a Swingline Loan shall be deemed a representation that the applicable conditions for borrowing under SECTION 4.02 are satisfied (unless such conditions have been waived). If the conditions for borrowing under SECTION 4.02 cannot in fact be fulfilled, (x) the Lead Borrower shall give immediate notice (a Noncompliance Notice) thereof to the Administrative Agent and the Swingline Lender, and the Administrative Agent shall promptly provide each Lender with a copy of the Noncompliance Notice, and (y) the Required Lenders may direct the Swingline Lender to, and the Swingline Lender thereupon shall, cease making Swingline Loans (other than Permitted Overadvances) until such conditions can be satisfied or are waived in accordance with SECTION 9.01. Unless the Required Lenders so direct the Swingline Lender, the Swingline Lender may, but is not obligated to, continue to make Swingline Loans commencing one (1) Business Day after the Noncompliance Notice is furnished to the Lenders. Notwithstanding the foregoing, no Swingline Loans (other than Permitted Overadvances) shall be made pursuant to this SECTION 2.06(b) if the Tranche A Credit Extensions and/or the aggregate outstanding amount of the Credit Extensions and Swingline Loans would exceed the limitations set forth in SECTION 2.01.
(c) Immediately upon the making of a Swingline Loan, each Tranche A Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swingline Lender a risk participation in such Swingline Loan in an amount equal to the product of such Tranche A Lenders Tranche A Commitment Percentage times the amount of such Swingline Loan.
SECTION 2.07 Notes.
(a) Upon the request of any Lender, the Revolving Credit Loans made by such Lender shall be evidenced by a Revolving Credit Note, duly executed on behalf of the Borrowers, dated the Closing Date payable to such Lender in an aggregate principal amount equal to such Lenders Commitment.
(b) Upon the request of the Swingline Lender, the Revolving Credit Loans made by the Swingline Lender with respect to Swingline Loans shall be evidenced by a Swingline Note, duly executed on behalf of the Borrowers, dated the Closing Date, payable to the Swingline Lender, in an aggregate principal amount equal to the Swingline Loan Ceiling.
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(c) Each Lender is hereby authorized by the Borrowers to endorse on a schedule attached to each Note delivered to such Lender (or on a continuation of such schedule attached to such Note and made a part thereof), or otherwise to record in such Lenders internal records, an appropriate notation evidencing the date and amount of each Revolving Credit Loan from such Lender, each payment and prepayment of principal of any such Revolving Credit Loan, each payment of interest on any such Revolving Credit Loan and the other information provided for on such schedule; provided, however, that the failure of any Lender to make such a notation or any error therein shall not affect the obligation of any Borrower to repay the Revolving Credit Loans made by such Lender in accordance with the terms of this Agreement and the applicable Notes.
(d) Upon receipt of an affidavit and indemnity of a Lender as to the loss, theft, destruction or mutilation of such Lenders Note and upon cancellation of such Note, the Borrowers will issue, in lieu thereof, a replacement Note in favor of such Lender, in the same principal amount thereof and otherwise of like tenor at such Lenders expense.
SECTION 2.08 Interest on Revolving Credit Loans.
(a) Interest on Revolving Credit Loans.
(i) Subject to SECTION 2.12, each Prime Rate Loan made by a Lender shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as applicable) at a rate per annum that shall be equal to the then Prime Rate plus the Applicable Margin for Prime Rate Loans.
(ii) Subject to SECTION 2.09 through SECTION 2.12, each LIBO Loan made by a Lender shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal, during each Interest Period applicable thereto, to the Adjusted LIBO Rate for such Interest Period, plus the Applicable Margin for LIBO Loans.
(b) Accrued interest on all Revolving Credit Loans shall be payable in arrears on each Interest Payment Date applicable thereto, at the Termination Date and after such Termination Date on demand.
SECTION 2.09 Conversion and Continuation of Revolving Credit Loans.
(a) The Lead Borrower shall have the right at any time, on three (3) Business Days prior notice to the Administrative Agent (which notice, to be effective, must be received by the Administrative Agent not later than 1:00 p.m. on the third Business Day preceding the date of any conversion), (i) to convert any outstanding Borrowings of Prime Rate Loans to Borrowings of LIBO Loans, or (ii) to continue an outstanding Borrowing of LIBO Loans for an additional Interest Period, or (iii) to convert any outstanding Borrowings of LIBO Loans to a Borrowing of Prime Rate Loans, subject in each case to the following:
(i) No Borrowing of Revolving Credit Loans may be converted into, or continued as, LIBO Loans at any time when any Event of Default has occurred and is continuing (nothing contained herein being deemed to obligate the Borrowers to incur
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Breakage Costs upon the occurrence and during the continuance of an Event of Default unless the Obligations are accelerated);
(ii) If less than a full Borrowing of Revolving Credit Loans is converted, such conversion shall be made pro rata among the Lenders based upon their Tranche A Commitment Percentages (or FILO Commitment Percentages, as the case may be) in accordance with the respective principal amounts of the Revolving Credit Loans comprising such Borrowing held by such Lenders immediately prior to such conversion;
(iii) The aggregate principal amount of Prime Rate Loans being converted into or continued as LIBO Loans shall be in an integral of $1,000,000 and at least $5,000,000;
(iv) Each Lender shall effect each conversion by applying the proceeds of its new LIBO Loan or Prime Rate Loan, as the case may be, to its Revolving Credit Loan being so converted;
(v) The Interest Period with respect to a Borrowing of LIBO Loans effected by a conversion or in respect to the Borrowing of LIBO Loans being continued as LIBO Loans shall commence on the date of conversion or the expiration of the current Interest Period applicable to such continuing Borrowing, as the case may be;
(vi) A Borrowing of LIBO Loans may not be converted prior to the last day of an Interest Period applicable thereto, unless the applicable Borrower pays all Breakage Costs incurred in connection with such conversion; and
(vii) Each request for a conversion or continuation of a Borrowing of LIBO Loans which fails to state an applicable Interest Period shall be deemed to be a request for an Interest Period of one (1) month.
(b) If the Lead Borrower does not give notice to convert any Borrowing of LIBO Loans, or does not give notice to continue, or does not have the right to continue, any Borrowing as LIBO Loans, in each case as provided in SECTION 2.09(a) above, such Borrowing shall automatically be converted to, or continued as, as applicable, a Borrowing of LIBO Loans with an Interest Period of one (1) month, at the expiration of the then-current Interest Period, provided that if an Event of Default then exists and is continuing, such Borrowing shall be converted to, or continued as a Prime Rate Loan. The Administrative Agent shall, after it receives notice from the Lead Borrower, promptly give each Lender notice of any conversion, in whole or part, of any Revolving Credit Loan made by such Lender.
SECTION 2.10 Alternate Rate of Interest for Revolving Credit Loans.
If prior to the commencement of any Interest Period for a LIBO Borrowing, the Administrative Agent:
(a) Reasonably determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the
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Adjusted LIBO Rate (in accordance with the terms of the definition thereof) for such Interest Period; or
(b) Is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Required Lenders of making or maintaining their Revolving Credit Loans included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Lead Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Lead Borrower and the applicable Lenders that the circumstances giving rise to such notice no longer exist (which notice the Administrative Agent shall deliver promptly upon obtaining knowledge of the same), (i) any Borrowing Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a LIBO Borrowing shall be ineffective and (ii) if any Borrowing Request requests a LIBO Borrowing, such Borrowing shall be made as a Borrowing of Prime Rate Loans unless withdrawn by the Lead Borrower.
SECTION 2.11 Change in Legality.
(a) Notwithstanding anything to the contrary contained elsewhere in this Agreement, if any Change in Law occurring after the Closing Date shall make it unlawful for a Lender to make or maintain a LIBO Loan or to give effect to its obligations as contemplated hereby with respect to a LIBO Loan, then, by written notice to the Lead Borrower, such Lender may (x) declare that LIBO Loans will not thereafter be made by such Lender hereunder, whereupon any request by the Lead Borrower for a LIBO Borrowing shall, as to such Lender only, be deemed a request for a Prime Rate Loan unless such declaration shall be subsequently withdrawn; and (y) require that all outstanding LIBO Loans made by such Lender be converted to Prime Rate Loans, in which event all such LIBO Loans shall be automatically converted to Prime Rate Loans as of the effective date of such notice as provided in SECTION 2.09(b). In the event any Lender shall exercise its rights hereunder, all payments and prepayments of principal which would otherwise have been applied to repay the LIBO Loans that would have been made by such Lender or the converted LIBO Loans of such Lender, shall instead be applied to repay the Prime Rate Loans made by such Lender in lieu of, or resulting from the conversion of, such LIBO Loans.
(b) For purposes of this SECTION 2.11, a notice to the Lead Borrower pursuant to SECTION 2.11(a) above shall be effective, if lawful, and if any LIBO Loans shall then be outstanding, on the last day of the then-current Interest Period; and otherwise such notice shall be effective on the date of receipt by the Lead Borrower.
SECTION 2.12 Default Interest.
Effective upon written notice from the Administrative Agent (which notice shall be given only at the direction of the Required Lenders after the occurrence of any Specified Default) and at all times thereafter while such Specified Default is continuing, interest shall accrue on all overdue amounts owing by the Borrowers (after as well as before judgment, as and to the extent permitted by law) at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days as applicable) (the Default Rate) equal to the rate
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(including the Applicable Margin for Tranche A Loans or FILO Loans, as applicable) in effect from time to time plus two percent (2.00%) per annum and such interest shall be payable on each Interest Payment Date (or any earlier maturity of the Revolving Credit Loans).
SECTION 2.13 Letters of Credit.
(a) Upon the terms and subject to the conditions herein set forth, at any time and from time to time after the date hereof and prior to the Termination Date, the Lead Borrower on behalf of the Borrowers may request an Issuing Bank to issue, and subject to the terms and conditions contained herein and in reliance on the agreement of the Lenders set forth in this SECTION 2.13, the applicable Issuing Bank shall issue, for the account of the Lead Borrower or a Restricted Subsidiary, one or more Letters of Credit; provided, however, that no Letter of Credit shall be issued if after giving effect to such issuance (i) the aggregate Letter of Credit Outstandings shall exceed the Letter of Credit Sublimit, or (ii) the Tranche A Credit Extensions and/or the aggregate Credit Extensions (including Swingline Loans) would exceed the limitations set forth in SECTION 2.01(a); provided, further, that no Letter of Credit shall be issued unless an Issuing Bank shall have received notice from the Administrative Agent that the conditions to such issuance have been met (such notice shall be deemed given if the Issuing Bank has not received notice that the conditions have not been met within two Business Days of the initial request to the Issuing Bank and the Administrative Agent pursuant to SECTION 2.13(h); provided further that any Letter of Credit issued for the benefit of any Restricted Subsidiary that is not a Borrower shall be issued naming the Lead Borrower as the account party on any such Letter of Credit but such Letter of Credit may contain a statement that it is being issued for the benefit of such Restricted Subsidiary; provided further that an Issuing Bank shall not be required to issue any such Letter of Credit in its reasonable discretion if: (A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank from issuing such Letter of Credit, or any Applicable Law relating to the Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Bank shall prohibit, or request that the Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the Issuing Bank in good faith deems material to it, (B) the issuance of such Letter of Credit would violate one or more policies of the Issuing Bank applicable to letters of credit generally, or (C) any Lender is at such time a Deteriorating Lender hereunder, unless the Issuing Bank has entered into reasonably satisfactory arrangements with the Borrowers or such Lender to eliminate the Issuing Banks risk of full reimbursement with respect to such Letter of Credit and all other Letters of Credit as to which the Issuing Banks has actual or potential fronting exposure with respect to such Deteriorating Lender (as determined by each Issuing Bank in its sole discretion). A permanent reduction of the Tranche A Commitments shall not require a corresponding pro rata reduction in the Letter of Credit Sublimit; provided, however, that if the Tranche A 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 Lead Borrowers option, less than) the Tranche A Commitments. Any Issuing Bank (other than Bank of America or any of its Affiliates) shall notify the Administrative Agent in writing on each Business Day of all Letters of Credit issued on the prior Business Day by such Issuing Bank. If the conditions for borrowing under SECTION 4.02 cannot in fact be fulfilled, the Required Lenders may direct the Issuing Banks to, and the Issuing Banks thereupon shall, cease
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issue Letters of Credit (other than Permitted Overadvances) until such conditions can be satisfied or are waived in accordance with SECTION 9.01.
(b) Each Standby Letter of Credit shall expire at or prior to the close of business on the earlier of the date which is (i) one (1) year after the date of the issuance of such Letter of Credit (or such other longer period of time as the Administrative Agent and the applicable Issuing Bank may agree) (or, in the case of any renewal or extension thereof, one (1) year after such renewal or extension) and (ii) unless cash collateralized or otherwise credit supported to the reasonable satisfaction of the Administrative Agent and the applicable Issuing Bank (in which case, the expiry may extend no longer than twelve (12) months after the then Latest Maturity Date), five (5) Business Days prior to the then Latest Maturity Date; provided, however, that each Standby Letter of Credit may, upon the request of the Lead Borrower, include a provision whereby such Letter of Credit shall be renewed automatically (unless the applicable Issuing Bank notifies the beneficiary thereof at least thirty (30) days prior to the then-applicable expiration date that such Letter of Credit will not be renewed) for additional consecutive periods of twelve (12) months or less (but not beyond the date that is five (5) Business Days prior to the then Latest Maturity Date, unless cash collateralized or otherwise credit supported to the reasonable satisfaction of the Administrative Agent and the applicable Issuing Bank (in which case, the expiry may extend no longer than twelve (12) months after the then Latest Maturity Date)).
(c) Each Commercial Letter of Credit shall expire at or prior to the close of business on the earlier of the date which is (i) one (1) year after the date of the issuance of such Commercial Letter of Credit (or such other period as may be acceptable to the Administrative Agent and the applicable Issuing Bank) and (ii) unless cash collateralized or otherwise credit supported to the reasonable satisfaction of the Administrative Agent and the applicable Issuing Bank (in which case, the expiry may extend no longer than twelve (12) months after the then Latest Maturity Date), five (5) Business Days prior to the then Latest Maturity Date.
(d) Drafts drawn under each Letter of Credit shall be reimbursed by the Borrowers by paying to the Administrative Agent an amount equal to such drawing not later than 1:00 p.m. on the second Business Day immediately following the day that the Lead Borrower receives notice of such drawing and demand for payment by the applicable Issuing Bank, provided that (i) in the absence of written notice to the contrary from the Lead Borrower, and subject to the other provisions of this Agreement, such payments shall be financed when due with a Prime Rate Loan or Swingline Loan to the applicable Borrower in an equivalent amount and, to the extent so financed, the respective Borrowers obligation to make such payment shall be discharged and replaced by the resulting Prime Rate Loan or Swingline Loan, and (ii) in the event that the Lead Borrower has notified the Administrative Agent that it will not so finance any such payments, the applicable Borrowers will make payment directly to the applicable Issuing Bank when due. The Administrative Agent shall promptly remit the proceeds from any Loans made pursuant to clause (i) above in reimbursement of a draw under a Letter of Credit to the applicable Issuing Bank. Such Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Such Issuing Bank shall promptly notify the Administrative Agent and the Lead Borrower by telephone (confirmed by telecopy) of such demand for payment and whether such Issuing Bank has made or will make payment thereunder; provided, however, that any failure to give or delay in giving such notice shall not relieve the Borrowers of their obligation to reimburse such Issuing Bank and the Lenders with respect to any such payment.
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(e) If any Issuing Bank shall make any Letter of Credit Disbursement, then, unless the applicable Borrowers shall reimburse such Issuing Bank in full on the date provided in SECTION 2.13(d) above, the unpaid amount thereof shall bear interest at the rate per annum then applicable to Prime Rate Loans determined by reference to the Prime Rate for each day from and including the date such payment is made to, but excluding, the date that such Borrowers reimburse such Issuing Bank therefor, provided, however, that, if such Borrowers fail to reimburse any Issuing Bank when due pursuant to SECTION 2.13(d), then interest shall accrue at the Default Rate. Interest accrued pursuant to this paragraph shall be for the account of, and promptly remitted by the Administrative Agent, upon receipt to, the applicable Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to SECTION 2.13(g) to reimburse such Issuing Bank shall be for the account of such Lender to the extent of such payment.
(f) Immediately upon the issuance of any Letter of Credit by any Issuing Bank (or the amendment of a Letter of Credit increasing the amount thereof), and without any further action on the part of such Issuing Bank, such Issuing Bank shall be deemed to have sold to each Tranche A Lender, and each such Tranche A Lender shall be deemed unconditionally and irrevocably to have purchased from such Issuing Bank, without recourse or warranty, an undivided interest and participation, to the extent of such Tranche A Lenders Tranche A Commitment Percentage, in such Letter of Credit, each drawing thereunder and the obligations of the Borrowers under this Agreement and the other Loan Documents with respect thereto. Upon any change in the Tranche A Commitments pursuant to SECTION 2.02, SECTION 2.15, SECTION 2.17 or SECTION 9.07 of this Agreement, it is hereby agreed that with respect to all Letter of Credit Outstandings, there shall be an automatic adjustment to the participations hereby created to reflect the new Tranche A Commitment Percentages of the assigning and assignee Tranche A Lenders and the Additional Commitment Lenders, if applicable. If any Letter of Credit Outstandings remain upon the termination of the Tranche A Commitments, and if the lesser of (i) FILO Commitments (determined without regard to any concurrent termination of such FILO Commitments) or (ii) Incremental Availability exceeds the FILO Credit Extensions (the Excess Amount), then upon such termination of the Tranche A Commitments, the Tranche A Lenders shall be deemed to have sold to each FILO Lender, and each FILO Lender shall be deemed unconditionally and irrevocably to have so purchased from the Tranche A Lenders, without recourse or warranty, an undivided interest and participation, to the extent of such FILO Lenders FILO Commitment Percentage in the lesser of such Excess Amount or such undivided interest and participation of each Tranche A Lender in the Letter of Credit Outstandings, each drawing thereunder and the obligations of the Borrowers under this Agreement and the other Loan Documents with respect thereto. Any action taken or omitted by any Issuing Bank under or in connection with a Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for such Issuing Bank any resulting liability to any Lender.
(g) In the event that any Issuing Bank makes any Letter of Credit Disbursement and the Borrowers shall not have reimbursed such amount in full to such Issuing Bank pursuant to this SECTION 2.13, such Issuing Bank shall promptly notify the Administrative Agent, which shall promptly notify each Tranche A Lender (or FILO Lender, with respect to the Excess Amount, if applicable), of such failure, and each Tranche A Lender (or FILO Lender, with respect to the Excess Amount, if applicable) shall promptly and unconditionally pay to the Administrative Agent, for the account of such Issuing Bank the amount of such Tranche A Lenders (or FILO Lenders, with respect to the Excess Amount, if applicable) Tranche A Commitment Percentage (or FILO Commitment Percentage, with respect to the Excess Amount, if applicable) of such unreimbursed payment in
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Dollars and in same day funds. If the applicable Issuing Bank so notifies the Administrative Agent and the Administrative Agent so notifies the Tranche A Lenders (or FILO Lender, with respect to the Excess Amount, if applicable) prior to 11:00 a.m. on any Business Day, each such Tranche A Lender (or FILO Lender, with respect to the Excess Amount, if applicable) shall make available to the applicable Issuing Bank such Tranche A Lenders (or FILO Lenders , with respect to the Excess Amount, if applicable) Tranche A Commitment Percentage (or FILO Commitment Percentage, with respect to the Excess Amount, if applicable) of the amount of such payment on such Business Day in same day funds (or if such notice is received by the Tranche A Lenders (or FILO Lender, with respect to the Excess Amount, if applicable) after 11:00 a.m. on the day of receipt, payment shall be made on the immediately following Business Day in same day funds). If and to the extent such Tranche A Lender (or FILO Lender, with respect to the Excess Amount, if applicable) shall not have so made its Tranche A Commitment Percentage (or FILO Commitment Percentage, with respect to the Excess Amount, if applicable) of the amount of such payment available to the applicable Issuing Bank, such Tranche A Lender (or FILO Lender, with respect to the Excess Amount, if applicable) agrees to pay to such Issuing Bank 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 for the account of such Issuing Bank at the Federal Funds Effective Rate. Each Tranche A Lender (or FILO Lender, with respect to the Excess Amount, if applicable) agrees to fund its Tranche A Commitment Percentage (or FILO Commitment Percentage, with respect to the Excess Amount, if applicable) of such unreimbursed payment notwithstanding a failure to satisfy any applicable lending conditions or the provisions of SECTION 2.01 or SECTION 2.06, or the occurrence of the Termination Date. The failure of any Tranche A Lender (or FILO Lender, with respect to the Excess Amount, if applicable) to make available to the applicable Issuing Bank its Tranche A Commitment Percentage (or FILO Commitment Percentage, with respect to the Excess Amount, if applicable) of any payment under any Letter of Credit shall neither relieve any Tranche A Lender (or FILO Lender, with respect to the Excess Amount, if applicable) of its obligation hereunder to make available to such Issuing Bank its Tranche A Commitment Percentage (or FILO Commitment Percentage, with respect to the Excess Amount, if applicable) of any payment under any Letter of Credit on the date required, as specified above, nor increase the obligation of such other Tranche A Lender (or FILO Lender, with respect to the Excess Amount, if applicable). Whenever any Tranche A Lender (or FILO Lender, with respect to the Excess Amount, if applicable) has made payments to any Issuing Bank in respect of any reimbursement obligation for any Letter of Credit, such Tranche A Lender (or FILO Lender, with respect to the Excess Amount, if applicable) shall be entitled to share ratably, based on its Tranche A Commitment Percentage (or FILO Commitment Percentage, with respect to the Excess Amount, if applicable), in all payments and collections thereafter received on account of such reimbursement obligation.
(h) Whenever the Lead Borrower desires that any Issuing Bank issue a Letter of Credit (or the amendment, renewal or extension (other than automatic renewal or extensions) of an outstanding Letter of Credit), the Lead Borrower shall give to the applicable Issuing Bank and the Administrative Agent at least two (2) Business Days prior written (including, without limitation, by telegraphic, telex, facsimile or cable communication) notice (or such shorter period as may be agreed upon in writing by such Issuing Bank and the Lead Borrower) specifying the date on which the proposed Letter of Credit is to be issued, amended, renewed or extended (which shall be a Business Day), the Stated Amount of the Letter of Credit so requested, the expiration date of such Letter of Credit, the name and address of the beneficiary thereof, and the provisions thereof. If requested by the applicable Issuing Bank, the Lead Borrower shall also submit documentation on such Issuing Banks
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standard form in connection with any request for the issuance, amendment, renewal or extension of a Letter of Credit, provided that in the event of a conflict or inconsistency between the terms of such documentation and this Agreement, the terms of this Agreement shall supersede any inconsistent or contrary terms in such documentation and this Agreement shall control.
(i) Subject to the limitations set forth below, the obligations of the Borrowers to reimburse the Issuing Banks for any Letter of Credit Disbursement shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation (it being understood that any such payment by the Borrowers shall be without prejudice to, and shall not constitute a waiver of, any rights the Borrowers might have or might acquire hereunder as a result of the payment by the applicable Issuing Bank of any draft or the reimbursement by the Borrowers thereof): (i) any lack of validity or enforceability of a Letter of Credit; (ii) the existence of any claim, setoff, defense or other right which a Borrower may have at any time against a beneficiary of any Letter of Credit or against any Issuing Bank or any of the Lenders, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction; (iii) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged or fraudulent in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment by any Issuing Bank of any Letter of Credit against presentation of a demand, draft or certificate or other document which does not strictly comply with the terms of such Letter of Credit; (v) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this SECTION 2.13, constitute a legal or equitable discharge of, or provide a right of setoff against, any Loan Partys obligations hereunder; or (vi) the fact that any Event of Default shall have occurred and be continuing; provided that the Borrowers shall have no obligation to reimburse any Issuing Bank to the extent that such payment was made in error due to the gross negligence, bad faith or willful misconduct of such Issuing Bank (as determined by a court of competent jurisdiction or another independent tribunal having jurisdiction). No Credit Party shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or 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 (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the applicable Issuing Bank, provided that the foregoing shall not be construed to excuse such Issuing Bank from liability to the Borrowers to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrowers to the extent permitted by Applicable Law) suffered by the Borrowers that are caused by such Issuing Banks failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence, bad faith or willful misconduct on the part of any Issuing Bank (as determined by a court of competent jurisdiction or another independent tribunal having jurisdiction), such Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented that appear on their face to be in compliance with the terms of a Letter of Credit, the applicable Issuing Bank may, in its reasonable discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or 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.
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(j) If any Specified Default shall occur and be continuing, on the Business Day that the Lead Borrower receives notice from the Administrative Agent (which notice may be given at the election of the Administrative Agent or at the direction of the Required Lenders) demanding the deposit of cash collateral pursuant to this paragraph, the applicable Loan Parties shall immediately deposit in the applicable Cash Collateral Account an amount in cash equal to 103% of the Letter of Credit Outstandings owing by such Loan Parties as of such date, plus any accrued and unpaid interest thereon. Each such deposit shall be held by the Collateral Agent for the payment and performance of the Obligations. The Collateral Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such Cash Collateral Account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and in the sole discretion of the Administrative Agent (at the request of the Lead Borrower and at the Borrowers risk and expense), such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such Cash Collateral Account shall be applied by the Administrative Agent to reimburse the Issuing Banks for payments on account of drawings under Letters of Credit for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrowers for the Letter of Credit Outstandings at such time or, if the maturity of the Revolving Credit Loans has been accelerated, shall be applied to satisfy the other respective Obligations of the applicable Borrower. If the applicable Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence and continuance of a Specified Default, such amount (to the extent not applied as aforesaid) shall be returned promptly to the respective Borrower but in no event later than two (2) Business Days after all Specified Defaults have been cured or waived.
(k) The Loan Parties and the Credit Parties agree that the Existing Letters of Credit shall be deemed Letters of Credit hereunder as if issued by an Issuing Bank, and from and after the Closing Date the Existing Letters of Credit shall be subject to and governed by the terms and conditions hereof.
(l) Unless otherwise expressly agreed by the Issuing Bank and the Lead Borrower when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), (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.
SECTION 2.14 Increased Costs.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any holding company of any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or any Issuing Bank; or
(ii) impose on any Lender or any Issuing Bank or the London interbank market any other condition affecting LIBO Loans made by such Lender or any Letter of Credit or participation therein;
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and the result of any of the foregoing shall be to increase the cost in any material amount in excess of those incurred by similarly situated lenders to such Lender of making or maintaining any LIBO Loan (or of maintaining its obligation to make any such Revolving Credit Loan) or to increase the cost in any material amount in excess of those incurred by similarly situated lenders to such Lender or any Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount in any material respect of any sum received or receivable by such Lender or such Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrowers will pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or any Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lenders or such Issuing Banks capital or on the capital of such Lenders or such Issuing Banks holding company, if any, as a consequence of this Agreement or the Revolving Credit Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lenders or such Issuing Banks holding company would have achieved but for such Change in Law (taking into consideration such Lenders or such Issuing Banks policies and the policies of such Lenders or such Issuing Banks holding company with respect to capital adequacy), then from time to time the Borrowers will pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lenders or such Issuing Banks holding company for any such reduction suffered.
(c) A certificate of a Lender or any Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or such Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this SECTION 2.14 and setting forth in reasonable detail the manner in which such amount or amounts were determined shall be delivered to the Lead Borrower and shall be conclusive absent manifest error. The Borrowers shall pay such Lender or such Issuing Bank, as the case may be, the amount shown as due on any such certificate within fifteen (15) Business Days after receipt thereof.
(d) Failure or delay on the part of any Lender or any Issuing Bank to demand compensation pursuant to this SECTION 2.14 shall not constitute a waiver of such Lenders or such Issuing Banks right to demand such compensation, provided that the Borrowers shall not be required to compensate a Lender or any Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 90 days prior to the date that such Lender or such Issuing Bank, as the case may be, notifies the Borrowers of the Change in Law giving rise to such increased costs or reductions and of such Lenders or such Issuing Banks intention to claim compensation therefor, and provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 90 day period referred to above shall be extended to include the period of retroactive effect thereof.
SECTION 2.15 Termination or Reduction of Commitments.
(a) Termination or Reduction of Tranche A Commitments. Upon at least two (2) Business Days prior written notice to the Administrative Agent, the Lead Borrower may, at any time, in whole permanently terminate, or from time to time in part permanently reduce, the Tranche A
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Commitments. Each such reduction shall be in the principal amount of $5,000,000 or any integral multiple thereof. Each such reduction or termination shall (i) be applied ratably to the Tranche A Commitments of each Lender and (ii) be irrevocable at the effective time of any such termination or reduction. The Borrowers shall pay to the Administrative Agent for application as provided herein (i) at the effective time of any such termination (but not any partial reduction), all earned and unpaid fees under the Fee Letter and all Unused Fees accrued on the Tranche A Commitments so terminated, and (ii) at the effective time of any such reduction or termination, all Breakage Costs incurred in connection therewith and any amount by which the Tranche A Credit Extensions to the Borrowers outstanding on such date exceed the amount to which the Tranche A Commitments are to be reduced effective on such date.
(b) Reserved.
(c) Termination or Reduction of FILO Commitments after Closing Date. Upon at least two (2) Business Days prior written notice to the Administrative Agent, the Lead Borrower may reduce or terminate the FILO Commitments at any time following the Closing Date and, notwithstanding any provisions of this Agreement to the contrary, prepay the FILO Loans then outstanding without first repaying the Tranche A Loans then outstanding, provided that after giving pro forma effect to such termination and prepayment, and on a projected basis (on a month-end basis) as of the end of each of the six (6) Fiscal Months thereafter, Availability shall be greater than twenty percent (20%) of the lesser of (i) the then FILO Borrowing Base (or, if the FILO Commitments have been terminated in whole, the then Tranche A Borrowing Base), and (ii) the then Revolving Credit Ceiling. Each reduction of the FILO Commitments shall be in the principal amount of $3,000,000 or any integral multiple thereof. The Borrowers shall pay to the Administrative Agent for application as provided herein (i) at the effective time of any such termination (but not any partial reduction), all Unused Fees accrued on the FILO Commitments so terminated, and (ii) at the effective time of any such reduction or termination, all Breakage Costs incurred in connection therewith and any amount by which the FILO Credit Extensions to the Borrowers outstanding on such date exceed the amount to which the FILO Commitments are to be reduced effective on such date.
(d) Termination of FILO Commitments Contemporaneously With Termination of Tranche A Commitments. Notwithstanding the foregoing, in the event that all of the Tranche A Commitments are terminated, the FILO Commitments shall be terminated contemporaneously therewith, without further action by the Administrative Agent, the Lead Borrower or any other Person.
(e) Termination Date. Upon the Termination Date, the Commitments of the Lenders shall be terminated in full, and the Borrowers shall pay, in full and in cash, all outstanding Revolving Credit Loans and all other outstanding Obligations then owing by them to the Lenders (including, without limitation, all Breakage Costs incurred in connection therewith).
SECTION 2.16 Optional Prepayment of Revolving Credit Loans; Reimbursement of Lenders.
(a) Subject to the provisions of SECTION 2.16(b), the Borrowers shall have the right at any time and from time to time to prepay without premium or penalty (but subject to payment of Breakage Costs as provided herein) (without a reduction in the Total Commitments) outstanding Revolving Credit Loans in whole or in part, (x) with respect to LIBO Loans, upon at least two (2)
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Business Days prior written, telex or facsimile notice to the Administrative Agent, prior to 1:00 p.m., and (y) with respect to Prime Rate Loans, on the same Business Day as such notice is furnished to the Administrative Agent, prior to 1:00 p.m., subject in each case to the following limitations:
(i) Subject to SECTION 2.17, all prepayments shall be paid to the Administrative Agent for application (except as otherwise directed by the applicable Borrower), first, to the prepayment of outstanding Swingline Loans, second, to the prepayment of other outstanding Tranche A Loans (other than Swingline Loans) ratably in accordance with each Tranche A Lenders Tranche A Commitment Percentage, third, to the prepayment of other outstanding FILO Loans ratably in accordance with each FILO Lenders FILO Commitment Percentage and fourth, if a Specified Default then exists, to the funding of a cash collateral deposit in the Cash Collateral Account in an amount equal to 103% of all Letter of Credit Outstandings;
(ii) Subject to the foregoing, outstanding Prime Rate Loans of the Borrowers shall be prepaid before outstanding LIBO Loans of the Borrowers are prepaid (except as otherwise directed by the Lead Borrower). Each partial prepayment of LIBO Loans shall be in an integral multiple of $1,000,000 (but in no event less than $5,000,000). No prepayment of LIBO Loans shall be permitted pursuant to this SECTION 2.16 prior to the last day of an Interest Period applicable thereto, unless the Borrowers reimburse the Lenders for all Breakage Costs associated therewith within five (5) Business Days of receiving a written demand for such reimbursement which sets forth the calculation of such Breakage Costs in reasonable detail. No partial prepayment of a Borrowing of LIBO Loans shall result in the aggregate principal amount of the LIBO Loans remaining outstanding pursuant to such Borrowing being less than $5,000,000 (unless all such outstanding LIBO Loans are being prepaid in full); and
(iii) Each notice of prepayment shall specify the prepayment date, the principal amount and Type of the Revolving Credit Loans to be prepaid and, in the case of LIBO Loans, the Borrowing or Borrowings pursuant to which such Revolving Credit Loans were made. Each notice of prepayment shall be revocable, provided that, within five (5) Business Days of receiving a written demand for such reimbursement which sets forth the calculation of such Breakage Costs in reasonable detail, the Borrowers shall reimburse the Lenders for all Breakage Costs associated with the revocation of any notice of prepayment. The Administrative Agent shall, promptly after receiving notice from the Lead Borrower hereunder, notify each applicable Lender of the principal amount and Type of the Revolving Credit Loans held by such Lender which are to be prepaid, the prepayment date and the manner of application of the prepayment.
(b) Notwithstanding the provisions of SECTION 2.16(a) which generally permit voluntary prepayments of the Revolving Credit Loans, except as provided in SECTION 2.15(c) or SECTION 2.17, only if all Tranche A Loans are repaid in full may the Borrowers repay or prepay amounts owed with respect to the FILO Loans, provided, however, that any such repayment or prepayment shall not reduce or terminate the FILO Commitments except to the extent provided in such Sections. In addition, the Borrowers shall also repay the FILO Loans as required (i) under SECTION 2.17 hereof, and (ii) upon any reduction or termination of the FILO Commitments in accordance with the provisions of SECTION 2.15(d) hereof.
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(c) The Borrowers shall reimburse each Lender as set forth below for any loss incurred or to be incurred by the Lenders in the reemployment of the funds (i) resulting from any prepayment (for any reason whatsoever, including, without limitation, conversion to Prime Rate Loans or acceleration by virtue of, and after, the occurrence and during the continuance of an Event of Default) of any LIBO Loan required or permitted under this Agreement, if such Revolving Credit Loan is prepaid prior to the last day of the Interest Period for such Revolving Credit Loan or (ii) in the event that after the Lead Borrower delivers a notice of borrowing under SECTION 2.04 in respect of LIBO Loans, such Revolving Credit Loans are not made on the first day of the Interest Period specified in such notice of borrowing for any reason other than a breach by such Lender of its obligations hereunder or the delivery of any notice pursuant to SECTION 2.09, SECTION 2.10 or SECTION 2.11, or (iii) in the event that after a Borrower delivers a notice of commitment reduction under SECTION 2.15 or a notice of prepayment under SECTION 2.16 in respect of LIBO Loans, such commitment reductions or such prepayments are not made on the day specified in such notice of reduction or prepayment. Such loss shall be the amount (herein, collectively, Breakage Costs) as reasonably determined by such Lender as the excess, if any, of (A) the amount of interest which would have accrued to such Lender on the amount so paid, not prepaid or not borrowed at a rate of interest equal to the Adjusted LIBO Rate for such Revolving Credit Loan (but specifically excluding any Applicable Margin), for the period from the date of such payment or failure to borrow or failure to prepay to the last day (x) in the case of a payment or refinancing of a LIBO Loan with Prime Rate Loans prior to the last day of the Interest Period for such Revolving Credit Loan or the failure to prepay a LIBO Loan, of the then current Interest Period for such Revolving Credit Loan or (y) in the case of such failure to borrow, of the Interest Period for such LIBO Loan which would have commenced on the date of such failure to borrow, over (B) the amount of interest which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the London interbank market. Any Lender demanding reimbursement for such loss shall deliver to the Lead Borrower from time to time one or more certificates setting forth the amount of such loss as determined by such Lender and setting forth in reasonable detail the manner in which such amount was determined and such amounts shall be due within ten (10) Business Days after the receipt of such notice.
(d) Whenever any partial prepayment of Revolving Credit Loans are to be applied to LIBO Loans, such LIBO Loans shall be prepaid in the chronological order of their Interest Payment Dates or as the Lead Borrower may otherwise designate in writing.
SECTION 2.17 Mandatory Prepayment; Commitment Termination; Cash Collateral.
The outstanding Obligations shall be subject to prepayment as follows:
(a) If at any time the amount of the Tranche A Credit Extensions by the Tranche A Lenders exceeds the lesser of the aggregate Tranche A Commitments or the Tranche A Borrowing Base, the Borrowers will, immediately upon notice from the Administrative Agent: (x) prepay the Tranche A Loans (including Swingline Loans) in an amount necessary to eliminate such deficiency; and (y) if, after giving effect to the prepayment in full of all outstanding Tranche A Loans such deficiency has not been eliminated, deposit cash into the Cash Collateral Account in an amount equal to 103% of the Letter of Credit Outstandings.
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(b) If at any time the amount of the Credit Extensions by the Lenders causes Availability to be less than zero, the Borrowers will, immediately upon notice from the Administrative Agent: (x) prepay the Tranche A Loans in an amount necessary to eliminate such deficiency; and (y) if, after giving effect to the prepayment in full of all outstanding Tranche A Loans such deficiency has not been eliminated, prepay the FILO Loans in an amount necessary to eliminate such deficiency, and (z) if, after giving effect to the prepayment in full of all outstanding Tranche A Loans and FILO Loans such deficiency has not been eliminated, deposit cash into the Cash Collateral Account in an amount equal to 103% of the Letter of Credit Outstandings.
(c) The Revolving Credit Loans shall be repaid daily in accordance with (and to the extent required under) the provisions of SECTION 2.18, to the extent then applicable. All such payments shall be applied first to Tranche A Loans and after prepayment in full thereof, to the FILO Loans.
(d) So long as a Liquidation has not been commenced and the conditions set forth in SECTION 4.02 have been satisfied by the Loan Parties or waived by the Administrative Agent, at the time of the delivery of each Borrowing Base Certificate, Tranche A Loans shall be made by the Tranche A Lenders (without regard to minimum or integral amounts for such Loans) to repay the FILO Credit Extensions to extent the FILO Credit Extensions exceed the lesser of the FILO Commitments or Incremental Availability as reflected in such Borrowing Base Certificate.
(e) Except during the continuance of a Cash Dominion Event, any Net Proceeds, Cash Receipts and other payments received by the Administrative Agent shall be applied as the Lead Borrower shall direct the Administrative Agent in writing, and otherwise consistent with the provisions of SECTION 2.16(b).
(f) Subject to the foregoing, except as otherwise directed by the Lead Borrower (whose direction may be given only if a Cash Dominion Event has not occurred and is not continuing), outstanding Prime Rate Loans shall be prepaid before outstanding LIBO Loans are prepaid. No prepayment of LIBO Loans shall be permitted pursuant to this SECTION 2.17 prior to the last day of an Interest Period applicable thereto, unless the Borrowers reimburse the Lenders for all Breakage Costs associated therewith within five (5) Business Days of receiving a written demand for such reimbursement which sets forth the calculation of such Breakage Costs in reasonable detail. In order to avoid such Breakage Costs, as long as no Specified Default has occurred and is continuing, at the request of the Lead Borrower, the Administrative Agent shall hold all amounts required to be applied to LIBO Loans in the Cash Collateral Account and will apply such funds to the applicable LIBO Loans at the end of the then pending Interest Period therefor (provided that the foregoing shall in no way limit or restrict the Administrative Agents or the Collateral Agents rights upon the occurrence and during the continuance of any other Event of Default). No partial prepayment of a Borrowing of LIBO Loans shall result in the aggregate principal amount of the LIBO Loans remaining outstanding pursuant to such Borrowing being less than $5,000,000. A prepayment of the Revolving Credit Loans pursuant to SECTION 2.16 or SECTION 2.17 shall not permanently reduce the Total Commitments.
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(g) The Borrowers shall repay the Obligations as required pursuant to SECTION 2.15(e).
SECTION 2.18 Cash Management.
(a) Within thirty (30) days of the occurrence of a Specified Default, or immediately upon the occurrence of any other Cash Dominion Event, the Borrowers, upon the request of the Administrative Agent, shall deliver to the Administrative Agent a schedule of all DDAs, that to the knowledge of the Responsible Officers of the Loan Parties, are maintained by the Loan Parties, which schedule includes, with respect to each depository (i) the name and address of such depository; (ii) the account number(s) maintained with such depository; and (iii) a contact person at such depository.
(b) Annexed hereto as Schedule 2.18(b) is a list describing, as of the Closing Date, all arrangements to which any Loan Party is a party with respect to the payment to such Loan Party of the proceeds of all credit card and debit card charges for sales by such Loan Party.
(c) To the extent not previously delivered, each Loan Party shall:
(i) on or prior to the thirty (30) day anniversary of the Closing Date or such later date as the Administrative Agent shall agree in writing, deliver to the Collateral Agent notifications (each, a Credit Card Notification) substantially in the form attached hereto as Exhibit G which have been executed on behalf of such Loan Party and addressed to such Loan Partys credit card and debit card clearinghouses and processors listed on Schedule 2.18(b); and
(ii) on or prior to the ninety (90) day anniversary of the Closing Date or such later date as the Administrative Agent shall agree in writing, in its sole discretion (such date, the Blocked Account Date), enter into a blocked account agreement (each, a Blocked Account Agreement), reasonably satisfactory to the Administrative Agent, with any Blocked Account Bank with respect to the DDAs in which material amounts (as reasonably determined by the Administrative Agent) of funds of any of the Loan Parties from one or more DDAs are concentrated (excluding, for the avoidance of doubt, the Designated Account (as defined below) and petty cash, payroll, trust and tax withholding accounts subject to the limitations set forth in clause (d) below) (including those existing as of the Closing Date and listed on Schedule 2.18(c) attached hereto) (collectively, the Material DDAs and, to the extent, subject to a Blocked Account Agreement, collectively, the Blocked Accounts); provided that in the event that any DDA listed on Schedule 2.18(c) is not subject to a Blocked Account Agreement on or prior to Blocked Account Date, then not later than sixty (60) days after the Blocked Account Date or such later date as the Administrative Agent shall agree in writing, in its sole discretion, the Loan Parties shall cause any DDA which is not a Blocked Account to be closed and have all funds therein transferred to a Blocked Account, and all future deposits made to, a Blocked Account with the Collateral Agent or another Lender.
(d) Each Credit Card Notification and Blocked Account Agreement entered into by a Loan Party shall require (after delivery of notice to the Blocked Account Bank from the Collateral Agent (which notice may be given during the continuance of a Cash Dominion Event)) the ACH or
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wire transfer on each Business Day (and whether or not there is then an outstanding balance in the Loan Account) of all available cash receipts (the Cash Receipts) (other than Uncontrolled Cash which may be deposited into a segregated DDA which the Lead Borrower designates in writing to the Administrative Agent as being the Uncontrolled Cash Account(the Designated Account )) to the concentration account maintained by the Administrative Agent at Bank of America (the Concentration Account), from:
(i) the sale of Inventory and other Collateral (whether or not constituting a Prepayment Event, but excluding, until the Term Loan Facility is repaid in full, any Term Priority Collateral);
(ii) all proceeds of collections of Accounts (whether or not constituting a Prepayment Event);
(iii) all Net Proceeds on account of any Prepayment Event (other than, until the Term Loan Facility or any Permitted Refinancing thereof is repaid in full, a Prepayment Event arising in connection with the Term Priority Collateral);
(iv) each Blocked Account (including all cash deposited therein from each DDA); and
(v) the cash proceeds of all credit card and debit card charges.
If any cash or Cash Equivalents owned by any Loan Party (other than (i) amounts on deposit in the Designated Account, which funds, shall not be funded from, or when withdrawn from the Designated Account, shall not be replenished by, funds constituting proceeds of Collateral so long as such Cash Dominion Event continues, (ii) petty cash accounts funded in the ordinary course of business, the deposits in which shall not aggregate more than $10,000,000 or exceed $2,000,000 with respect to any one account (or in each case, such greater amounts to which the Administrative Agent may agree in its sole discretion), and (iii) payroll, trust and tax withholding accounts funded in the ordinary course of business and required by Applicable Law) are deposited to any account, or held or invested in any manner, otherwise than in a Blocked Account (or a DDA which is swept daily to a Blocked Account), then (a) the Borrowers shall cause all funds in such accounts or so held or so invested to be transferred with such frequency as may be reasonably required by the Administrative Agent to a Blocked Account (or a DDA which is swept daily to a Blocked Account) and (b) the Collateral Agent may require the applicable Loan Party to close such account and have all funds therein transferred to a Blocked Account, and all future deposits made to a Blocked Account. In addition to the foregoing, 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, which shall identify, to the reasonable 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 Loan Facility or any Permitted
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Refinancing thereof the proceeds of the Term Priority Collateral received by the Administrative Agent.
(e) [Reserved].
(f) The Loan Parties may close Material DDAs or Blocked Accounts and/or open new Material DDAs or Blocked Accounts, subject to the execution and delivery to the Collateral Agent of appropriate Blocked Account Agreements (unless expressly waived by the Collateral Agent) consistent with the provisions of this SECTION 2.18 and otherwise reasonably satisfactory to the Collateral Agent. The Loan Parties shall furnish the Collateral Agent with prior written notice of their intention to open or close a Material DDA and the Collateral Agent shall promptly notify the Lead Borrower as to whether the Collateral Agent shall require a Blocked Account Agreement with the Person with whom such account will be maintained. Unless consented to in writing by the Collateral Agent, the Borrowers shall not enter into any agreements with credit card or debit card processors other than the ones expressly contemplated herein unless contemporaneously therewith, a Credit Card Notification, is executed and delivered to the Collateral Agent. The Borrowers may also maintain one or more disbursement accounts (the Disbursement Accounts) to be used by the Borrowers for disbursements and payments (including payroll) in the ordinary course of business or as otherwise permitted hereunder.
(g) The Loan Parties shall establish and maintain cash management arrangements and procedures, including Blocked Accounts, reasonably satisfactory to the Administrative Agent.
(h) The Concentration Account shall at all times be under the sole dominion and control of the Collateral Agent. Each Borrower hereby acknowledges and agrees that (i) such Borrower has no right of withdrawal from the Concentration Account, (ii) the funds on deposit in the Concentration Account shall at all times continue to 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 2.18, during the continuation of a Cash Dominion Event, any Borrower receives or otherwise has dominion and control of any such proceeds or collections, such proceeds and collections shall be held in trust by such Borrower for the Collateral Agent, shall not be commingled with any of such Borrowers other funds or deposited in any account of such Borrower and shall promptly be deposited into the Concentration Account or dealt with in such other fashion as such Borrower may be instructed by the Collateral Agent.
(i) Any amounts received in the Concentration Account at any time when all of the Obligations then due have been and remain fully repaid shall be remitted to the operating account of the Borrowers maintained with the Administrative Agent.
(j) The Collateral Agent shall promptly (but in any event within one Business Day) furnish written notice to each Person with whom a Blocked Account is maintained of any termination of a Cash Dominion Event.
(k) The following shall apply to deposits and payments under and pursuant to this Agreement:
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(i) Funds shall be deemed to have been deposited to the Concentration Account on the Business Day on which deposited, provided that such deposit is available to the Administrative Agent by 4:00 p.m. on that Business Day (except that if the Obligations are being paid in full, by 2:00 p.m. Boston time, on that Business Day);
(ii) Funds paid to the Administrative Agent, other than by deposit to the Concentration Account, shall be deemed to have been received on the Business Day when they are good and collected funds, provided that such payment is available to the Administrative Agent by 4:00 p.m. on that Business Day (except that if the Obligations are being paid in full, by 2:00 p.m. Boston time, on that Business Day);
(iii) If a deposit to the Concentration Account or payment is not available to the Administrative Agent until after 4:00 p.m. on a Business Day, such deposit or payment shall be deemed to have been made at 9:00 a.m. on the then next Business Day;
(iv) If any item deposited to the Concentration Account and credited to the Loan Account is dishonored or returned unpaid for any reason, whether or not such return is rightful or timely, the Administrative Agent shall have the right to reverse such credit and charge the amount of such item to the applicable Loan Account and the Borrowers shall indemnify the Secured Parties against all out-of-pocket claims and losses resulting from such dishonor or return;
(v) All amounts received under this SECTION 2.18 shall be applied in the manner set forth in SECTION 7.04.
SECTION 2.19 Fees.
(a) The Borrowers shall pay to the Administrative Agent and MLPF&S, for their respective accounts, the fees set forth in the Fee Letter as and when payment of such fees is due as therein set forth.
(b) The Borrowers shall pay the Administrative Agent, for the account of the Lenders, an aggregate fee (the Unused Fee) equal to the Applicable Unused Fee Rate per annum (on the basis of actual days elapsed in a year of 360 days) of the average daily balance of the Lenders respective Unused Commitment during the Fiscal Quarter just ended (or relevant period with respect to the payment being made through the first Fiscal Quarter ending after the Closing Date or on the Termination Date). The Unused Fee shall be paid in arrears, on the first day of each Fiscal Quarter after the execution of this Agreement and on the Termination Date. The Administrative Agent shall pay the Unused Fee to the Lenders upon the Administrative Agents receipt of the Unused Fee based upon each Lenders pro rata share of the average daily balance of the Lenders Unused Commitment.
(c) [Reserved].
(d) The Borrowers shall pay the Administrative Agent, for the account of the Lenders who are then participating in the Letters of Credit, on the first day of each Fiscal Quarter and on demand after the Termination Date, in arrears, a fee calculated on the basis of a 360 day year, as applicable and actual days elapsed (each, a Letter of Credit Fee), equal to the following per annum
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percentages of the average face amount of the following categories of Letters of Credit outstanding during the three month period then ended:
(i) Standby Letters of Credit: for the account of each Lender in accordance with its Tranche A Commitment Percentage, at a per annum rate equal to the then Applicable Margin for Tranche A Loans that are LIBO Loans;
(ii) Commercial Letters of Credit: for the account of each Lender in accordance with its Tranche A Commitment Percentage, at a per annum rate equal to fifty percent (50%) of the then Applicable Margin for Tranche A Loans that are LIBO Loans;
(iii) After the occurrence and during the continuance of a Specified Default, at any time that the Administrative Agent is not holding in the Cash Collateral Account an amount in cash equal to 103% of the Letter of Credit Outstandings, as of such date, plus accrued and unpaid interest on any unreimbursed drawings of such Letter of Credit Outstandings, effective upon written notice from the Administrative Agent (which notice may be given at the election of the Administrative Agent or at the direction of the Required Lenders after the occurrence of any Specified Default), the Letter of Credit Fees set forth in clauses (i) and (ii) of this SECTION 2.19(d) shall be increased, at the option of the Administrative Agent or the Required Lenders, by an amount equal to two percent (2%) per annum.
(e) The Borrowers shall pay to each Issuing Bank, in addition to all Letter of Credit Fees otherwise provided for herein, (i) the reasonable and customary fees and charges of such Issuing Bank in connection with the negotiation, settlement and amendment of each Letter of Credit issued by such Issuing Bank, and (ii) a fronting fee (each, a Fronting Fee) equal to one-eighth of one percent (0.125%) on the aggregate Stated Amount of all Letters of Credit. Each such Fronting Fee shall be payable on the first day of each Fiscal Quarter and on demand after the Termination Date, in arrears. In addition, the Borrowers shall pay directly to each Issuing Bank for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of such Issuing Bank relating to letters of credit as from time to time in effect.
(f) All fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for the account of the Administrative Agent and other Credit Parties as provided herein. Once due, all fees shall be fully earned and shall not be refundable under any circumstances.
SECTION 2.20 Maintenance of Loan Account; Statements of Account.
(a) The Administrative Agent shall maintain an account on its books in the name of the Borrowers (each, the Loan Account) which will reflect (i) all Revolving Credit Loans and other advances made by the Lenders to the Borrowers or for the Borrowers account, (ii) all Letter of Credit Disbursements, fees and interest that have become payable as herein set forth, and (iii) any and all other monetary Obligations that have become payable.
(b) The Loan Account will be credited with all amounts received by the Administrative Agent from the Borrowers or from other Persons for the Borrowers account, including all amounts received in the Concentration Account from the Blocked Account Banks, and the amounts so credited shall be applied as set forth in and to the extent required by SECTION 2.17 or SECTION 7.04,
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as applicable. After the end of each month, the Administrative Agent shall send to the Borrowers a statement accounting for the charges (including interest), loans, advances and other transactions occurring among and between the Administrative Agent, the Lenders and the Borrowers during that month. The monthly statements, absent manifest error, shall be deemed presumptively correct.
SECTION 2.21 Payments; Sharing of Setoff.
(a) The Borrowers shall make each payment required to be made hereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of drawings under Letters of Credit, of amounts payable under SECTION 2.14, SECTION 2.15(c), SECTION 2.16(c), SECTION 2.23, SECTION 9.04, SECTION 9.05 or otherwise) prior to 2:00 p.m. on the date when due, in immediately available funds, without condition or deduction for any defense, recoupment, setoff or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 100 Federal Street, Boston, Massachusetts (or such other place as the Administrative Agent may direct), except payments to be made directly to each Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to SECTION 2.14, SECTION 2.15(a), SECTION 2.15(c), SECTION 2.15(e), SECTION 2.16(c), SECTION 2.23, SECTION 9.04 and SECTION 9.05 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein. The Administrative Agent shall distribute any such payments to the appropriate recipient promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a Business Day, except with respect to LIBO Borrowings, the date for payment shall be extended to the next succeeding Business Day, and, if any payment due with respect to LIBO Borrowings shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, unless that succeeding Business Day is in the next calendar month, in which event, the date of such payment shall be on the last Business Day of subject calendar month, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension.
(b) All funds received by and available to the Administrative Agent to pay principal, unreimbursed drawings under Letters of Credit, interest, fees and other amounts then due hereunder, shall be applied in accordance with the provisions of SECTION 2.17 or SECTION 7.04 ratably among the parties entitled thereto in accordance with the amounts of principal, unreimbursed drawings under Letters of Credit, interest, fees and other amounts then due to such respective parties, except to the extent that payments hereunder are provided to be made solely to the FILO Lenders under SECTION 2.15. For purposes of calculating interest due to a Lender, that Lender shall be entitled to receive interest on the actual amount contributed by that Lender towards the principal balance of the Revolving Credit Loans outstanding during the applicable period covered by the interest payment made by the Borrowers. Any net principal reductions to the Revolving Credit Loans received by the Administrative Agent in accordance with the Loan Documents during such period shall not reduce such actual amount so contributed, for purposes of calculation of interest due to that Lender, until the Administrative Agent has distributed to the applicable Lender its Commitment Percentage thereof. All credits against the Obligations shall be conditioned upon final payment to the Administrative Agent of the items giving rise to such credits. If any item credited to the Loan Account is dishonored or returned unpaid for any reason, whether or not such return is rightful or timely, the Administrative Agent shall
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have the right to reverse such credit and charge the amount of such item to the Loan Account and the Borrowers shall indemnify the Secured Parties against all claims and losses resulting from such dishonor or return.
(c) Unless the Administrative Agent shall have received notice from the Lead Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Banks hereunder that the Borrowers will not make such payment, the Administrative Agent may assume that the Borrowers have made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the applicable Issuing Bank, as the case may be, the amount due. In such event, if the Borrowers have not in fact made such payment, then each of the Lenders or the applicable Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or such Issuing Bank 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 Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
(d) In accordance with the provisions of SECTION 8.16, if any Lender shall fail to make any payment required to be made by it pursuant to this Agreement, 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 under such Section.
SECTION 2.22 Settlement Amongst Lenders.
(a) The Swingline Lender may, at any time (but, in any event shall weekly, as provided in SECTION 2.22(b)), on behalf of the Borrowers (which hereby authorize the Swingline Lender to act on their behalf in that regard) request the Administrative Agent to cause the Tranche A Lenders to make a Tranche A Loan (which shall be a Prime Rate Loan) in an amount equal to such Lenders Tranche A Commitment Percentage of the outstanding amount of Swingline Loans made in accordance with SECTION 2.06, which request may be made regardless of whether the conditions set forth in Article IV have been satisfied but subject to the last sentence of this SECTION 2.22(a). Upon such request, each Tranche A Lender shall make available to the Administrative Agent the proceeds of such Tranche A Loan for the account of the Swingline Lender. If the Swingline Lender requires a Tranche A Loan to be made by the Tranche A Lenders and the request therefor is received prior to 1:00 p.m. on a Business Day, such transfers shall be made in immediately available funds no later than 3:00 p.m. that day; and, if the request therefor is received after 1:00 p.m., then no later than 3:00 p.m. on the next Business Day. The obligation of each such Tranche A Lender to transfer such funds is irrevocable, unconditional and without recourse to or warranty by the Administrative Agent or the Swingline Lender. If and to the extent any Tranche A Lender shall not have so made its transfer to the Administrative Agent, such Tranche A 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, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. In the event that the Borrowers have not borrowed the full amount of the lesser of the FILO Commitments or Incremental Availability, the Administrative Agent may (notwithstanding any contrary provision of this Agreement but subject to SECTION 2.22(b)) require a settlement of any
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Swingline Loan: first, from the making of FILO Loans, and thereupon the settlement provisions of this SECTION 2.22(a) shall apply to such settlement by FILO Lenders, mutatis mutandis, and second, from the making of Tranche A Revolver Loans. If for any reason any Swingline Loan cannot be refinanced by a Tranche A Loan in accordance with this SECTION 2.22(a) (including because the conditions set forth in Article IV have not been satisfied), the request submitted by the Swingline Lender as set forth above shall be deemed to be a request by the Swingline Lender that each of the Tranche A Lenders fund its risk participation in the relevant Swingline Loan and each Tranche A Lenders payment to the Administrative Agent for the account of the Swingline Lender described above shall be deemed payment in respect of such participation.
(b) The amount of each Lenders Tranche A Commitment Percentage or FILO Commitment Percentage of outstanding Revolving Credit Loans (including outstanding Swingline Loans, except that settlements of Swingline Loans during the months of October, November and December of each year shall be required to be made by the Swingline Lender only with respect to those Swingline Loans in excess of $10,000,000 in the aggregate only (the amounts in excess of $10,000,000 being referred to as the Excess Swingline Loans)) shall be computed weekly (or more frequently in the Administrative Agents discretion) and shall be adjusted upward or downward based on all Revolving Credit Loans (including Swingline Loans other than Excess Swingline Loans) and repayments of Revolving Credit Loans (including Swingline Loans other than Excess Swingline 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.
(c) The Administrative Agent shall deliver to each of the Lenders promptly after a Settlement Date a summary statement of the amount of outstanding Revolving Credit Loans (including Swingline Loans other than Excess Swingline Loans) for the period and the amount of repayments received for the period. As reflected on the summary statement, (i) the Administrative Agent shall transfer to each Tranche A Lender or FILO Lender, as applicable, its Tranche A Commitment Percentage or FILO Commitment 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 Revolving Credit Loans made by each Tranche A Lender or FILO Lender, as applicable, with respect to Revolving Credit Loans to the Borrowers (including Swingline Loans other than Excess Swingline Loans) shall be equal to such Tranche A Lenders Tranche A Commitment Percentage, or FILO Lenders FILO Commitment Percentage of Revolving Credit Loans, as applicable (including Swingline Loans which are not Excess Swingline 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 1:00 p.m. on a Business Day, such transfers shall be made in immediately available funds no later than 3:00 p.m. that day; and, if received after 1:00 p.m., then no later than 3:00 p.m. on the next Business Day. The obligation of each 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, at the Federal Funds Effective Rate.
SECTION 2.23 Taxes.
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(a) Except as otherwise expressly provided in this SECTION 2.23, any and all payments by or on account of any obligation of the Loan Parties hereunder or under any other Loan Document shall be made free and clear of and without deduction or withholding for any Indemnified Taxes or Other Taxes; provided, however, that if a Loan Party or an Agent shall be required to deduct, withhold or remit any such Taxes from such payments, then (i) in the case of any Indemnified Taxes or Other Taxes, the sum payable shall be increased as necessary so that after making all required deductions, withholdings, or remittances for such Taxes (including deductions or withholdings applicable to additional sums payable under this SECTION 2.23) the applicable Credit Party receives an amount equal to the sum it would have received had no such deductions or withholdings been made, (ii) the applicable withholding agent shall make such deductions or withholdings, (iii) the applicable withholding agent shall pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with Applicable Law and (iv) within thirty (30) days after the date of such payment (or, if receipts or evidence are not available within thirty (30) days, as soon as possible thereafter), if a Borrower or any Facility Guarantor is the applicable withholding agent, the applicable withholding agent shall furnish to such Agent or Lender (as the case may be) the original or a copy of a receipt evidencing payment thereof or other evidence acceptable to such Agent or Lender.
(b) In addition, the Loan Parties shall pay any Other Taxes to the relevant Governmental Authority in accordance with Applicable Law, excluding, in each case, such amounts that result from a Lenders assignment, grant of a participation, transfer or assignment to or designation of a new applicable New Lending Office or other office for receiving payments under any Loan Document (collectively, Assignment Taxes), except for Assignment Taxes resulting from assignment or participation that is requested or required in writing by the Borrower.
(c) (i) The Loan Parties shall indemnify each Credit Party, within ten (10) days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid or payable by such Credit Party on or with respect to any payment by or on account of any obligation of the Loan Parties hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this SECTION 2.23) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto; provided that if any Loan Party reasonably believes that such Taxes were not correctly or legally asserted, each Lender will use reasonable efforts to cooperate with such Loan Party to obtain a refund of such Taxes so long as such efforts would not, in the sole determination of such Lender, result in any unreimbursed additional costs, expenses or risks or be otherwise disadvantageous to it; provided further, that the Loan Parties shall not be required to compensate any Lender pursuant to this SECTION 2.23 for any amounts incurred in any fiscal year for which such Lender is claiming compensation if such Lender does not furnish notice of such claim within six (6) months from the end of such fiscal year; provided further, that if the circumstances giving rise to such claim have a retroactive effect, then the beginning of such six (6) month period shall be extended to include such period of retroactive effect. A certificate as to the amount of such payment or liability delivered to the Lead Borrower by a Credit Party, or by the Administrative Agent on its own behalf or on behalf of any other Credit Party, setting forth in reasonable detail the manner in which such amount was determined, shall be conclusive absent manifest error.
(ii) Without limiting the provisions of subsection (a) or (b) above, each Lender and the Issuing Bank shall, and does hereby, indemnify each Loan Party and each Agent, and shall make payment in respect thereof within 10 days after demand therefor, against any and all Excluded Taxes
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and any and all related losses, claims, liabilities, penalties, interest and expenses (including the fees, charges and disbursements of any counsel for such Loan Party or such Agent) incurred by or asserted against such Loan Party or such Agent by any Governmental Authority. Each Lender and the Issuing Bank hereby authorizes each Agent and Loan Party to set off and apply any and all amounts at any time owing to such Lender or the Issuing Bank, as the case may be, under this Agreement or any other Loan Document against any amount due to the Administrative Agent under this SECTION 2.23(e)(ii). The agreements in this SECTION 2.23(e)(ii) shall survive the resignation and/or replacement of any Agent, any assignment of rights by, or the replacement of, a Lender or the Issuing Bank, the termination of the Commitments and the repayment, satisfaction or discharge of all other Obligations.
(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Loan Party to a Governmental Authority, the Lead Borrower 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) (i) Each Lender (with respect to the relevant lending office) and Agent shall, if reasonably requested by a Loan Party, deliver such documentation prescribed by Applicable Law or as reasonably requested by such Loan Party, as will enable such Loan Party to determine whether such Lender (with respect to the relevant lending office) is subject to withholding under Applicable Law, is entitled to an exemption from such withholding or is eligible for a reduced rate of withholding with respect to payments to be made to such Lender under the Loan Documents. In addition, each Lender (with respect to the relevant lending office) and Agent shall deliver updated or appropriate documentation (including any new documentation reasonably requested by the applicable withholding agent) promptly upon the obsolescence or invalidity of any documentation previously delivered by such party or promptly notify the Borrower. In addition, each Lender (with respect to the relevant lending office) shall deliver to the Borrowers and the Administrative Agent such other tax forms or other documents as shall be prescribed by Applicable Law, to the extent applicable, (x) to demonstrate that payments to such Lender (with respect to the relevant lending office) under this Agreement and the other Loan Documents are exempt from any United States federal withholding tax imposed pursuant to FATCA or (y) to allow the Borrower and the Administrative Agent to determine the amount to deduct or withhold under FATCA from a payment hereunder. Without limiting the foregoing:
(ii) Any Foreign Lender (with respect to the relevant lending office) and other Credit Party shall deliver to the Lead Borrower and the Administrative Agent two (2) originals of (i) either United States Internal Revenue Service Form W-8BEN (claiming a treaty benefit) or Form W-8ECI, in each case, together with such other documentation as is required under the Code, or any subsequent versions thereof or successors thereto, or, (ii) in the case of a Foreign Lender (with respect to the relevant lending office) claiming exemption from or reduction in U.S. federal withholding Tax under Section 871(h) or 881(c) of the Code with respect to payments of portfolio interest a (A) an appropriate Form W-8, or any subsequent versions thereof or successors thereto and (B) a certificate in the form attached hereto as Exhibit L, representing that such Foreign Lender (with respect to the relevant lending office) or Credit Party (1) is not a bank for purposes of Section 881(c) of the Code, (2) is not a 10 percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of any Loan Party and (3) is not a controlled foreign corporation related to the Loan Parties (within the meaning of Section 864(d)(4) of the
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Code)), in all cases, properly completed and duly executed by such Foreign Lender or Credit Party claiming, as applicable, complete exemption from or reduced rate of, U.S. federal withholding tax on payments by the Loan Parties under this Agreement and the other Loan Documents. Such forms shall be delivered by each Foreign Lender (with respect to the relevant lending office) on or before the date it becomes a party to this Agreement and on or before the date, if any, a Foreign Lender changes its applicable lending office or uses an office not previously used to fund a Revolving Credit Loan under this Agreement by designating a different lending office (a New Lending Office). In addition, each such party shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by it. Notwithstanding any other provision of this SECTION 2.23(e), a Lender shall not be required to deliver any form pursuant to this SECTION 2.23(e) that such Lender is not legally able to deliver.
(iii) Each Lender and other Credit Party that is a United States person as defined under Section 7701(a)(30) of the Code (a U.S. Lender) shall deliver to the Lead Borrower and the Administrative Agent such form or forms, certificates or documentation, including two original copies of United States Internal Revenue Service Form W-9, as reasonably requested by any Borrower to confirm or establish that such Credit Party is not subject to deduction, withholding, or backup withholding of United States federal income Tax with respect to any payments to such Credit Party. Such forms shall be delivered by each Credit Party to the Borrower on or before the date such Credit Party becomes a party to this Agreement.
(f) [Reserved].
(g) If any Loan Party shall be required pursuant to this SECTION 2.23 to pay any additional amount to, or to indemnify, any Credit Party, such Credit Party shall use reasonable efforts to avoid or minimize any amounts which might otherwise be payable pursuant to this SECTION 2.23(g); provided, however, that such efforts shall not include the taking of any actions by such Credit Party that would result in any Tax, costs or other expense to such Credit Party (other than a Tax, cost or other expense for which such Credit Party shall have been reimbursed or indemnified by the Loan Parties pursuant to this Agreement or otherwise) or any action which would or might in the reasonable opinion of such Credit Party have an adverse effect upon its business, operations or financial condition or otherwise be disadvantageous to such Credit Party.
(h) [Reserved].
(i) If any Credit Party reasonably determines that it has actually and finally realized, by reason of a refund, deduction or credit of any Taxes paid or reimbursed by the Loan Parties pursuant to subsection (a), (b) or (c) above in respect of payments under the Loan Documents (which refund, deduction or credit is provided by the jurisdiction imposing such Taxes), a current monetary benefit that it would otherwise not have obtained and that would result in the total payments under this SECTION 2.23 exceeding the amount needed to make such Credit Party whole, such Credit Party shall pay to the Lead Borrower, with reasonable promptness following the date upon which it actually realizes such benefit, an amount equal to the amount of such refund, deduction or credit, net of all out of pocket expenses incurred in securing such refund, deduction or credit. This SECTION 2.23 (i) shall not be construed to require any Credit Party to make available its Tax returns (or any other confidential information relating to its Taxes) to any Loan Party.
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SECTION 2.24 Mitigation Obligations; Replacement of Lenders.
(a) If any Lender requests compensation under SECTION 2.14 or cannot make Revolving Credit Loans under SECTION 2.11, or if the Borrowers are required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to SECTION 2.23, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Revolving Credit Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to SECTION 2.14 or SECTION 2.23, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense. The Borrowers hereby agree to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment; provided, however, that the Borrowers shall not be liable for such costs and expenses of a Lender requesting compensation if (i) such Lender becomes a party to this Agreement on a date after the Closing Date and (ii) the relevant Change in Law occurs on a date prior to the date such Lender becomes a party hereto.
(b) (i) If any Lender requests compensation under SECTION 2.14 or cannot make Revolving Credit Loans under SECTION 2.11 for thirty (30) consecutive days, or (ii) if any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to SECTION 2.23, or (iii) if any Lender becomes a Delinquent Lender or otherwise defaults in its obligation to fund Revolving Credit Loans hereunder, then the Borrowers may, at their sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in SECTION 9.07), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided, however, that (i) the Lead Borrower shall have received the prior written consent of the Administrative Agent, the Issuing Banks and the Swingline Lender, which consent shall not be unreasonably withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Revolving Credit Loans and participations in unreimbursed drawings under Letters of Credit and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under SECTION 2.14 or payments required to be made pursuant to SECTION 2.23, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrowers to require such assignment and delegation cease to apply.
SECTION 2.25 Designation of Lead Borrower as Borrowers Agent.
(a) Each Borrower hereby irrevocably designates and appoints the Lead Borrower as such Borrowers agent to obtain Revolving Credit Loans and Letters of Credit, the proceeds of which shall be available to each Borrower for such uses as are permitted under this Agreement. As the disclosed principal for its agent, each Borrower shall be obligated to the Administrative Agent and each Lender on account of Revolving Credit Loans so made and Letters of Credit so issued as if made directly by the Lenders to such Borrower, notwithstanding the manner by which such Revolving
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Credit Loans and Letters of Credit are recorded on the books and records of the Lead Borrower and of any other Borrower.
(b) Each Borrower represents to the Credit Parties that it is an integral part of a consolidated enterprise, and that each Loan Party will receive direct and indirect benefits from the availability of the joint credit facility provided for herein, and from the ability to access the collective credit resources of the consolidated enterprise which the Loan Parties comprise. Each Borrower recognizes that credit available to it hereunder is in excess of and on better terms than it otherwise could obtain on and for its own account and that one of the reasons therefor is its joining in the credit facility contemplated herein with all other Borrowers. Consequently, each Borrower hereby assumes and agrees to discharge all Obligations of each of the other Borrowers as if the Borrower which is so assuming and agreeing were each of the other Borrowers.
(c) The Lead Borrower shall act as a conduit for each Borrower (including itself, as a Borrower) on whose behalf the Lead Borrower has requested a Revolving Credit Loan. None of the Agents nor any other Credit Party shall have any obligation to see to the application of such proceeds.
(d) The authority of the Lead Borrower to request Revolving Credit Loans and Letters of Credit on behalf of, and to bind, the Borrowers, shall continue unless and until the Administrative Agent actually receives written notice of: (i) the termination of such authority, and (ii) the subsequent appointment of a successor Lead Borrower, which notice is signed by the respective Financial Officers of each Borrower; and (iii) written notice from such successive Lead Borrower accepting such appointment and acknowledging that from and after the date of such appointment, the newly appointed Lead Borrower shall be bound by the terms hereof, and that as used herein, the term Lead Borrower shall mean and include the newly appointed Lead Borrower.
SECTION 2.26 Canadian Credit Facility.
(a) Notwithstanding anything to the contrary contained in this Agreement, at any time after the Closing Date, the Lead Borrower may request that one or more of its Canadian Subsidiaries join this Credit Agreement as Canadian borrower(s) pursuant to a separate Canadian credit facility provided by Canadian lenders holding Canadian commitments that are subject to a separate Canadian borrowing base (collectively, the Canadian Credit Facility); provided that the Canadian Credit Facility (A) may be guaranteed by the Loan Parties so long as the obligations in respect of any guarantee of the Canadian Credit Facility are subordinate to the Obligations (other than any Cash Management Services, Bank Products and other outstanding Other Liabilities) under SECTION 7.04; provided, however, that if the Canadian Credit Facility is guaranteed by the Loan Parties then the final maturity date of the Canadian Credit Facility shall not be earlier than the then Latest Maturity Date; (B) shall be on terms and conditions as determined by the Lead Borrower, the Canadian lenders and any collateral agent for the Canadian lenders, subject to the approval of the Administrative Agent (it being understood that (x) such terms and conditions may include, without limitation, Canadian Credit Facility-specific borrowing base, representations, warranties, covenants and Events of Default, interest rates, fees, final maturity date, required prepayment provision as to the Canadian borrowing base and post-Cash Dominion Event waterfall provisions with respect to Canadian collateral and amendment and waiver provisions and (y) any upfront, underwriting, arrangement or similar fees in respect of the Canadian Credit Facility shall be agreed to by Lead Borrower and the Persons participating in the Canadian Credit Facility and the arrangement thereof); (C) shall be subject to closing conditions as
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may be determined by the Administrative Agent, the Collateral Agent (or any of their respective Affiliates), the Canadian lenders providing the Canadian Credit Facility and the Lead Borrower; (D) shall be subject to the condition precedent that no Default shall have occurred and be continuing immediately before or after giving effect thereto; (E) the aggregrate amount of the Canadian commitments under the Canadian Credit Facility shall not exceed $50,000,000 and (F) all documentation in respect of the Canadian Credit Facility shall be consistent with the foregoing and in form and substance reasonably satisfactory to the Administrative Agent; and provided, further, that no Lender shall be obligated to participate in the Canadian Credit Facility.
(b) The Lenders hereby irrevocably authorize the Administrative Agent and Collateral Agent to enter into amendments to (including amendments and restatements of) this Agreement and the other Loan Documents with the Loan Parties, the Canadian Subsidiaries and the lenders participating in the Canadian Credit Facility as may be necessary or desirable in order to establish the Canadian Credit Facility, in each case on terms consistent with this SECTION 2.26. Notwithstanding the foregoing, each of the Administrative Agent and the Collateral Agent shall have the right (but not the obligation) to seek the advice or concurrence of the Required Lenders with respect to the Canadian Credit Facility and any matter contemplated by this SECTION 2.26 and, if either the Administrative Agent or the Collateral Agent seeks such advice or concurrence, it shall be permitted to enter into such amendments in accordance with any instructions actually received by such Required Lenders and shall also be entitled to refrain from entering into such amendments unless and until it shall have received such advice or concurrence; provided, however, that whether or not there has been a request by the Administrative Agent or the Collateral Agent for any such advice or concurrence, all such amendments entered into by the Administrative Agent or the Collateral Agent under this SECTION 2.26 shall be binding and conclusive on the Lenders.
SECTION 2.27 Extensions of Revolving Credit Commitments, Etc.
(a) Notwithstanding anything to the contrary in this Agreement, pursuant to one or more offers (each, an Extension Offer) made from time to time by the Lead Borrower to all Lenders holding Tranche A Commitments or FILO Commitments, as the case may be, with a like Maturity Date on a pro rata basis (based on the aggregate Tranche A Commitments or FILO Commitments, as applicable, of all Lenders with the same Maturity Date) and on the same terms to each such Lender, the Lead Borrower may from time to time with the consent of any Lender that shall have accepted such offer extend the maturity date of any Tranche A Commitments or FILO Commitments, as the case may be, and otherwise modify the terms of such Tranche A Commitments or FILO Commitments of such Lender pursuant to the terms of the relevant Extension Offer (including, without limitation, by increasing the interest rate or fees payable in respect of such Tranche A Commitments or FILO Commitments and Credit Extensions made thereunder) (each, an Extension, and each group of Tranche A Commitments or FILO Commitments as so extended, as well as the original Tranche A Commitments or FILO Commitments not so extended, being a tranche; any Extended Commitments (as defined below) shall constitute a separate tranche of Commitments from the tranche of Commitments from which they were converted), so long as the following terms are satisfied: (i) no Default shall have occurred and be continuing at the time the offering document in respect of an Extension Offer is delivered to the Lenders or prior to or after giving effect to any Extended Commitments, (ii) except as to interest rates, fees, final maturity date, premium, required prepayment dates and participation in prepayments (which shall, subject to immediately succeeding clauses (iii) and (iv), be determined by the Lead Borrower and MLPF&S and set forth in the relevant Extension
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Offer), the Tranche A Commitments or FILO Commitments of any Lender (an Extending Lender) extended pursuant to any Extension (Extended Commitments) shall have the same terms as the tranche of Commitments subject to such Extension Offer, (iii) the final maturity date of any Extended Commitments shall be no earlier than the then Latest Maturity Date, (iv) any Extended Commitments may participate on a pro rata basis or a less than pro rata basis (but not greater than a pro rata basis) in any voluntary or mandatory repayments or prepayments hereunder, in each case as specified in the respective Extension Offer, (v) if the aggregate amount of Tranche A Commitments or FILO Commitments in respect of which Lenders shall have accepted the relevant Extension Offer shall exceed the maximum aggregate amount of Tranche A Commitments or FILO Commitments offered to be extended by the Borrowers pursuant to such Extension Offer, then the Tranche A Commitments or FILO Commitments (as applicable) of such Lenders shall be extended ratably up to such maximum amount based on the respective principal amounts (but not to exceed actual holdings of record) with respect to which such Lenders have accepted such Extension Offer, (vi) all documentation in respect of such Extension shall be consistent with the foregoing and in form and substance reasonably satisfactory to the Administrative Agent, (vii) any applicable Minimum Extension Condition shall be satisfied unless waived by the Borrowers and (viii) any such Extension and Extended Commitments (and the terms thereof) shall have been approved by the Administrative Agent.
(b) If, at the time any Extension becomes effective, not all of the Revolving Credit Commitments that were subject to the applicable Extension Offer shall have been extended (such non-extended Revolving Credit Commitments with respect to any Extension, the Non-Extended Commitments), then if the effective interest rate (which, for this purpose, shall be reasonably determined by the Administrative Agent and shall take into account any interest rate floors or similar devices and be deemed to include (without duplication) all fees, including upfront or similar fees or original issue discount (amortized over the shorter of (x) the life of such new Extended Commitments and (y) the four years following the date of the respective Extension) payable to Lenders with such new Extended Commitments, but excluding any arrangement, structuring or other fees payable in connection therewith that are not generally shared with the relevant extending Lenders) in respect of extensions of credit under such new Extended Commitments shall at any time (over the life of such new Extended Commitments) exceed the effective interest rate applicable to extensions of credit under the applicable Non-Extended Commitments by more than 1.00% (determined on the same basis as provided in the first parenthetical in this sentence), then the Applicable Margin applicable to extensions of credit under such Non-Extended Commitments shall be increased to the extent necessary so that at all times thereafter such Non-Extended Commitments do not receive less effective interest rate than the effective interest rate applicable to extensions of credit under such new Extended Commitments minus 1.00%.
(c) With respect to all Extensions consummated by the Lead Borrower pursuant to this SECTION 2.27, (i) such Extensions shall not constitute voluntary or mandatory payments or prepayments for purposes of SECTION 2.16 or SECTION 2.17 and (ii) no Extension Offer is required to be in any minimum amount or any minimum increment, provided that the Lead Borrower may at its election specify as a condition (a Minimum Extension Condition) to consummating any such Extension that a minimum amount (to be determined and specified in the relevant Extension Offer in the Borrowers sole discretion and may be waived by the Borrowers) of Tranche A Commitments or FILO Commitments (as applicable) of any or all applicable tranches be tendered. The Lenders hereby consent to the Extensions and the other transactions contemplated by this SECTION 2.27 (including, for the avoidance of doubt, payment of any interest, fees or premium in respect of any Extended
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Commitments on such terms as may be set forth in the relevant Extension Offer) and hereby waive the requirements of any provision of this Agreement or any other Loan Document that may otherwise prohibit any such Extension or any other transaction contemplated by this SECTION 2.27.
(d) The Lenders hereby irrevocably authorize the Administrative Agent and Collateral Agent to enter into amendments to this Agreement and the other Loan Documents with the Borrowers and the other Loan Parties as may be necessary in order to establish new tranches or sub-tranches in respect of Commitments so extended and such technical amendments as may be necessary or appropriate in the reasonable opinion of the Administrative Agent and the Borrowers in connection with the establishment of such new tranches or sub-tranches, in each case on terms consistent with this SECTION 2.27. Notwithstanding the foregoing, each of the Administrative Agent and the Collateral Agent shall have the right (but not the obligation) to seek the advice or concurrence of the Required Lenders with respect to any matter contemplated by this SECTION 2.27(d) and, if either the Administrative Agent or the Collateral Agent seeks such advice or concurrence, it shall be permitted to enter into such amendments with the Borrowers in accordance with any instructions actually received by such Required Lenders and shall also be entitled to refrain from entering into such amendments with the Borrowers unless and until it shall have received such advice or concurrence; provided, however, that whether or not there has been a request by the Administrative Agent or the Collateral Agent for any such advice or concurrence, all such amendments entered into with the Lead Borrower by the Administrative Agent or the Collateral Agent hereunder shall be binding and conclusive on the Lenders. Without limiting the foregoing, in connection with any Extensions the respective Loan Parties shall (at their expense) amend (and the Collateral Agent is hereby directed to amend) any Mortgage that has a maturity date prior to the then Latest Maturity Date so that such maturity date is extended to the then Latest Maturity Date (or such later date as may be advised by local counsel to the Collateral Agent).
(e) In connection with any Extension, the Lead Borrower shall provide the Administrative Agent at least 5 Business Days (or such shorter period as may be agreed by the Administrative Agent in its sole discretion) prior written notice thereof, 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 purposes of this SECTION 2.27.
(f) This SECTION 2.27 shall supersede any provisions in SECTION 2.21 or SECTION 9.01 to the contrary.
SECTION 2.28 Obligations of the Lenders Several. The obligations of the Lenders hereunder to make Loans, to fund participations in Letters of Credit and Swingline Loans and to make payments pursuant to hereunder are several and not joint. The failure of any Lender to make any Loan, to fund any such participation or to make any payment hereunder on any date required under this Agreement shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan, to purchase its participation or to make its payment hereunder.
SECTION 2.29 Cash Collateral Generally. All cash collateral required to be maintained pursuant to SECTION 2.13, SECTION 2.16, SECTION 2.17, or SECTION 7.02 with respect to Letters of Credit, or pursuant to SECTION 8.16 with respect to a Delinquent Lender (other than credit support not constituting funds subject to deposit) shall be maintained in a cash
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collateral account. Each of the Loan Parties, and to the extent provided by any Lender, such Lender, hereby grants to (and subjects to the control of) the Administrative Agent, for the benefit of the Administrative Agent, the Issuing Banks and the Lenders (including the Swingline Lender), and agrees to maintain, a first priority security interest in all such cash, deposit accounts and all balances therein, and all other property so provided as collateral, and in all proceeds of the foregoing, all as security for the obligations to which such cash collateral may be applied. If at any time the Administrative Agent determines that such cash collateral is subject to any right or claim of any Person other than the Administrative Agent as herein provided, or that the total amount of such cash collateral is less than the applicable obligations secured thereby, the Loan Parties or the relevant Delinquent Lender will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent additional cash collateral in an amount sufficient to eliminate such deficiency. Notwithstanding anything to the contrary contained in this Agreement, cash collateral provided under hereunder in respect of Letters of Credit or Swingline Loans shall be held and applied to the satisfaction of the specific obligations to fund participations in Letters of Credit or Swingline Loans (including, as to cash collateral provided by a Delinquent Lender, any interest accrued on such obligation) and other obligations for which the cash collateral was so provided, prior to any other application of such property as may be provided for herein.
ARTICLE III
Representations and Warranties
To induce the Credit Parties to make the Revolving Credit Loans (including Swingline Loans) and to issue Letters of Credit, the Loan Parties, jointly and severally, make the following representations and warranties to each Credit Party with respect to each Loan Party:
SECTION 3.01 Existence, Qualification and Power; Compliance with Laws.
Each Loan Party and each of its Restricted Subsidiaries (a) is a Person duly organized or formed, validly existing and in good standing under the Applicable Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party (including, with respect to the Borrowers, to borrow money and request Letters of Credit hereunder), (c) is duly qualified and in good standing under the Applicable Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, (d) is in compliance with all Applicable Laws, orders, writs, injunctions and orders and (e) has all requisite governmental licenses, authorizations, consents and approvals to operate its business as currently conducted; except in each case referred to in clause (c), (d) or (e), to the extent that failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Schedule 3.01 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.
SECTION 3.02 Authorization; No Contravention.
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The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is a party (a) are within such Loan Partys corporate or other powers and have been duly authorized by all necessary corporate or other organizational action, and (b) do not and will not (i) contravene the terms of any of such Persons Organization Documents, (ii) conflict with or result in any breach or contravention of, or the creation of (or requirement to create) any Lien (other than Liens permitted under SECTION 6.01) under or require any payment to be made under (x) any contractual obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Restricted Subsidiaries or (y) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (iii) violate any material Applicable Law; except with respect to any conflict, breach or contravention or payment (but not creation of Liens) referred to in clause (ii)(x), to the extent that such conflict, breach, contravention or payment, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
SECTION 3.03 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 (a) the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, (b) the grant by any Loan Party of the Liens granted by it pursuant to the Security Documents, (c) the perfection or maintenance of the Liens created under the Security Documents (including the priority thereof) or (d) the exercise by the Administrative Agent, the Collateral Agent or any Lender of their rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Security Documents, except for (i) filings necessary to perfect the Liens on the Collateral granted by the Loan Parties in favor of the Secured Parties, (ii) the approvals, consents, exemptions, authorizations, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect (except to the extent not required to be obtained, taken, given or made or to be in full force and effect pursuant the Collateral and Guarantee Requirement) and (iii) those approvals, consents, exemptions, authorizations or other actions, notices or filings, the failure of which to obtain or make, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
SECTION 3.04 Binding Effect.
This Agreement and each other Loan Document has been duly executed and delivered by each Loan Party that is party thereto. This Agreement and each other Loan Document constitutes, a legal, valid and binding obligation of each such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors rights generally and by general principles of equity.
SECTION 3.05 Financial Statements; No Material Adverse Effect.
(a) (i) The unaudited pro forma consolidated balance sheet of the Company and its Subsidiaries as at the last day of the most recent fiscal quarter for which Unaudited Financial Statements have been delivered (including the notes thereto describing the pro forma adjustments) (the
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Pro Forma Balance Sheet) and the unaudited pro forma consolidated statements of income and cash flows of the Company and its Subsidiaries for the twelve months ended on the last day of the most recent fiscal quarter for which Unaudited Financial Statements have been delivered (together with the Pro Forma Balance Sheet, the Pro Forma Financial Statements), copies of which have been furnished to each Lender, have been prepared giving effect (as if such events had occurred on such date or at the beginning of such periods, as the case may be) to the Transactions. The Pro Forma Financial Statements have been prepared in good faith, based on assumptions believed by the Lead Borrower to be reasonable as of the date of delivery thereof, and present fairly in all material respects on a Pro Forma Basis the estimated financial position of the Company and its consolidated Subsidiaries as at the last day of the most recent fiscal quarter for which Unaudited Financial Statements have been delivered and their estimated results of operations for the periods covered thereby, assuming that the events specified in the preceding sentence had actually occurred at such date or at the beginning of the periods covered thereby.
(ii) The Audited Financial Statements fairly present in all material respects the financial condition of the Company and its consolidated Subsidiaries as of the dates thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the periods covered thereby, except as otherwise expressly noted therein.
(iii) The Unaudited Financial Statements fairly present in all material respects the financial condition of the Company and its consolidated Subsidiaries as of the dates thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the periods covered thereby, except as otherwise expressly noted therein.
(b) The Financial Performance Projections attached hereto as Schedule 3.05(b) (which includes pro forma Consolidated balance sheets, statements of income and cash flows, the FILO Borrowing Base, the Tranche A Borrowing Base and Availability prepared (i) on a monthly basis for the twelve full Fiscal Months ended after the Closing Date and (ii) on an annual basis through the term of this Agreement), which have been furnished to the Administrative Agent prior to the Closing Date, have been prepared in good faith on the basis of the assumptions stated therein, which assumptions were believed to be reasonable at the time of preparation of such forecasts, it being understood that actual results may vary from such forecasts and that such variations may be material.
(c) Since the Closing Date, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.
(d) As of the Closing Date, neither Holdings, the Lead Borrower nor any Restricted Subsidiary has any Indebtedness or other obligations or liabilities, direct or contingent (other than (i) the liabilities reflected on Schedule 6.03, (ii) obligations arising under this Agreement and the other Loan Documents, (iii) the Term Loan Facility and the Senior Notes, and (iv) liabilities incurred in the ordinary course of business) that, either individually or in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect.
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SECTION 3.06 Litigation.
There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of any Loan Party, threatened in writing or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against Holdings, the Lead Borrower or any of its Restricted Subsidiaries or against any of their properties or revenues that (a) either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or (b) involve any of the Loan Documents, which could reasonably be expected to have a Material Adverse Effect.
SECTION 3.07 No Default.
Neither Holdings, the Lead Borrower nor any Restricted Subsidiary is in default under or with respect to, or a party to, any contractual obligation or Material Indebtedness that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 3.08 Ownership of Property; Liens.
(a) Each Loan Party and each of its Restricted Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests in, or easements or other limited property interests in, all real property necessary in the ordinary conduct of its business, free and clear of all Liens except (i) for minor defects in title that do not materially interfere with its ability to conduct its business or to utilize such assets for their intended purposes, (ii) Liens permitted by SECTION 6.01 and except (iii) where the failure to have such title could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(b) Schedule 3.08(b)(i) sets forth the address (including county) of all Real Estate that is owned by the Loan Parties as of the Closing Date. Schedule 3.08(b)(ii) sets forth the address of all Real Estate that is leased by the Loan Parties as of the Closing Date. Except as would not reasonably be expected to result in a Material Adverse Effect, to the knowledge of the Responsible Officers of the Loan Parties each of such Leases is in full force and effect and the Loan Parties are not in default of the terms thereof.
(c) As of the Closing Date, except as otherwise disclosed in writing to the Collateral Agent, (i) no Loan Party has received any notice of, nor has any knowledge of, the occurrence (and still pending as of the Closing Date) or pendency or contemplation of any Casualty Event affecting all or any portion of a Mortgaged Property, and (ii) no Mortgage encumbers improved Mortgaged Property 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 Flood Laws unless Evidence of Flood Insurance has been delivered to the Collateral Agent.
SECTION 3.09 Environmental Compliance.
(a) There are no claims, actions, suits, or proceedings alleging potential liability or responsibility for violation of, or otherwise relating to, any Environmental Law that could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
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(b) Except as specifically disclosed in Schedule 3.09(b) or except as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (i) none of the properties currently or formerly owned, leased or operated by any Loan Party or any of its Restricted Subsidiaries is listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state, provincial or local list or is adjacent to any such property; (ii) to the knowledge of the Loan Parties, there are no, and never have been, any underground or aboveground 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 of on any property currently owned, leased or operated by any Loan Party or any of its Restricted Subsidiaries or, to its knowledge, on any property formerly owned or operated by any Loan Party or any of its Restricted Subsidiaries; (iii) to the knowledge of the Loan Parties, there is no asbestos or asbestos-containing material, the renewal or remediation of which is required by any Environmental Law, on any property currently owned or operated by any Loan Party or any of its Restricted Subsidiaries; and (iv) to the knowledge of the Loan Parties, Hazardous Materials have not been released, discharged or disposed of by any Person on any property currently or formerly owned, leased or operated by any Loan Party or any of its Restricted Subsidiaries and Hazardous Materials have not otherwise been released, discharged or disposed of by any of the Loan Parties and their Restricted Subsidiaries at any other location.
(c) The properties owned, leased or operated by the Loan Parties and their Restricted Subsidiaries do not contain any Hazardous Materials in amounts or concentrations which (i) constitute, or constituted a violation of, (ii) require remedial action under, or (iii) could give rise to liability under, Environmental Laws, which violations, remedial actions and liabilities, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.
(d) Except as specifically disclosed in Schedule 3.09(d), neither any Loan Party nor any of their Restricted Subsidiaries is undertaking, or has 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 for such investigation or assessment or remedial or response action that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
(e) All Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries have been disposed of in a manner not reasonably expected to result, individually or in the aggregate, in a Material Adverse Effect.
(f) Except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect, none of the Loan Parties and their Subsidiaries has contractually assumed any liability or obligation under or relating to any Environmental Law.
(g) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not require any notification, registration, filing, reporting, disclosure, investigation, remediation or cleanup pursuant to any applicable
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Environmental Law, except for any requirement the noncompliance with which could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(h) As of the Closing Date, the Lead Borrower has made available to the Administrative Agent and the Lenders all material documents, studies, and reports in the possession, custody or control of the Loan Parties concerning compliance with or liability under Environmental Law, including those concerning the actual or suspected existence of Hazardous Material at Real Estate or facilities currently or formerly owned, operated, leased or used by the Loan Parties which could reasonably be expected to have a Material Adverse Effect.
SECTION 3.10 Taxes.
Except as set forth in Schedule 3.10 and except as could not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, Holdings, the Lead Borrower and its Restricted Subsidiaries have timely filed all federal, state, provincial and other tax returns and reports required to be filed, and have timely paid all federal, state, provincial and other Taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate actions diligently conducted and for which adequate reserves have been provided in accordance with GAAP. There is no proposed Tax deficiency or assessment known to any Loan Party against any Loan Party or any Restricted Subsidiary that would, if made, individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.11 ERISA; Plan Compliance.
(a) Except as set forth in Schedule 3.11 or as could not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, each Plan is in compliance in with the applicable provisions of ERISA, the Code and other federal or state Applicable Laws (and the regulations and published interpretations thereunder).
(b) (i) As of the Closing Date, no Plan is a Multiemployer Plan; nor is any Plan subject to Section 302 or Title IV of ERISA or Section 412 of the Code; and (ii) as of the Closing Date, neither any Loan Party nor any ERISA Affiliate nor any predecessor thereof has in the past six years (A) sponsored, maintained or contributed to, any Plan subject to Title IV of ERISA or (B) contributed to any Multiemployer Plan.
(c) (i) No Plan has an accumulated funding deficiency (as defined in Section 412 of the Code), whether or not waived; (ii) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iii) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (iv) neither any Loan Party nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA, except, with respect to each of the foregoing clauses of this SECTION 3.11(c), as could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.
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(d) The Loan Parties are in compliance with the applicable provisions of ERISA, the Code, and other federal or state Applicable Laws with respect to each Plan, except where the failure to so comply would not reasonably be expected to have a Material Adverse Effect. No fact or situation that may reasonably be expected to result in a Material Adverse Effect exists in connection with any Plan.
SECTION 3.12 Subsidiaries; Equity Interests.
As of the Closing Date, neither the Lead Borrower nor any Loan Party has any Subsidiaries other than those specifically disclosed in Schedule 3.12, and all of the outstanding Capital Stock in their respective Subsidiaries has been validly issued, is fully paid and nonassessable and all Capital Stock owned by the Lead Borrower or a Loan Party is owned free and clear of all Liens except (i) those created under the Security Documents, (ii) those to secure the Term Loan Facility (which Liens shall be subject to the Intercreditor Agreement), and (iii) any nonconsensual Lien that is permitted under SECTION 6.01. As of the Closing Date, Schedule 3.12 (a) sets forth the name and jurisdiction of each Subsidiary, and (b) sets forth the ownership interest of the Lead Borrower and any other Subsidiary in each Subsidiary, including the percentage of such ownership.
SECTION 3.13 Margin Regulations; Investment Company Act.
(a) No Loan Party or Restricted Subsidiary is engaged nor will it engage, principally or as one of its important activities, in the business of purchasing or carrying Margin Stock, or extending credit for the purpose of purchasing or carrying Margin Stock and no proceeds of any Revolving Credit Loan (including Swingline Loans) or drawings under any Letter of Credit will be used for the purpose of purchasing or carrying Margin Stock, or any other purpose that violates Regulation U. The value of the Margin Stock at any time owned by the Loan Parties and their Subsidiaries at any time a Credit Extension constitutes a purpose credit (within the meaning of Regulation U) does not exceed twenty-five percent (25%) of the value of the assets of the Loan Parties and their Subsidiaries taken as a whole.
(b) None of Holdings, the Lead Borrower or any Subsidiary is or is required to be registered as an investment company, or is subject to regulation (with respect to which it is not otherwise exempt), under the Investment Company Act of 1940.
SECTION 3.14 Disclosure.
No report, financial statement, confidential information, memorandum, certificate or other written information furnished by or on behalf of any Loan Party (other than information of a general economic nature) to any Credit Party in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (as modified or supplemented by other information so furnished) when taken as a whole contains or will contain any material misstatement of fact or omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were or will be made, not materially misleading; provided that with respect to projected financial information and pro forma financial information, each of Holdings and the Lead Borrower represents only that such information was prepared in good faith based upon
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assumptions believed to be reasonable at the time of preparation; it being understood that such projections may vary from actual results and that such variances may be material.
SECTION 3.15 Intellectual Property; Licenses, Etc.
Schedule 3.15 sets forth, as of the Closing Date, with respect to each Loan Party a list of all of the registered Intellectual Property owned by such Loan Party and all applications for the registrations or issuance thereof. Each such registration and application that is reasonably necessary to the business of such Loan Party is subsisting. Each of the Loan Parties and their Subsidiaries own, license or possess the right to use, all of the trademarks, service marks, trade names, domain names, copyrights, patents, patent rights, licenses, technology, software, know-how database rights, design rights and other intellectual property rights (collectively, IP Rights) that are reasonably necessary for the operation of their respective businesses as currently conducted, and, without conflict with the rights of any Person, except to the extent that such conflicts, or the failure to own, license or possess the right to use such IP Rights, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. No IP Rights, advertising, product, process, method, substance, part or other material used by any Loan Party or any Subsidiary in the operation of their respective businesses as currently conducted infringes upon any rights held by any Person except for such infringements, individually or in the aggregate, which could not reasonably be expected to have a Material Adverse Effect. No claim or litigation regarding any of the IP Rights, is pending or, to the knowledge of the Lead Borrower, threatened against any Loan Party or Subsidiary, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
SECTION 3.16 Solvency.
Immediately after giving effect to the consummation of the Transactions to occur on the Closing Date, including the making of the Revolving Credit Loans and the issuance of Letters of Credit (if any) under this Agreement and the making of the loans under the Term Loan Facility, and immediately after giving effect to the application of the proceeds of all such extensions of credit, (a) the fair value of the assets of the Lead Borrower and its Subsidiaries, on a consolidated basis, exceeds, on a consolidated basis, their debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of the Lead Borrower and its Subsidiaries, on a consolidated basis, is greater than the amount that will be required to pay the probable liability, on a consolidated basis, of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Lead Borrower and its Subsidiaries, on a consolidated basis, are able to pay their debts and liabilities, subordinated, contingent or otherwise, as such liabilities become absolute and matured; and (d) the Lead Borrower and its Subsidiaries, on a consolidated basis, are not engaged in, and are not about to engage in, business for which they have unreasonably small capital. For purposes of this SECTION 3.16, the amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual and matured liability.
SECTION 3.17 Subordination of Junior Financing.
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The Obligations are Senior Debt, Senior Indebtedness, Guarantor Senior Debt Designated Senior Indebtedness or Senior Secured Financing (or any comparable term) under, and as defined in, any Junior Financing.
SECTION 3.18 Labor Matters.
Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect or as disclosed in the Audited Financial Statements: (a) there are no strikes or other labor disputes against any of Holdings, the Lead Borrower or its Subsidiaries pending or, to the knowledge of the Lead Borrower, threatened; (b) hours worked by and payment made to employees of each of Holdings, the Lead Borrower or its Restricted Subsidiaries have not been in violation of the Fair Labor Standards Act or any other Applicable Laws dealing with such matters; and (c) all payments due from any of Holdings, the Lead Borrower or its Restricted Subsidiaries on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant party. Except as disclosed in the Audited Financial Statements, as of the Closing Date no Loan Party is a party to or bound by any collective bargaining agreement or any similar agreement. As of the Closing Date, there are no representation proceedings pending or, to the actual knowledge of any Responsible Officer of any Loan Party, threatened to be filed with the National Labor Relations Board or other applicable Governmental Authority, and no labor organization or group of employees of any Loan Party has made a pending demand in writing for recognition. As of the Closing Date, the consummation of the transactions contemplated by the Loan Documents will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which any Loan Party is bound to the extent that such would be reasonably expected to result in a Material Adverse Effect.
SECTION 3.19 Compliance with Laws and Agreements.
Each Loan Party is in compliance with all Applicable Law, except where the failure to comply, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect. Without limiting the generality of the foregoing, each Loan Party has obtained all permits, licenses and other authorizations which are required with respect to the ownership and operations of its business, except where the failure to obtain such permits, licenses or other authorizations, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Each Loan Party is in compliance with all terms and conditions of all such permits, licenses, orders and authorizations, except where the failure to comply with such terms or conditions, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
SECTION 3.20 Security Documents.
(a) The Security Documents (other than the Mortgages) create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral described therein as security for the Obligations to the extent that a legal, valid, binding and enforceable security interest in such Collateral may be created under any Applicable Law of the United States of America and any states thereof, including, without limitation, the applicable Uniform Commercial Code, and the Security Documents
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constitute, or will upon the filing of financing statements and the obtaining of control, in each case, as applicable, with respect to the relevant Collateral as required under the applicable Uniform Commercial Code, the creation of a fully perfected first priority Lien on, and security interest in, all right, title and interest of the Borrowers and each Facility Guarantor thereunder in such Collateral, in each case prior and superior in right to any other Person (other than (x) Permitted Encumbrances having priority under Applicable Law and (y) with respect to the Term Priority Collateral, which shall be subject to the Intercreditor Agreement), except as permitted hereunder or under any other Loan Document, in each case to the extent that a security interest may be perfected by the filing of a financing statement under the applicable Uniform Commercial Code, or by obtaining control.
(b) Upon recording thereof in the appropriate recording office, each Mortgage is effective to create, in favor of the Collateral Agent, for its benefit and the benefit of the Secured Parties, legal, valid and enforceable perfected Liens on, and a security interest in, all of the Loan Parties right, title and interest in and to the Mortgaged Property thereunder and the proceeds thereof, subject only to Liens permitted hereunder, and when such Mortgage is filed in the offices specified on Section I.H. to the Perfection Certificate dated the Closing Date (or, in the case of any Mortgage executed and delivered after the date thereof in accordance with the provisions of SECTIONS 5.11 and 5.13, when such Mortgage is filed in the offices specified in the local counsel opinion delivered with respect thereto in accordance with the provisions of SECTIONS 5.11 and 5.13), such Mortgage shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Party to such Mortgage in the Mortgaged Property described therein and the proceeds thereof, in each case prior and superior in right to any other person, other than Liens expressly permitted by SECTION 6.01.
Notwithstanding anything herein (including this SECTION 3.20) or in any other Loan Document to the contrary, neither the Lead Borrower nor any other Loan Party makes any representation or warranty as to (A) the effects of perfection or non-perfection, the priority or the enforceability of any pledge of or security interest in (other than with respect to those pledges and security interests made under the laws of the jurisdiction of formation of the applicable Foreign Subsidiary) any Equity Interests of any Foreign Subsidiary, or as to the rights and remedies of the Agents or any Lender with respect thereto, under foreign law, (B) the pledge or creation of any security interest, or the effects of perfection or non-perfection, the priority or the enforceability of any pledge of or security interest to the extent such pledge, security interest, perfection or priority is not required pursuant to the Collateral and Guarantee Requirement or (C) on the Closing Date and until required pursuant to SECTION 5.11 or SECTION 4.01(e), the pledge or creation of any security interest, or the effects of perfection or non-perfection, the priority or enforceability of any pledge or security interest to the extent not required on the Closing Date pursuant to SECTION 4.01(e).
ARTICLE IV
Conditions
SECTION 4.01 Conditions of Effectiveness of Credit Agreement and Conditions Precedent to Each Revolving Credit Loan and Each Letter of Credit on the Closing Date.
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The effectiveness of this Agreement and the obligation of the Lenders to make each Revolving Credit Loan and of the Issuing Banks to issue each Letter of Credit on the Closing Date is subject to the satisfaction by the Loan Parties or the waiver of each of the following conditions precedent:
(a) The Administrative Agent (or its counsel) shall have received from each Loan Party and each Lender either (i) a counterpart of this Agreement, the Facility Guarantee, the Security Agreement and the Intercreditor Agreement (each in form and substance reasonably satisfactory to the Administrative Agent and each Lender) signed on behalf of each such party thereto or (ii) written evidence reasonably satisfactory to the Administrative Agent (which may include telecopy transmission or electronic .pdf copy of a signed signature page of this Agreement or any other relevant Loan Document) that each such party has signed a counterpart of this Agreement and all other Loan Documents to which it is a party.
(b) If applicable, the Administrative Agent shall have received a notice with respect to any Borrowing to be made on the Closing Date or any Letter of Credit to be issued on the Closing Date, as the case may be, as required by Article II, and in the case of the issuance of a Letter of Credit, the applicable Issuing Bank shall have received notice with respect thereto in accordance with SECTION 2.13; provided, however, that the Lenders and the Issuing Banks shall be under no obligation to make any Credit Extensions to the Borrowers on the Closing Date to the extent that the sum of (x) aggregate amount of Revolving Credit Loans requested on the Closing Date, plus (y) the maximum drawing amount of Letters of Credit requested on the Closing Date, plus (z) the maximum drawing amount of Existing Letters of Credit deemed issued hereunder pursuant to SECTION 2.13(k), exceeds the Maximum Closing Date Borrowing Amount; and provided further that Credit Extensions made to the Borrowers on the Closing Date may only be used for the purposes described in SECTION 5.17(a).
(c) The Administrative Agent shall have received a written opinion (addressed to the Administrative Agent, the Collateral Agent and the Lenders and dated the Closing Date) of Ropes & Gray LLP, counsel for the Loan Parties and each local counsel to the Loan Parties set forth on Schedule 4.01(c), substantially to the effect set forth in Exhibits K-1 and K-2, respectively. The Loan Parties hereby request such counsel to deliver such opinions.
(d) The Administrative Agent shall have received (i) a copy of the certificate or articles of incorporation or organization (or similar organizational document), including all amendments thereto, of each Loan Party, certified, if applicable, as of a recent date by the Secretary of State of the state of its organization, and a certificate as to the good standing (where relevant) of each Loan Party as of a recent date, from such Secretary of State or similar Governmental Authority; (ii) a certificate of the Secretary or Assistant Secretary of each Loan Party dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the by-laws or operating (or limited liability company) agreement of such Loan Party as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the board of directors (or equivalent governing body) of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such Person is a party and, in the case of the Borrowers, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate or articles of incorporation or organization (or similar organization document) of
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such Loan Party have not been amended since the date of the last amendment thereto shown on the certificate of good standing furnished pursuant to clause (i) above, and (E) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party; and (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to clause (ii) above.
(e) (i) The Administrative Agent shall have received the results of (x) searches of the Uniform Commercial Code filings (or equivalent filings) and (y) judgment and tax lien searches, made with respect to the Loan Parties in the states or other jurisdictions of formation of such Person and with respect to such other locations and names listed on the Perfection Certificate, together with (in the case of clause (y)) copies of the financing statements (or similar documents) disclosed by such search, and (ii) the Collateral Agent or the collateral agent under the Term Loan Facility (pursuant to the Intercreditor Agreement) shall have received (x) certificates, if any, representing the Pledged Equity of the Borrowers and Subsidiary Facility Guarantors accompanied by undated stock powers executed in blank and (y) documents and instruments to be recorded or filed that the Collateral Agent may deem reasonably necessary to satisfy the Collateral and Guarantee Requirement; provided, however, that, each of the requirements set forth in clauses (i) and (ii) above, including lien searches and the delivery of documents and instruments necessary to satisfy the Collateral and Guarantee Requirement (other than the pledge and perfection of assets pursuant to the filing of a financing statement under the Uniform Commercial Code or the delivery of a stock certificate and related stock power of the Borrowers and any wholly-owned Domestic Subsidiary) shall not constitute conditions precedent to the Credit Extensions on the Closing Date after the Loan Parties use of commercially reasonable efforts, without undue burden or cost, to provide such items on or prior to the Closing Date if the Loan Parties agree to deliver, or cause to be delivered, such search results, documents and instruments, or take or cause to be taken such other actions as may be required to perfect such security interests within 90 days after the Closing Date (subject to extensions approved by the Administrative Agent in its reasonable discretion).
(f) The Administrative Agent shall have received evidence reasonably satisfactory to it that (i) the Term Loan Agreement shall have become effective and all conditions to the initial credit extension thereunder satisfied and shall be funded on the Closing Date contemporaneously with the funding of the Senior Notes and the closing of this Agreement and (ii) the Intercreditor Agreement shall have been duly executed and delivered by the Term Loan Agent and each Loan Party party thereto.
(g) The Administrative Agent shall have received a copy of (i) the Merger Agreement (together with all exhibits, schedules, amendments, supplements and modifications thereto) and all certificates, opinions and other documents delivered thereunder and (ii) the Sponsor Management Agreement as in effect on the Closing Date, each certified by a Responsible Officer of the Lead Borrower as being true, complete and correct. Prior to or substantially concurrently with the initial Credit Extension on the Closing Date, the Merger shall have been consummated pursuant to the Merger Agreement, and no provision of the Merger Agreement shall have been waived or amended in any material respect by Holdings or Merger Sub in a manner materially adverse to the Lenders (in their capacity as such) without the consent of the Arranger, such consent not to be unreasonably withheld or delayed (it being understood that (x) any reduction in the acquisition consideration by more than 10% shall be deemed to be materially adverse to the Lenders and (y) any reduction in the
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acquisition consideration of less than or equal to 10% shall reduce the aggregate amount of the Senior Notes permitted hereby on a dollar-for-dollar basis).
(h) (i) The conditions in Section 7.2(a) of the Merger Agreement or in clause (d)(ii) of Annex I to the Merger Agreement, as applicable (but only with respect to representations and warranties made by the Company in the Merger Agreement that are material to the interests of the Lenders, and only to the extent that Giraffe Holding, Inc. or Merger Sub has the right to terminate its obligations under the Merger Agreement as a result of a breach of such representations and warranties in the Merger Agreement), shall be satisfied; (ii) the Specified Representations shall be true and correct in all material respects (or, if qualified by materiality, material adverse effect or similar language, in all respects (after giving effect to such qualification)); (iii) the Merger Sub shall have received the Equity Contribution; (iv) Merger Sub or the Lead Borrower shall have issued and sold the Senior Notes in a Rule 144A or other private placement on the Closing Date yielding at least $400,000,000 in gross cash proceeds on the Closing Date and (v) the Administrative Agent shall have received a certificate from the chief executive officer, president or chief financial officer of the Lead Borrower, in form and substance reasonably satisfactory to the Administrative Agent, certifying as to the matters set forth in this SECTION 4.01(h).
(i) The Administrative Agent shall have received a solvency certificate, substantially in the form set forth in Exhibit J, from the chief financial officer or other officer with equivalent duties of the Lead Borrower, or in lieu thereof at the option of the Lead Borrower, an opinion of a nationally recognized valuation firm as to the solvency (on a consolidated basis) of the Lead Borrower and its Restricted Subsidiaries as of the Closing Date.
(j) All principal, premium, if any, interest, fees and other amounts due or outstanding under the Existing Credit Agreement shall have been paid in full, the commitments thereunder terminated and all guarantees and security in support thereof discharged and released, and the Administrative Agent shall have received reasonably satisfactory evidence thereof.
(k) Immediately after giving effect to the Transactions and the other transactions contemplated hereby, Holdings, the Lead Borrower and the Subsidiaries shall have outstanding no Indebtedness for borrowed money other than (a) Indebtedness outstanding under this Agreement, (b) Indebtedness outstanding under the Term Loan Facility in an amount not to exceed the amount contemplated in the preliminary statements hereto, (c) Indebtedness in respect of the Senior Notes, in an aggregate principal amount not to exceed $400,000,000 (or such lesser amount as contemplated by clause (y) of SECTION 4.01(g)), (d) Indebtedness set forth on Schedule 6.03 and (e) Indebtedness permitted pursuant to SECTION 6.03(d).
(l) The Administrative Agent shall have received, at least 5 days prior to the Closing Date (or such later date as the Administrative Agent shall agree in writing), all documentation and other information about the Loan Parties required under applicable know your customer and anti-money laundering rules and regulations, including without limitation the USA PATRIOT Act, that has been requested in writing at least 10 days prior to the Closing Date.
(m) The Arranger shall have received the Audited Financial Statements, the Unaudited Financial Statements, the Pro Forma Financial Statements and the Projected Financial Statements.
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(n) (i) Since January 30, 2010, there shall not have occurred any Company Material Adverse Effect except (A) as disclosed in the Company SEC Documents (as defined in the Merger Agreement) filed with the SEC after December 31, 2009 and prior to the date of the Merger Agreement (other than any disclosure in such Company SEC Documents (x) that is set forth under the captions Risk Factors or Forward Looking Statements or (y) that is otherwise predictive, cautionary or forward-looking in nature), in each case, if and only if the nature and content of the applicable disclosure in such Company SEC Document is such that its relevance to the determination of the occurrence of a Company Material Adverse Effect is reasonably apparent on the face of such disclosure, or (B) as disclosed in any section of the Company Disclosure Letter (as defined in the Merger Agreement) the relevance of which disclosure to the determination of the occurrence of a Company Material Adverse Effect is reasonably apparent on the face of such disclosure and (ii) the Administrative Agent shall have received a certificate from a Responsible Officer of the Lead Borrower certifying as to the matters set forth in this SECTION 4.01(n).
For purposes of this clause (n), Company Material Adverse Effect means any change, event, effect, occurrence, state of facts or development (whether or not constituting a breach of a representation, warranty or covenant set forth in the Merger Agreement) that, individually or in the aggregate with any such other changes, events, effects, occurrences, state of facts or developments, (a) has had or is reasonably likely to have a material adverse effect on the business, results of operations, assets, liabilities or financial condition, in each case, of the Company and its subsidiaries taken as a whole, or (b) prevents or would be reasonably likely to prevent the consummation of the merger of Merger Sub with and into the Company, other than, in the case of clause (a), any changes, events, effects, occurrences, state of facts or developments to the extent attributable to: (i) any changes in general economic or political conditions, or in the financial, credit or securities markets in general (including changes in interest rates, exchange rates, stock, bond and/or debt prices) in any country or region in which the Company or any of its subsidiaries conducts business; (ii) any events, circumstances, changes or effects that affect the industries in which the Company or any of the Companys subsidiaries operate; (iii) any changes, after October 11, 2010, in laws applicable to the Company or any of the Companys subsidiaries or any of their respective properties or assets or changes, after October 11, 2010, in GAAP or rules and policies of the Public Company Accounting Oversight Board; (iv) any natural disasters or acts of war, sabotage or terrorism, or armed hostilities, or any escalation or worsening thereof, in each case occurring after October 11, 2010; (v) the entry into, announcement or performance of the Merger Agreement and the transactions contemplated thereby (including compliance with the covenants set forth therein), but in any event excluding the obligation to comply with Section 6.1 of the Merger Agreement and Section 6.4 of the Merger Agreement and other than for purposes of any representation or warranty contained in Section 4.5 of the Merger Agreement; (vi) any changes in the market price or trading volume of shares of the Companys common stock or any failure to meet internal or published projections, forecasts or revenue, net retail sales, comparable store sales or earnings predictions for any period (provided that the underlying cause of such decline or failure shall not be excluded); (vii) any loss of, or change in, the relationship of the Company or any of the Companys subsidiaries, contractual or otherwise, with its customers, suppliers, vendors, lenders, employees, investors, or venture partners arising out of the execution, delivery or performance of the Merger Agreement, the consummation of the transactions contemplated thereby or the announcement of any of the foregoing; or (viii) any litigation arising from allegations of a breach of fiduciary duty or other violation of applicable Law relating to the Merger Agreement or the transactions contemplated
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by the Merger Agreement, in the case of clauses (i), (ii), (iii) and (iv), other than to the extent such change, event, effect, occurrence, state of facts or development disproportionately impact the Company and its subsidiaries relative to other companies in its industry.
(o) The Administrative Agent shall have received a Borrowing Base Certificate dated the Closing Date, relating to the month ending on October 30, 2010, and executed by a Financial Officer of the Lead Borrower.
(p) The Administrative Agent shall have received evidence of the Loan Parties insurance, all as and to the extent required by the Loan Documents.
(q) The Administrative Agent, the Arranger and the Lenders shall have received all applicable fees and other amounts due and payable on or prior to the Closing Date, including, to the extent invoiced at least two Business Days prior to the Closing Date (except as otherwise reasonably agreed by the Lead Borrower), reimbursement or payment of all out of pocket expenses required to be reimbursed or paid by the Borrowers hereunder or under any other Loan Document.
Without limiting the generality of the provisions of the last paragraph of SECTION 8.06, 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.
SECTION 4.02 Conditions Precedent to Each Revolving Credit Loan and Each Letter of Credit after the Closing Date.
The obligation of the Lenders to make each Revolving Credit Loan and of the Issuing Banks to issue each Letter of Credit after the Closing Date is subject to the satisfaction by the Loan Parties or the waiver of each of the following conditions precedent:
(a) The Administrative Agent shall have received a notice with respect to such Borrowing or issuance, as the case may be, as required by Article II, and in the case of the issuance of a Letter of Credit, the applicable Issuing Bank shall have received notice with respect thereto in accordance with SECTION 2.13.
(b) All representations and warranties contained in this Agreement and the other Loan Documents or otherwise made in writing in connection herewith or therewith shall be true and correct in all material respects on and as of the date of each Borrowing or the issuance of each Letter of Credit hereunder with the same effect as if made on and as of such date, other than representations and warranties that relate solely to an earlier date, which shall be true and correct in all material respects as of such earlier date, provided that any representation and warranty which is qualified as to materiality, Material Adverse Effect or similar language shall be true and correct in all respects on such respective dates.
(c) Both before and after giving effect to each Borrowing or issuance of each Letter of Credit hereunder, no Default or Event of Default shall have occurred and be continuing.
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The request by the Lead Borrower for, and the acceptance by any Borrower of, each extension of credit hereunder shall be deemed to be a representation and warranty by the Loan Parties that the conditions specified in this SECTION 4.02 have been satisfied at that time and that after giving effect to such extension of credit the Borrowers shall continue to be in compliance with the then FILO Borrowing Base (or, if the FILO Commitments have been terminated, the then Tranche A Borrowing Base). The conditions set forth in this SECTION 4.02 are for the sole benefit of the Administrative Agent and each other Credit Party and may be waived by the Administrative Agent, in whole or in part, without prejudice to the rights of the Administrative Agent or any other Credit Party.
ARTICLE V
Affirmative Covenants
Until (i) the Commitments have expired or been terminated, (ii) the principal of and interest on each Revolving Credit Loan (including Swingline Loans) and all fees and other Obligations (other than contingent indemnity obligations with respect to then unasserted claims and the Other Liabilities) shall have been paid in full, (iii) all Letters of Credit shall have expired or terminated (or been cash collateralized or backstopped in a manner reasonably satisfactory to the applicable Issuing Bank) and (iv) all Letter of Credit Outstandings have been reduced to zero (or cash collateralized or backstopped in a manner reasonably satisfactory to the applicable Issuing Bank), ), the Lead Borrower shall and shall (except in the case of the covenants set forth in SECTION 5.01, SECTION 5.02, SECTION 5.03, SECTION 5.14 and SECTION 5.15) cause each of its Restricted Subsidiaries to:
SECTION 5.01 Financial Statements.
Deliver to the Administrative Agent for prompt further distribution to each Lender:
(a) as soon as available, but in any event within ninety (90) days after the end of each Fiscal Year of the Lead Borrower beginning with the Fiscal Year ending January 29, 2011, a Consolidated balance sheet of the Lead Borrower and its Subsidiaries as at the end of such Fiscal Year, and the related Consolidated statements of income or operations, stockholders equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of Deloitte & Touche LLP or any other independent registered public accounting firm of nationally recognized standing, 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 forty-five (45) days after the end of each of the first three (3) Fiscal Quarters of each Fiscal Year of the Lead Borrower (commencing with the Fiscal Quarter ending April 30, 2011), a Consolidated balance sheet of the Lead Borrower and its Subsidiaries as at the end of such Fiscal Quarter, and the related (A) Consolidated statements of income or operations for such Fiscal Quarter and for the portion of the Fiscal Year then ended and (B) Consolidated statements of cash flows for the portion of the Fiscal Year then ended, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter of the previous Fiscal
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Year and the corresponding portion of the previous Fiscal Year, all in reasonable detail and certified by a Responsible Officer of the Lead Borrower as fairly presenting in all material respects the financial condition, results of operations and cash flows of the Lead Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;
(c) as soon as available, but in any event within thirty-five (35) days after the end of each of the first two (2) Fiscal Months of each Fiscal Quarter of the Lead Borrower, a Consolidated balance sheet of the Lead Borrower and its Subsidiaries as at the end of such Fiscal Month, and the related (i) Consolidated statements of income or operations for such Fiscal Month and for the portion of the Fiscal Year then ended and (ii) Consolidated statements of cash flows for the portion of the Fiscal Year then ended, setting forth in each case in comparative form the figures for the corresponding Fiscal Month of the previous Fiscal Year and the corresponding portion of the previous Fiscal Year, all in reasonable detail and certified by a Responsible Officer of the Lead Borrower as fairly presenting in all material respects the financial condition, results of operations and cash flows of the Lead Borrower and its Subsidiaries;
(d) as soon as available, and in any event no later than ninety (90) days after the end of each Fiscal Year of the Lead Borrower (commencing with the fiscal year ending January 29, 2011), a reasonably detailed consolidated budget by quarter for the following Fiscal Year (including a projected Consolidated balance sheet of the Lead Borrower and its Subsidiaries as of the end of each quarter of the following Fiscal Year, the related Consolidated statements of projected cash flow and projected income and a summary of the material underlying assumptions applicable thereto), (collectively, the Projections), which Projections shall in each case be accompanied by a certificate of a Responsible Officer stating that such Projections are based on estimates, information and assumptions believed to be reasonable and that such Responsible Officer has no reason to believe that such Projections are incorrect or misleading in any material respect;
(e) On the 10th Business Day of each month (or on Wednesday of each week (or, if Wednesday is not a Business Day, on the next succeeding Business Day) if the Lead Borrower shall so elect, subject to the proviso below), a certificate in the form of Exhibit I (a Borrowing Base Certificate) showing the Tranche A Borrowing Base and the FILO Borrowing Base as of the close of business on the immediately preceding Fiscal Month (or in the case of a voluntary delivery of a Borrowing Base Certificate at the election of the Borrowers on a weekly basis, as of the close of business on the immediately preceding Saturday), each Borrowing Base Certificate to be certified as complete and correct in all material respects on behalf of the Lead Borrower by a Responsible Officer of the Lead Borrower, provided that if (x) any Specified Default has occurred and is continuing or (y) Availability is less than (i) the greater of (A) fifteen percent (15%) of the lesser of (X) the then FILO Borrowing Base (or, if the FILO Commitments have been terminated, the then Tranche A Borrowing Base) and (Y) the then Revolving Credit Ceiling, and (B) $25,000,000, in each case for this clause (y), for five (5) consecutive Business Days, or (ii) at any time, ten percent (10%) of the lesser of (X) the then FILO Borrowing Base (or, if the FILO Commitments have been terminated, the then Tranche A Borrowing Base) and (Y) the then Revolving Credit Ceiling, then such Borrowing Base Certificate shall be furnished on Wednesday of each week (or, if Wednesday is not a Business Day, on the next succeeding Business Day), as of the close of business on the immediately preceding Saturday until the date on which, in the case of clause (x) above, such Specified Default is waived or cured or, in the case of clause (y) above, Availability has been greater than the greater of (A) fifteen percent (15%) of the
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lesser of (X) the then FILO Borrowing Base (or, if the FILO Commitments have been terminated, the then Tranche A Borrowing Base) and (Y) the then Revolving Credit Ceiling, and (B) $25,000,000, in each case for thirty (30) consecutive calendar days; provided further that if the Borrowers elect to furnish the Administrative Agent with a Borrowing Base Certificate on a weekly basis, then the Lead Borrower shall continue to furnish a Borrowing Base Certificate on such weekly basis from the date of such election through the remainder of the Fiscal Year in which such election was made;
(f) simultaneously with the delivery of each set of Consolidated financial statements referred to in SECTION 5.01(a), SECTION 5.01(b) and SECTION 5.01(c) above, the related consolidating financial statements (which may be in footnote form) reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) from such Consolidated financial statements; and
(g) promptly upon receipt thereof, copies of all management letters from the Lead Borrowers independent certified public accountants submitted by such accountants to management in connection with their annual audit (i) commenting on any material weakness in the Lead Borrowers internal controls, and (ii) subject to the consent of such accountants (which consent the Lead Borrower shall in good faith seek to obtain), commenting on any other matters relating to the Lead Borrowers internal controls.
Notwithstanding the foregoing, the obligations in paragraphs (a), (b) and (c) of this SECTION 5.01 may be satisfied with respect to financial information of the Lead Borrower and its Restricted Subsidiaries by furnishing (A) the Consolidated financial statements of Holdings, the Lead Borrower (or any direct or indirect parent thereof), or (B) the Lead Borrowers or Holdings (or any direct or indirect parent thereof), as applicable, Form 10-K or 10-Q, as applicable, filed with the SEC, provided that to the extent that such information relates to Holdings (or any direct or indirect parent thereof), such information is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to Holdings (or any direct or indirect parent thereof) and its Subsidiaries, on the one hand, and the Lead Borrower and its Restricted Subsidiaries on the other hand, and (ii) to the extent such information is in lieu of information required to be provided under SECTION 5.01(a), such materials are accompanied by a report and opinion of Deloitte & Touche LLP or any other independent registered public accounting firm of nationally recognized standing, 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.
SECTION 5.02 Certificates; Other Information.
Deliver to the Administrative Agent for prompt further distribution to each Lender:
(a) [Reserved]
(b) contemporaneously with the delivery of the financial statements referred to in SECTION 5.01(a) and SECTION 5.01(b), commencing with the first full Fiscal Quarter completed after the Closing Date, a duly completed Compliance Certificate signed by a Responsible Officer of the Lead Borrower in the form of Exhibit H hereto (a Compliance
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Certificate) (i) certifying as to whether a Default or Event of Default has occurred and, if a Default or Event of Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations with respect to the Consolidated Fixed Charge Coverage Ratio for such period, (iii) detailing all Store openings and Store closings during the immediately preceding fiscal period, and stating the aggregate number of the Loan Parties Stores as of the first day of the current fiscal period, (iv) setting forth in reasonable detail the status of rental payments for each of the Loan Parties (A) warehouses and distribution centers, and (B) other leased locations in the Landlord Lien States designated by the Administrative Agent in its commercially reasonable judgment (which, as of the Closing Date, are Washington, Pennsylvania and Virginia), and (v) stating whether any change in GAAP or in the application thereof has occurred since the date of the Lead Borrowers most recent audited financial statements and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such Compliance Certificate;
(c) promptly after the same are publicly available, copies of all annual, regular, periodic and special reports and registration statements which the Lead Borrower or Holdings files with the SEC or with any Governmental Authority that may be substituted therefor (other than amendments to any registration statement (to the extent such registration statement, in the form it became effective, is delivered), exhibits to any registration statement and, if applicable, any registration statement on Form S-8) and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;
(d) promptly after the furnishing thereof, copies of any material requests or material notices received by the Lead Borrower or any of its Restricted Subsidiaries (other than in the ordinary course of business) or material statements or material reports (other than in connection with any board observer rights) furnished to any holder of Material Indebtedness of the Lead Borrower or of any of its Restricted Subsidiaries, including pursuant to the terms of the Senior Notes, the Term Loan Facility, any Junior Financing or any Permitted Refinancing thereof, and not otherwise required to be furnished to the Lenders pursuant to any other clause of this SECTION 5.02;
(e) together with the delivery of each Compliance Certificate pursuant to SECTION 5.02(b), (i) a report setting forth the information required by Section 4.02(e) of the Security Agreement or confirming that there has been no change in such information since the Closing Date or the date of the last such report), and (ii) a list of each Subsidiary that identifies each Subsidiary as a Restricted Subsidiary or an Unrestricted Subsidiary as of the date of delivery of such Compliance Certificate;
(f) The financial and collateral reports described on Schedule 5.02(f) hereto, at the times set forth in such Schedule 5.02(f); and
(g) After the occurrence and during the continuance of a Cash Dominion Event, a detailed summary of all Net Proceeds received from any Prepayment Event, in each case within five (5) Business Days after receipt of such Net Proceeds other than from sales of Inventory in the ordinary course of business;
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(h) promptly when available, (i) a copy of the acquisition agreement and other acquisition documents relating to any Permitted Acquisition and (ii) updated schedules to this Agreement and the Security Agreement after giving effect to such Permitted Acquisition, appropriate financial statements of the Person which is the subject of such Permitted Acquisition and financial statements prepared on a Pro Forma Basis (to the extent available) after giving effect to such Permitted Acquisition (including balance sheets, cash flows and income statements);
(i) at least five (5) Business Days (or such shorter period as the Administrative Agent shall agree in writing) prior to the making of any Specified Payment, a detailed calculation of the Consolidated Fixed Charge Coverage Ratio and the Pro Forma Availability Condition and all components thereof, with such supporting documentation as the Administrative Agent may reasonably request; and
(j) promptly, such additional information regarding the business, legal, financial or corporate affairs of any Loan Party or any Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender through the Administrative Agent may from time to time reasonably request.
Documents required to be delivered pursuant to SECTION 5.01(a), SECTION 5.01(b), SECTION 5.01(c) or SECTION 5.02(d) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Lead Borrower posts such documents, or provides a link thereto on the Lead Borrowers website on the Internet at the website address listed on Schedule 5.02; or (ii) on which such documents are posted on the Lead Borrowers behalf on IntraLinks/IntraAgency or another relevant website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) upon written request by the Administrative Agent, the Lead Borrower shall deliver paper copies of such documents to the Administrative Agent for further distribution to each Lender until a written request to cease delivering paper copies is given by the Administrative Agent and (ii) the Lead Borrower shall notify (which may be by facsimile or electronic mail) the Administrative Agent of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. Notwithstanding anything contained herein, in every instance the Lead Borrower shall be required to provide paper copies of the Compliance Certificates required by SECTION 5.02(b) to the Administrative Agent. Each Lender shall be solely responsible for timely accessing posted documents or requesting delivery of paper copies of such documents from the Administrative Agent and maintaining its copies of such documents.
The Lead Borrower hereby acknowledges that (a) the Administrative Agent and/or the Arranger will make available to the Lenders and the Issuing Banks materials and/or information provided by or on behalf of the Loan Parties hereunder (collectively, Borrower Materials) by posting the Borrower Materials on IntraLinks or another similar electronic system (the Platform) and (b) certain of the Lenders (each, a Public Lender) may have personnel who do not wish to receive material non-public information with respect to Holdings (or any parent thereof), the Lead Borrower or any of their respective Subsidiaries, or the respective securities of any of the foregoing, and who may be engaged in investment and other market-related activities
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with respect to such Persons securities. The Lead Borrower hereby agrees that (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked PUBLIC which, at a minimum, shall mean that the word PUBLIC shall appear prominently on the first page thereof; (x) by marking Borrower Materials PUBLIC, the Lead Borrower shall be deemed to have authorized the Administrative Agent, the Arranger, the Issuing Banks and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to the Lead 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 9.08); (y) all Borrower Materials marked PUBLIC are permitted to be made available through a portion of the Platform designated Public Side Information; and (z) the Administrative Agent and the Arranger 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 Side Information. Notwithstanding the foregoing, the Lead Borrower shall be under no obligation to mark any Borrower Materials PUBLIC.
SECTION 5.03 Notices.
Promptly after obtaining knowledge thereof, notify the Administrative Agent in writing (for prompt distribution to the Lenders):
(a) of the occurrence of any Default, specifying the nature and extent thereof and the action (if any) which is proposed to be taken with respect thereto; and
(b) (i) of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including arising out of or resulting from (A) breach or non-performance of, or any default or event of default under, a contractual obligation of any Loan Party or any Subsidiary, (B) any dispute, litigation, investigation, proceeding or suspension between any Loan Party or any Subsidiary and any Governmental Authority, (C) the commencement of, or any material development in, any litigation or proceeding affecting any Loan Party or any Subsidiary, including pursuant to any applicable Environmental Laws or in respect of IP Rights or the assertion or occurrence of any noncompliance by any Loan Party or any of its Subsidiaries with, or liability under, any Environmental Law or permit, (D) any strikes, lockouts or slowdowns against any Loan Party, or (E) the occurrence of any ERISA Event or (ii) if any Loan Party or any ERISA Affiliate enters into any agreement or takes any other corporate action that will result in its becoming a sponsor of, beginning to maintain or becoming obligated to contribute to, a Plan or a Multiemployer Plan;
(c) Any change in any Loan Partys chief executive officer or chief financial officer;
(d) Any material change in any Loan Partys financial reporting practices;
(e) The filing of any Lien for unpaid Taxes against any Loan Party in excess of $10,000,000;
(f) The discharge by any Loan Party of its present independent accountants or any withdrawal or resignation by such independent accountants;
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(g) Any casualty or other insured damage to any portion of the Collateral included in the Tranche A Borrowing Base or the FILO Borrowing Base in excess of $10,000,000, or the commencement of any action or proceeding for the taking of any interest in a portion of the Collateral included in the Tranche A Borrowing Base or the FILO Borrowing Base in excess of $10,000,000 or any part thereof or interest therein under power of eminent domain or by condemnation or similar proceeding, and
(h) The receipt of any notice of default by a Loan Party under, or notice of termination of, any Lease for any of the Loan Parties distribution centers or warehouses.
Each notice pursuant to this Section shall be accompanied by a written statement of a Responsible Officer of the Lead Borrower (x) that such notice is being delivered pursuant to this SECTION 5.03, and (y) setting forth details of the occurrence referred to therein and stating what action the Lead Borrower has taken and proposes to take with respect thereto.
SECTION 5.04 Payment of Taxes, Etc.
Pay, discharge or otherwise satisfy as the same shall become due and payable, (a) all its Indebtedness and other obligations in accordance with their terms and (b) all its obligations and liabilities in respect of Taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, except, in each case, (x) in the case of clause (b), where the validity or amount thereof is being contested in good faith by appropriate actions and the Lead Borrower or its Restricted Subsidiary, as applicable, has set aside on its books adequate reserves with respect thereto in accordance with GAAP, and such contest effectively suspends collection of the contested obligation and enforcement of any Lien securing such obligation, or (b) in the case of either clause (a) or (b), to the extent the failure to pay, discharge or otherwise satisfy the same could not reasonably be expected to have a Material Adverse Effect.
SECTION 5.05 Preservation of Existence, Etc.
(a) Preserve, renew and maintain in full force and effect its legal existence under the Applicable Laws of the jurisdiction of its organization except in a transaction permitted by SECTION 6.04 or SECTION 6.05, and (b) take all reasonable action to maintain all rights, privileges (including its good standing), permits, licenses and franchises necessary or desirable in the normal conduct of its business, except (i) to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect or (ii) pursuant to a transaction permitted by SECTION 6.04 or SECTION 6.05.
SECTION 5.06 Maintenance of Properties.
Unless the failure to do so could not reasonably be expected to have a Material Adverse Effect, (a) maintain, preserve and protect all of its properties and equipment necessary in the operation of its business in good working order, repair and condition, ordinary wear and tear and obligations of landlords under leases excepted and casualty or condemnation excepted, and (b) make all necessary renewals, replacements, modifications, improvements, upgrades, extensions and additions thereof or thereto in accordance with prudent industry practice.
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SECTION 5.07 Maintenance of Insurance.
(a) Maintain with financially sound and reputable insurance companies, insurance with respect to their properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts (after giving effect to any self-insurance reasonable and customary for similarly situated Persons engaged in the same or similar businesses as the Lead Borrower and its Restricted Subsidiaries) as are customarily carried under similar circumstances by such other Persons. The Lead Borrower shall furnish to the Administrative Agent, upon written request, full information as to the insurance carried.
(b) Use commercially reasonable efforts to obtain, not later than ninety (90) days after the Closing Date (or such longer period as the Administrative Agent may agree in writing in its sole discretion), endorsements or amendments to all casualty, loss, fire and extended coverage policies maintained with respect to any Collateral to include (i) a non-contributing mortgage clause (regarding improvements to real property) and a lenders loss payable clause (regarding personal property), in form and substance reasonably satisfactory to the Administrative Agent, which endorsements or amendments shall provide that the insurer shall pay all proceeds otherwise payable to the Loan Parties (other than Holdings) under the policies directly to the Administrative Agent, (ii) a provision to the effect that none of the Loan Parties, Credit Parties (in their capacity as such) or any other Affiliate of a Loan Party shall be a co-insurer (the foregoing not being deemed to limit the amount of self-insured retention or deductibles under such policies, which self-insured retention or deductibles shall be consistent with business practices in effect on the Closing Date or as otherwise determined by the Responsible Officers of the Loan Parties acting reasonably in their business judgment; it being understood that any applicable deductible under such policies will apply to cover losses), and (iii) such other provisions as the Administrative 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 Administrative Agent as an additional insured (or, in the event that the Administrative Agent is already named as such, shall continue to name the Administrative Agent as an additional insured). To the extent such endorsement can be obtained through the commercially reasonable efforts of the Lead Borrower and its Restricted Subsidiaries, each endorsement to such casualty or liability policy referred to in this SECTION 5.07(b) shall also provide that it shall not be canceled, modified in any manner that would cause this SECTION 5.07 to be violated, 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 Administrative Agent (giving the Administrative 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 Administrative Agent. The Lead Borrower shall deliver to the Administrative Agent, prior to any cancellation, any material modification or any 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 Administrative Agent, including an insurance binder) together with evidence reasonably satisfactory to the Administrative Agent of payment of the premium therefor.
(c) The Administrative Agent acknowledges that the insurance policies described on Schedule 5.07 are satisfactory to it as of the Closing Date and are in compliance with the provisions of this SECTION 5.07.
(d) With respect to each Mortgaged Property, if at any time the area in which any building or other improvement is located is designated a flood hazard area in any Flood Insurance
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Rate Map published by the Federal Emergency Management Agency (or any successor agency), obtain flood insurance in such amount and with such deductible as is required to ensure compliance with the Flood Laws. Following the Closing Date, the Lead Borrower shall deliver to the Collateral Agent annual renewals of the flood insurance policy or annual renewals of a force-placed flood insurance policy. In connection with any amendment to this Agreement pursuant to which any increase, extension, or renewal of Loans or Commitments is contemplated, the Lead Borrower shall cause to be delivered to the Collateral Agent for any Mortgaged Property, a Flood Determination Form, Borrower Notice and Evidence of Flood Insurance, as applicable.
SECTION 5.08 Compliance with Laws.
Comply in all material respects with the requirements of all Applicable Laws applicable to it or to its business or property, except where the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.
SECTION 5.09 Books and Records.
Maintain proper books of record and account, in which entries that are full, true and correct in all material respects shall be made of all material financial transactions and matters involving the assets and business of the Lead Borrower or its Restricted Subsidiaries, as the case may be and shall cause financial statements to be prepared in conformity with GAAP.
SECTION 5.10 Inspection Rights.
(a) Permit any representatives designated by the Administrative Agent, upon reasonable prior notice, to visit and inspect its properties, to discuss its affairs, finances and condition with its officers and to examine and make extracts from its books and records, all at such reasonable times during normal business hours and as may be reasonably requested upon reasonable advance notice to the Lead Borrower; provided that, excluding any such visits and inspections during the continuation of an Event of Default, only the Administrative Agent on behalf of the Lenders may exercise the rights of the Administrative Agent and the Lenders under this SECTION 5.10(a) and the Administrative Agent shall not exercise such rights more often than two (2) times during any calendar year, absent the existence of an Event of Default and only one (1) such time shall be at the Lead Borrowers expense; provided further that when an Event of Default exists, the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Lead Borrower at any time during normal business hours and upon reasonable advance notice. The Administrative Agent and the Lenders shall give the Lead Borrower the opportunity to participate in any discussions with the Lead Borrowers independent public accountants. Nothing contained in this SECTION 5.10(a) shall be deemed to limit or modify the rights of the Administrative Agent under SECTION 5.10(b) hereof.
(b) From time to time upon the request of the Administrative Agent, permit the Administrative Agent or professionals (including consultants, accountants, lawyers and appraisers) retained by the Administrative Agent, on reasonable prior notice and during normal business hours, to conduct appraisals and commercial finance examinations, including, without limitation, of (i) the Borrowers practices in the computation of the then FILO Borrowing Base (or, if the FILO Commitments have been terminated, the then Tranche A Borrowing Base), and (ii) the assets included
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in the then FILO Borrowing Base (or, if the FILO Commitments have been terminated, the then Tranche A Borrowing Base) and related financial information such as, but not limited to, sales, gross margins, payables, accruals and reserves. Subject to the following, the Loan Parties shall pay the reasonable out-of-pocket fees and expenses of the Administrative Agent or such professionals with respect to such evaluations and appraisals.
(i) The Administrative Agent may conduct up to one (1) commercial finance examinations in each calendar year, each at the Loan Parties expense; provided that, if Availability is less than (i) fifty percent (50%) of the lesser of (A) the then FILO Borrowing Base (or, if the FILO Commitments have been terminated, the then Tranche A Borrowing Base) and (B) the then Revolving Credit Ceiling, in each case for five (5) consecutive Business Days, the Administrative Agent may conduct up to two (2) commercial finance examinations in each calendar year, each at the Loan Parties expense or (ii) fifteen percent (15%) of the lesser of (A) the then FILO Borrowing Base (or, if the FILO Commitments have been terminated, the then Tranche A Borrowing Base) and (B) the then Revolving Credit Ceiling, in each case for five (5) consecutive Business Days, the Administrative Agent may conduct up to three (3) commercial finance examinations in each calendar year, each at the Loan Parties expense. Notwithstanding anything to the contrary contained herein, the Administrative Agent (A) may undertake one (1) additional commercial finance examination in each calendar year at the sole expense of the Administrative Agent, and (B) after the occurrence and during the continuance of any Specified Default, may cause such additional commercial finance examinations to be taken as the Administrative Agent, in its reasonable discretion, determine are necessary or appropriate (each, at the expense of the Loan Parties).
(ii) The Administrative Agent may conduct up to one (1) appraisals of the Loan Parties Inventory in each calendar year, each at the Loan Parties expense; provided that, if Availability is less than (i) fifty percent (50%) of the lesser of (A) the then FILO Borrowing Base (or, if the FILO Commitments have been terminated, the then Tranche A Borrowing Base) and (B) the then Revolving Credit Ceiling, in each case for five (5) consecutive Business Days, the Administrative Agent may conduct up to two (2) appraisals of the Loan Parties Inventory in each calendar year, each at the Loan Parties expense or (ii) fifteen percent (15%) of the lesser of (A) the then FILO Borrowing Base (or, if the FILO Commitments have been terminated, the then Tranche A Borrowing Base) and (B) the then Revolving Credit Ceiling, in each case for five (5) consecutive Business Days, the Administrative Agent may conduct up to three (3) appraisals of the Loan Parties Inventory in each calendar year, each at the Loan Parties expense. Notwithstanding anything to the contrary contained herein, the Administrative Agent (A) may undertake one (1) additional Inventory appraisal in each calendar year at the sole expense of the Administrative Agent, and (B) after the occurrence and during the continuance of any Specified Default, may cause such additional Inventory appraisals to be taken as the Administrative Agent, in its reasonable discretion, determine are necessary or appropriate (each, at the expense of the Loan Parties).
(c) At all times retain independent certified public accountants of national standing and shall instruct such accountants to cooperate with, and be available to, the Administrative Agent or its representatives to discuss the annual audited statements, the financial performance, financial
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condition, operating results, controls of the Lead Borrower and its Restricted Subsidiaries, and such other matters, within the scope of the retention of such accountants for such audited statements, as may be raised by the Administrative Agent; subject, however, if requested by such accountants, to the execution of an access agreement by the Administrative Agent and such accountants in form reasonably satisfactory to each of them; provided that a representative of the Lead Borrower shall be given the opportunity to be present all such discussions.
SECTION 5.11 Covenant to Become a Loan Party and Give Security.
At the Lead Borrowers expense, take all action necessary or reasonably requested by the Administrative Agent or the Collateral Agent to ensure that the Collateral and Guarantee Requirement continues to be satisfied (subject to the limitations set forth in the definition of Collateral and Guarantee Requirement), including:
(a) Upon the formation or acquisition of any new direct or indirect wholly owned Domestic Subsidiary (in each case, other than an Excluded Subsidiary) by the Lead Borrower, the designation in accordance with SECTION 5.14 of any existing direct or indirect wholly owned Domestic Subsidiary as a Restricted Subsidiary (other than an Excluded Subsidiary) or any wholly owned Domestic Subsidiary ceasing to be an Excluded Subsidiary:
(i) as soon as practicable, but in any event within 60 days after such formation, acquisition, designation or other event, or such longer period as the Administrative Agent may agree in writing in its sole discretion:
(a) cause each such Domestic Subsidiary to duly execute and deliver to the Administrative Agent or the Collateral Agent (as appropriate) a joinder to this Agreement as a Borrower (provided, however, that if the Lead Borrower shall reasonably determine that causing such Restricted Subsidiary to become a Borrower hereunder is not practicable (including, without limitation, because materially adverse tax consequences would result therefrom), the Lead Borrower shall cause such Restricted Subsidiary to duly execute and deliver to the Administrative Agent a joinder to the Facility Guaranty) security agreement supplements, intellectual property security agreements and other security agreements and documents, as reasonably requested by and in form and substance reasonably satisfactory to the Administrative Agent (consistent with the Mortgage, Security Agreement, intellectual property security agreements and other security agreements in effect on the Closing Date), in each case granting Liens required by the Collateral and Guarantee Requirement;
(b) cause each such Domestic Subsidiary (and the parent of each such Domestic Subsidiary that is a Loan Party) to deliver to the Collateral Agent (subject to the Intercreditor Agreement) any and all certificates representing Capital Stock (to the extent certificated) and intercompany notes (to the extent certificated) that are required to be pledged pursuant to the Collateral and Guarantee Requirement, accompanied by undated stock powers or other appropriate instruments of transfer executed in blank;
(c) take and cause such Restricted Subsidiary and each direct or indirect parent of such Restricted Subsidiary to take whatever action (including the recording of
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Mortgages, the filing of UCC financing statements and delivery of stock and membership interest certificates) as may be necessary in the reasonable opinion of the Collateral Agent to vest in the Collateral Agent (or in any representative of the Collateral Agent designated by it) valid and perfected Liens to the extent required by the Collateral and Guarantee Requirement, and to otherwise comply with the requirements of the Collateral and Guarantee Requirement;
(ii) if reasonably requested by the Administrative Agent or the Collateral Agent, as soon as available but in any event within forty-five (45) days after such request (or such longer period as the Administrative Agent may agree in writing in its sole discretion), deliver to the Administrative Agent a signed copy of an opinion, addressed to the Administrative Agent and the Lenders, of counsel for the Loan Parties reasonably acceptable to the Administrative Agent as to such matters set forth in this SECTION 5.11(a) as the Administrative Agent may reasonably request;
(iii) as promptly as practicable after the request therefor by the Administrative Agent or Collateral Agent, deliver to the Collateral Agent with respect to each Material Real Property, any existing surveys, title reports, abstracts or environmental assessment reports, to the extent available and in the possession or control of the Borrower; provided, however, that there shall be no obligation to deliver to the Collateral Agent any existing environmental assessment report whose disclosure to the Collateral Agent would require the consent of a Person other than the Lead Borrower or one of its Subsidiaries, where, despite the commercially reasonable efforts of the Lead Borrower to obtain such consent, such consent cannot be obtained; and
(iv) if reasonably requested by the Administrative Agent or the Collateral Agent, as soon as available but in any event within sixty (60) days after such request (or such longer period as the Administrative Agent may agree in writing in its sole discretion), deliver to the Collateral Agent any other items necessary from time to time to satisfy the Collateral and Guarantee Requirement with respect to the validity, perfection, existence and priority of security interests with respect to property of any Borrower or Facility Guarantor acquired after the Closing Date and subject to the Collateral and Guarantee Requirement, but not specifically covered by the preceding clauses (i), (ii) or (iii) or clause (b) below.
(b) As soon as is practicable, but in any event not later than one hundred twenty (120) days after the acquisition by any Loan Party of Material Real Property that is required to be provided as Collateral pursuant to the Collateral and Guarantee Requirement (or such longer period as the Administrative Agent may agree in writing in its sole discretion), which property would not be automatically subject to another Lien pursuant to pre-existing Security Documents, cause such property to be subject to a Lien in favor of the Collateral Agent for the benefit of the Secured Parties and take, or cause the relevant Loan Party to take, such actions as shall be necessary or reasonably requested by the Administrative Agent or the Collateral Agent to grant and perfect or record such Lien, in each case to the extent required by, and subject to the limitations and exceptions of, the Collateral and Guarantee Requirement and to otherwise comply with the requirements of the Collateral and Guarantee Requirement.
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(c) Always ensuring that the Obligations are secured by a perfected security interest in all the Capital Stock of each of the Borrowers and the Subsidiary Facility Guarantors.
SECTION 5.12 Compliance with Environmental Laws.
Except, in each case, to the extent that the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, the Loan Parties shall comply, and take all reasonable actions to cause all lessees and other Persons operating or occupying its properties to comply with all applicable Environmental Laws and permits; obtain and renew all permits necessary for its operations and properties; and, in each case to the extent required by Environmental Laws, conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws.
SECTION 5.13 Further Assurances and Post-Closing Conditions.
(a) Within ninety (90) days after the Closing Date (subject to extension by the Administrative Agent or the Collateral Agent in its reasonable discretion, and subject to the concurrent delivery to the Term Loan Agent of a comparable Security Document with respect to any Term Priority Collateral), deliver each Security Document set forth on Schedule 5.13, duly executed by each Loan Party thereto, together with all documents and instruments required to perfect the security interest of the Collateral Agent in the Collateral free of any other pledges, security interests or mortgages, except Liens expressly permitted hereunder, to the extent required pursuant to the Collateral and Guarantee Requirement.
(b) Promptly upon reasonable request by the Administrative Agent or the Collateral Agent (i) correct any material defect or error that may be discovered in the execution, acknowledgment, filing or recordation of any Security Document or other document or instrument relating to any Collateral, and (ii) 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 the Collateral Agent may reasonably request from time to time in order to carry out more effectively the purposes of the Loan Documents and to cause the Collateral and Guarantee Requirement to be and remain satisfied. Without limiting the foregoing, the Loan Parties shall use commercially reasonable efforts to obtain a Collateral Access Agreement from any Person from whom a Loan Party enters into a Lease after the Closing Date for a warehouse or distribution center prior to entering into such Lease.
(c) Use commercially reasonable efforts to cause each of its customs brokers or freight forwarder or carrier to deliver an agreement (including, without limitation, a Customs Broker Agreement) to the Collateral Agent covering such matters and in such form as the Collateral Agent may reasonably require. Notwithstanding anything to the contrary contained in any Loan Document, in the event Inventory is in the possession or control of a customs broker or freight forwarder or carrier that has not delivered an agreement as required by the preceding sentence on or prior to the ninety (90) day anniversary of the Closing Date, such Inventory shall not be considered Eligible In-Transit Inventory hereunder.
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SECTION 5.14 Designation of Subsidiaries.
The board of directors of the Lead Borrower 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) after giving effect to such designation, the Payment Conditions shall have been satisfied, (iii) no Subsidiary may be designated as an Unrestricted Subsidiary if such Subsidiary is a Borrower or if such Subsidiary owns any property of the type (e.g., Inventory and Accounts) included in the Tranche A Borrowing Base or the FILO Borrowing Base, (iv) no Subsidiary may be designated as an Unrestricted Subsidiary if it is a Restricted Subsidiary for the purpose of the Senior Notes, the Term Loan Facility or any Junior Financing, as applicable, and (v) no Restricted Subsidiary may be designated as an Unrestricted Subsidiary if it was previously designated an Unrestricted Subsidiary. The designation of any Subsidiary as an Unrestricted Subsidiary shall constitute an Investment by the Lead Borrower therein at the date of designation in an amount equal to the net book value of the Lead Borrowers or 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.
SECTION 5.15 Information Regarding Collateral.
The Lead Borrower will furnish to the Administrative Agent prompt written notice of any change in: (a) any Loan Partys name; (b) the location of any Loan Partys chief executive office or its principal place of business; (c) any Loan Partys organizational structure or jurisdiction of incorporation or formation; or (d) any Loan Partys Federal Taxpayer Identification Number or organizational identification number assigned to it by its state or province of organization. The Loan Parties agree not to effect or permit any change referred to in the preceding sentence unless all filings, publications and registrations, have been made (or will be made in a timely fashion) 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 to the extent required under the Security Documents (subject only to Permitted Encumbrances having priority under Applicable Law) in all the Collateral for its own benefit and the benefit of the other Secured Parties.
SECTION 5.16 Physical Inventories.
The Loan Parties, at their own expense, shall cause not less than one (1) physical count of Inventory to be undertaken in each twelve (12) month period (or alternatively, periodic cycle counts) in conjunction with the preparation of its annual audited financial statements, conducted following such methodology as is consistent with the methodology used in the immediately preceding Inventory (or cycle count) or as otherwise may be reasonably satisfactory to the Administrative Agent. Following the completion of such Inventory count, and in any event by the next date required for the delivery of a Borrowing Base Certificate hereunder, the Borrowers shall deliver the results of such physical inventory to the Administrative Agent and shall post such results to the Loan Parties stock ledgers and general ledgers, as applicable.
SECTION 5.17 Use of Proceeds of Credit Extensions.
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The proceeds of Revolving Credit Loans made hereunder and of Letters of Credit issued hereunder will be used only (a) on the Closing Date, (i) to fund any original issue discount or upfront fees in connection with (x) the flex provisions in the Fee Letter or (y) the issuance of the Senior Notes or any other Securities (as defined in the Fee Letter), (ii) for working capital needs of the Lead Borrower and its Subsidiaries in an amount not to exceed $20,000,000, (iii) to fund an advance in lieu of the Management Investment in an amount not to exceed $15,000,000 and (iv) for the issuance of Letters of Credit on the Closing Date to backstop or replace letters of credit outstanding on the Closing Date (including the treatment of Existing Letters of Credit as provided in SECTION 2.13(k)) or for other general corporate purposes and (b) after the Closing Date, (i) to finance the acquisition of working capital assets of the Lead Borrower and its Subsidiaries, including the purchase of inventory and equipment, in each case in the ordinary course of business, (ii) to finance Capital Expenditures of the Lead Borrower and its Subsidiaries, (iii) to finance Permitted Acquisitions, and (iv) for general corporate purposes, all to the extent permitted in this Agreement. No part of the proceeds of any Revolving Credit Loan or other Credit Extension will be used, whether directly or indirectly, for any purpose that entails a violation of any of the regulations of the FRB, including Regulations U and X.
SECTION 5.18 Covenant Regarding Management Investment.
On or before the six (6) month anniversary of the Closing Date, the Lead Borrower shall apply the proceeds of a capital contribution to the equity of the Lead Borrower in an amount not less than $15,000,000 to prepay the outstanding Revolving Credit Loans (without a reduction in the Commitments). The Lead Borrower shall provide a certificate of a Responsible Officer (in form and substance reasonably satisfactory to the Administrative Agent) (x) certifying receipt of such capital contribution promptly after the receipt thereof and (y) confirming the application of such proceeds in accordance this SECTION 5.18.
SECTION 5.19 Covenant Regarding Certain Accounting Systems.
The Lead Borrower shall use commercially reasonable efforts to, on or prior to the 120 day anniversary of the Closing Date, to (x) update its internal accounting systems and controls so that they are capable of accurately distinguishing (without duplication) between items of Inventory which constitute Eligible Inventory and items of Inventory which constitute Eligible Letter of Credit Inventory and (y) upon the completion of such update, provide evidence reasonably satisfactory to the Administrative Agent of the satisfaction of the condition set forth in the preceding clause (x).
SECTION 5.20 Pension Plans.
Cause each of its Plans to be duly qualified and administered in all respects in compliance with all Applicable Laws, and the terms of the Plans and any agreements relating thereto, except for such non-compliance as would not reasonably be expected to have a Material Adverse Effect. The Lead Borrower and each of its Restricted Subsidiaries shall use reasonable commercial efforts to ensure that it, except where failure to do so would not reasonably be expected to have a Material Adverse Effect: (a) has no Unfunded Pension Liability in respect of any Plan, including any Plan to be established and administered by it or them; and (b) does not
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engage in a prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that could reasonably be expected to result in liability.
ARTICLE VI
Negative Covenants
Until (i) the Commitments have expired or been terminated, (ii) the principal of and interest on each Revolving Credit Loan (including Swingline Loans) and all fees and other Obligations (other than contingent indemnity obligations with respect to then unasserted claims and the Other Liabilities) shall have been paid in full, (iii) all Letters of Credit shall have expired or terminated (or been cash collateralized or backstopped in a manner reasonably satisfactory to the applicable Issuing Bank) and (iv) all Letter of Credit Outstandings have been reduced to zero (or cash collateralized or backstopped in a manner reasonably satisfactory to the applicable Issuing Bank):
SECTION 6.01 Liens.
The Lead Borrower will not, nor will it permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following (each a Permitted Encumbrance):
(a) Liens securing any Obligations;
(b) Liens existing on the Closing Date and listed on Schedule 6.01 and any modifications, replacements, renewals or extensions thereof; provided that (i) the Lien does not extend to any additional property other than (A) after-acquired property that is affixed or incorporated into the property covered by such Lien or financed by Indebtedness permitted under SECTION 6.03, and (B) proceeds and products thereof, and (ii) the renewal, extension or refinancing of the obligations secured or benefited by such Liens is permitted by SECTION 6.03;
(c) Liens for taxes, assessments or governmental charges which are not required to be paid pursuant to SECTION 5.04 or which are not yet due and payable;
(d) statutory or common law Liens of landlords, sublandlords, carriers, warehousemen, mechanics, materialmen, repairmen, construction contractors or other like Liens imposed by Applicable Law or other customary Liens (other than Liens in respect of Indebtedness) in favor of landlords, in each case, arising in the ordinary course of business which secure amounts not overdue for a period of more than thirty (30) days and no other action has been taken to enforce such Lien or which are being contested in good faith and by appropriate actions diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP and such contest effectively suspends collection of the contested obligation and enforcement of any Lien securing such obligation;
(e) (i) pledges or deposits in the ordinary course of business in connection with workers compensation, unemployment insurance and other social security legislation and (ii) pledges and deposits in the ordinary course of business securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank
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guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to the Lead Borrower or any Restricted Subsidiary;
(f) deposits to secure the performance of bids, trade contracts, governmental contracts and leases (other than Indebtedness for borrowed money), statutory obligations, surety, stay, customs and appeal bonds, performance bonds and other obligations of a like nature (including those to secure health, safety and environmental obligations) incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions, encroachments, servitudes, rights of way, licenses, protrusions, site plan agreements, development agreements, contract zoning agreements and other similar encumbrances, rights, agreements and minor title defects affecting real property which, in the aggregate, do not in any case materially interfere with the ordinary conduct of the business of the Lead Borrower or any Restricted Subsidiary (other than an Immaterial Subsidiary) taken as a whole, and exceptions on Mortgage Policies issued in connection with such Mortgage Policies;
(h) Liens securing judgments for the payment of money not constituting an Event of Default under SECTION 7.01(h);
(i) Liens securing Indebtedness permitted under SECTION 6.03(e); provided that (i) such Liens attach concurrently with or within two hundred and seventy (270) days after the acquisition, lease, repair, replacement, construction or improvement (as applicable) of the property subject to such Liens, (ii) such Liens do not at any time encumber any property (except for accessions, replacements or additions to such property) other than the property financed by such Indebtedness and the proceeds and the products thereof and customary security deposits and (iii) with respect to Capitalized Leases, such Liens do not at any time extend to or cover any assets (except for accessions, replacements or additions to such assets) other than the assets subject to such Capitalized Leases and the proceeds and products thereof and customary security deposits; provided that individual financings of equipment provided by one lender may be cross collateralized to other financings of equipment provided by such lender; and Liens securing any Permitted Refinancing of Indebtedness under SECTION 6.03(e) that do not extend to any property that was not subject to the Lien securing the Indebtedness being refinanced other than (A) after-acquired property that is affixed or incorporated into the property covered by such Lien and (B) proceeds and products thereof, and (ii) the renewal, extension or refinancing of the obligations secured or benefited by such Liens is permitted by SECTION 6.03 (to the extent constituting Indebtedness;
(j) leases, licenses, subleases or sublicenses granted to others in the ordinary course of business which do not (i) interfere in any material respect with the business of Holdings, the Lead Borrower or any Restricted Subsidiary (other than an Immaterial Subsidiary), taken as a whole, or (ii) secure any Indebtedness;
(k) Liens (i) in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business which payments are not overdue for a period of more than thirty (30) days and no other action has been taken to enforce such Lien or which are being contested in
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good faith and by appropriate actions diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP and such contest effectively suspends collection of the contested obligation and enforcement of any Lien securing such obligation and (ii) on specific items of inventory or other goods and proceeds thereof of any Person securing such Persons obligations in respect of bankers acceptances or letters of credit issued or created for the account of such person to facilitate the purchase, shipment or storage of such inventory or such other goods in the ordinary course of business; provided that no item of inventory subject to a Lien under this clause (k)(ii) (other than a Lien in favor of the Collateral Agent securing the Obligations and Liens in favor of Term Loan Agent and/or any agent or trustee with respect to the Term Loan Facility or any Permitted Refinancing thereof) shall be included in the FILO Borrowing Base or the Tranche A Borrowing Base;
(l) Liens (i) arising by operation of law under Article 4 of the UCC in connection with collection of items provided for therein, and (ii) in favor of a banking or other financial institution arising as a matter of law or under customary general terms and conditions encumbering deposits or other funds maintained with a financial institution (including the right of set-off) and which are within the general parameters customary in the banking industry or arising pursuant to such banking institutions general terms and conditions;
(m) Liens (i) on cash advances in favor of the seller of any property to be acquired in a Permitted Acquisition, an Investment permitted pursuant to SECTION 6.02(l) or, to the extent related to any of the foregoing, SECTION 6.02(v), in each case, to be applied against the purchase price for such Permitted Acquisition or Investment, and (ii) consisting of an agreement to dispose of any property in a Permitted Disposition, in each case, solely to the extent such Permitted Acquisition or Permitted Disposition, as the case may be, would have been permitted on the date of the creation of such Lien;
(n) Liens on property (i) of any Foreign Subsidiary that is not a Loan Party and (ii) that does not constitute Collateral, which Liens secure Indebtedness of the applicable Foreign Subsidiary permitted under SECTION 6.03;
(o) Liens in favor of the Lead Borrower or a Restricted Subsidiary securing Indebtedness permitted under SECTION 6.03(d);
(p) Liens (x) existing on property (other than ABL Priority Collateral unless the Liens thereon are subordinated to the Lien of the Collateral Agent in a manner consistent with the terms of the Intercreditor Agreement) at the time of its acquisition or existing on the property of any Person at the time such Person becomes a Restricted Subsidiary (other than by designation as a Restricted Subsidiary pursuant to SECTION 5.14), in each case after the Closing Date (other than Liens on the Capital Stock of any Person that becomes a Restricted Subsidiary) and (y) placed upon property or assets (other than ABL Priority Collateral unless the Liens thereon are subordinated to the Lien of the Collateral Agent in a manner consistent with the terms of the Intercreditor Agreement) of any Restricted Subsidiary or its Restricted Subsidiaries acquired pursuant to a Permitted Acquisition to secure Indebtedness incurred pursuant to SECTION 6.03(g) in connection with such Permitted Acquisition; provided that (i) in the case of clause (x), such Lien was not created in contemplation of such acquisition or such Person becoming a Restricted Subsidiary, (ii) in the case of clause (x), such Lien does not extend to or cover any
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other assets or property (other than the proceeds or products thereof and accessions or additions thereto and other than after-acquired property subjected to a Lien securing Indebtedness and other obligations incurred prior to such time and which Indebtedness and other obligations are permitted hereunder that require, pursuant to their terms at such time, a pledge of after-acquired property, it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition) and (iii) in the case of clauses (x) and (y), (1) the obligations secured thereby do not exceed $50,000,000 at any time outstanding and (2) the Indebtedness secured thereby is permitted under SECTION 6.03(g);
(q) any interest or title (and all encumbrances and other matters affecting such interest or title) of a licensor, sublicensor, lessor or sublessor under licenses and leases entered into by the Lead Borrower or any of its Restricted Subsidiaries in the ordinary course of business provided that no such lease or sublease shall constitute a Capitalized Lease;
(r) Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods entered into by the Lead Borrower or any of its Restricted Subsidiaries in the ordinary course of business permitted by this Agreement;
(s) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;
(t) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Lead Borrower or any Restricted Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Lead Borrower and its Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Lead Borrower or any Restricted Subsidiary in the ordinary course of business;
(u) Liens solely on any cash earnest money deposits made by the Lead Borrower or any of its Restricted Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder;
(v) Liens in respect of the Indebtedness incurred pursuant to SECTION 6.03(s) or any Permitted Refinancing thereof; provided that such Liens are at all times subject to the Intercreditor Agreement;
(w) Liens arising from precautionary UCC filings regarding true operating leases or the consignment of goods to a Loan Party;
(x) Liens placed on the Capital Stock of any joint venture entity in the form of a transfer restriction, purchase option, call or similar right of a third party joint venture partner;
(y) ground leases in respect of real property on which facilities owned or leased by the Lead Borrower or any of its Subsidiaries are located;
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(z) Liens existing on title insurance policies relating to any Mortgages;
(aa) Liens on insurance proceeds incurred in the ordinary course of business in connection with the financing of insurance premiums;
(bb) Liens on securities which are the subject of repurchase agreements incurred in the ordinary course of business, provided that such Liens do not extend to any assets other than those that are the subject of such repurchase agreement;
(cc) Liens arising by operation of law in the United States under Article 2 of the UCC in favor of a reclaiming seller of goods or buyer of goods;
(dd) Security given to a public or private utility or any Governmental Authority as required in the ordinary course of business;
(ee)(i) zoning, building, entitlement and other land use regulations by Governmental Authorities with which the normal operation of the business complies, and (ii) any zoning or similar law or right reserved to or vested in any Governmental Authority to control or regulate the use of any real property that does not materially interfere with the ordinary conduct of the business of the Lead Borrower and its Restricted Subsidiaries, taken as a whole;
(ff) [Reserved];
(gg) Undetermined or inchoate Liens which have not at such time been filed and of which none of the Loan Parties have been given notice and which relate to obligations not then due and payable; and
(hh) Without duplication of, or aggregation with, any other Lien permitted under any other clause of this SECTION 6.01, other Liens (not covering ABL Priority Collateral unless the Liens thereon are subordinated to the Lien of the Collateral Agent in a manner consistent with the terms of the Intercreditor Agreement) securing Indebtedness outstanding in an aggregate principal amount not to exceed $60,000,000 at any time outstanding.
The designation of a Lien as a Permitted Encumbrance shall not limit or restrict the ability of the Administrative Agent to establish any Reserve relating thereto.
SECTION 6.02 Investments.
The Lead Borrower shall not, nor shall it permit any Restricted Subsidiary to, make or hold any Investments, except the following (each a Permitted Investment):
(a) Investments by the Lead Borrower or a Restricted Subsidiary in assets that were Cash Equivalents when such Investment was made;
(b) loans or advances to officers, directors and employees of Holdings, the Lead Borrower and its Restricted Subsidiaries (i) for reasonable and customary business-related travel, entertainment, relocation and analogous ordinary business purposes, (ii) to the extent permitted by Applicable Law, in connection with such Persons purchase of Capital Stock of the
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Lead Borrower (or any direct or indirect parent of the Lead Borrower), provided that the amount of such loans and advances shall be contributed to the Lead Borrower in cash as common equity, or paid to the Lead Borrower in connection with such purchase of Capital Stock, and (iii) to the extent permitted by Applicable Law, for purposes not described in the foregoing clauses (i) and (ii), provided that the aggregate principal amount outstanding at any time pursuant to this SECTION 6.02(b) shall not exceed $18,000,000;
(c) Investments (i) by the Lead Borrower or any Restricted Subsidiary in any Loan Party (other than Holdings), (ii) by any Restricted Subsidiary that is not a Loan Party in any other such Restricted Subsidiary that is also not a Loan Party, and (iii) by the Lead Borrower or any Restricted Subsidiary (A) in any Foreign Subsidiary; provided that the outstanding aggregate amount of such Investments in Foreign Subsidiaries that are not Loan Parties shall not exceed $25,000,000 at any time (net of any return representing a return of capital in respect of any such Investment), (B) in any Foreign Subsidiary, constituting an exchange of Capital Stock of such Foreign Subsidiary for Indebtedness of such Foreign Subsidiary or (C) constituting Guarantees of Indebtedness or other monetary obligations of Foreign Subsidiaries owing to any Loan Party;
(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 and other credits to suppliers in the ordinary course of business;
(e) Investments consisting of Permitted Encumbrances, Permitted Indebtedness, fundamental changes, Permitted Dispositions, and Restricted Payments permitted under SECTION 6.01, SECTION 6.03 (other than SECTION 6.03(c) and (d)), SECTION 6.04 (other than SECTION 6.04(c), (d) and (g)), SECTION 6.05 (other than SECTION 6.05(d) and (e)), and SECTION 6.06 (other than SECTION 6.06(c)), respectively;
(f) Investments by the Lead Borrower and its Restricted Subsidiaries consisting of Permitted Acquisitions;
(g) Investments (i) existing or contemplated on the Closing Date and set forth on Schedule 6.02 and any modification, replacement, renewal, reinvestment or extension thereof and (ii) Investments existing on the Closing Date by the Lead Borrower or any Restricted Subsidiary in the Lead Borrower or any other Restricted Subsidiary and any modification, renewal or extension thereof; provided that the amount of the original Investment is not increased except by the terms of such Investment or as otherwise permitted by this SECTION 6.02;
(h) Investments in Swap Contracts permitted under SECTION 6.03;
(i) promissory notes and other noncash consideration received in connection with Permitted Dispositions;
(j) Investments in the ordinary course of business consisting of endorsements for collection or deposit and customary trade arrangements with customers consistent with past practices;
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(k) Investments (including debt obligations and Capital Stock) received in connection with the bankruptcy or reorganization of suppliers and customers or in settlement of delinquent obligations of, or other disputes with, customers and suppliers arising in the ordinary course of business or upon the foreclosure with respect to any secured Investment or other transfer of title with respect to any secured Investment;
(l) so long as immediately after giving effect to any such Investment, no Event of Default has occurred and is continuing and without duplication of any other clauses of this SECTION 6.02, other Investments that do not exceed $60,000,000 in the aggregate at any time outstanding (net of any return of capital, interest, distributions, income and similar amounts actually received in cash in respect of any such Investment) and valued at the time of the making thereof (provided that, such amount shall be increased by the Net Proceeds of Permitted Equity Issuances), and determined without regard to any write-downs or write-offs thereof;
(m) advances of payroll payments to employees in the ordinary course of business;
(n) Investments to the extent that payment for such Investments is made solely with Capital Stock of the Lead Borrower or any direct or indirect parent of the Lead Borrower not resulting in a Change in Control;
(o) Investments of a Restricted Subsidiary acquired after the Closing Date or of a Person merged into or amalgamated with the Lead Borrower or merged, amalgamated or consolidated with a Restricted Subsidiary in accordance with SECTION 6.04 after the Closing Date to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger, amalgamation, or consolidation and were in existence on the date of such acquisition, merger, amalgamation, or consolidation;
(p) Guarantees the Lead Borrower or any Restricted Subsidiary of leases (other than Capitalized Leases) or of other obligations that do not constitute Indebtedness, in each case entered into in the ordinary course of business;
(q) Guarantees constituting Permitted Indebtedness;
(r) Subject to SECTION 2.18, Investments in deposit accounts opened in the ordinary course of business;
(s) [Reserved];
(t) Capital Expenditures;
(u) Loans and advances to Holdings in lieu of, and not in excess of the amount of (after giving effect to any other loans, advances or Restricted Payments in respect thereof), Restricted Payments to the extent permitted to be made to Holdings in accordance with SECTION 6.06;
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(v) Without duplication of, or aggregation with, any Investment made under any other clause of this SECTION 6.02, the Lead Borrower and its Restricted Subsidiaries may make other Investments as long as the Payment Conditions are satisfied; and
(w) Investments made by any Restricted Subsidiary that is not a Loan Party to the extent such Investments are financed with the proceeds received by such Restricted Subsidiary from an Investment in such Restricted Subsidiary permitted pursuant to SECTION 6.02(c)(iii), SECTION 6.02(f) or SECTION 6.02(v);
provided that no Investment in an Unrestricted Subsidiary that would otherwise be permitted under this SECTION 6.02 shall be permitted hereunder (w) to the extent that any portion of such Investment is used to make any prepayments, redemptions, purchases, defeasances and other payments in respect of any Indebtedness of Holdings, the Lead Borrower or any of their Restricted Subsidiaries, (x) if immediately before or after such Investment, an Event of Default shall have occurred and be continuing, (y) if after giving effect to such Investment, the Payment Conditions shall not have been satisfied, or (z) if such Investment consists of a transfer of any property of the type (e.g., Inventory and Accounts) included in the Tranche A Borrowing Base or the FILO Borrowing Base.
SECTION 6.03 Indebtedness.
The Lead Borrower will not, nor will it permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any Indebtedness, except the following (each Permitted Indebtedness):
(a) Indebtedness of the Lead Borrower and any of its Subsidiaries under the Loan Documents;
(b) Indebtedness (i) outstanding on the Closing Date and listed on Schedule 6.03, and (ii) intercompany Indebtedness outstanding on the Closing Date;
(c) Guarantees by the Lead Borrower and its Restricted Subsidiaries in respect of Indebtedness of the Lead Borrower or any Restricted Subsidiary otherwise permitted hereunder; provided that (A) no Guarantee by any Restricted Subsidiary of the Senior Notes or the Term Loan Facility or any Junior Financing shall be permitted unless such Restricted Subsidiary shall have also provided a Guarantee of the Obligations substantially on the terms set forth in the Facility Guarantee executed on the Closing Date and (B) if the Indebtedness being Guaranteed is subordinated to the Obligations, such Guarantee shall be subordinated to the Facility Guarantee of the Obligations on terms at least as favorable to the Lenders as those contained in the subordination of such Indebtedness;
(d) Indebtedness of the Lead Borrower or any Restricted Subsidiary owing to the Lead Borrower or any other Restricted Subsidiary to the extent constituting an Investment permitted by SECTION 6.02; provided that, (i) all such Indebtedness of any Loan Party owed to any Person that is not, or ceases to be, a Loan Party shall be subject to the subordination terms set forth in Article VII of the Security Agreement pursuant to an express written agreement by such Person for the benefit of the Administrative Agent and Collateral Agent and (ii) in the event of any such Indebtedness in respect of the sale, transfer or assignment of ABL Priority Collateral, such Indebtedness shall be duly
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noted on the books and records of the Loan Parties as being owing in respect of ABL Priority Collateral;
(e) So long as the Payment Conditions are satisfied after giving effect thereto, Attributable Indebtedness and other Indebtedness (including Capitalized Leases) of the Lead Borrower and its Restricted Subsidiaries financing the acquisition, lease, construction, repair, replacement or improvement of fixed or capital assets, other than software; provided that (i) such Indebtedness is incurred concurrently with or within two hundred and seventy (270) days after the applicable acquisition, construction, repair, lease, replacement or improvement, and (ii) if reasonably requested by the Administrative Agent, the Loan Parties will use commercially reasonable efforts to cause the holder of such Indebtedness to enter into a Collateral Access Agreement with the Collateral Agent on terms reasonably satisfactory to the Collateral Agent; provided further that notwithstanding the foregoing, the Lead Borrower and its Restricted Subsidiaries may incur Attributable Indebtedness and other Indebtedness of the type described in this clause (e), in an aggregate amount not to exceed $25,000,000 at any time outstanding, without satisfaction of the Payment Conditions.
(f) Indebtedness in respect of Swap Contracts designed to hedge against interest rates, foreign exchange rates or commodities pricing risks incurred in the ordinary course of business and not for speculative purposes;
(g) (i) Indebtedness of the Lead Borrower or any of its Restricted Subsidiaries (A) assumed in connection with any Permitted Acquisition; provided that such Indebtedness is not incurred in contemplation of such Permitted Acquisition, or (B) incurred to finance a Permitted Acquisition and (ii) any Permitted Refinancing of the foregoing; provided, in each case that such Indebtedness and all Indebtedness resulting from any Permitted Refinancing thereof (v) is unsecured (except for (A) Liens permitted under SECTION 6.01(p) securing Indebtedness (together with Permitted Refinancings thereof) in an aggregate principal outstanding not to exceed $50,000,000 and (B) Liens permitted under SECTION 6.01(hh)) or is subordinated to the Obligations on terms reasonably acceptable to the Administrative Agent, (w) both immediately prior and after giving effect thereto, no Event of Default shall exist or result therefrom (other than with respect to a Permitted Acquisition made pursuant to a legally binding commitment entered into at a time when no Event of Default existed or would result therefrom), (x) matures after, and does not require any scheduled amortization or other scheduled payments of principal prior to, the then Latest Maturity Date (it being understood that such Indebtedness may have mandatory prepayment, repurchase or redemptions provisions satisfying the requirement of clause (y) hereof) and (y) has terms and conditions (other than interest rate, redemption premiums, and optional prepayment and optional redemption terms), taken as a whole, that are reasonably acceptable to the Administrative Agent provided that a certificate of a Responsible Officer shall be delivered to the Administrative Agent at least five Business Days prior to the incurrence of such Indebtedness (or within such shorter period as the Administrative Agent shall agree in writing, in its sole discretion), together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that the Lead Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirement and such certificate shall be conclusive evidence that such terms and conditions satisfy the foregoing requirement unless the Administrative Agent notifies the Lead Borrower within such five Business Day period that it disagrees with such determination (including a reasonable description of the basis upon which it disagrees);
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(h) Indebtedness representing deferred compensation, severance, and health and welfare retirement benefits to current and former employees of Holdings, the Lead Borrower and its Restricted Subsidiaries incurred in the ordinary course of business or existing on the Closing Date;
(i) Indebtedness consisting of promissory notes issued by any Loan Party to current or former officers, directors , employees and consultants, their respective estates, spouses or former spouses to finance the purchase or redemption of Capital Stock of Holdings or the Lead Borrower or any direct or indirect parent of Holdings or the Lead Borrower permitted by SECTION 6.06;
(j) Indebtedness incurred by the Lead Borrower or its Restricted Subsidiaries in connection with any Permitted Acquisition, Investment or disposition expressly permitted hereunder constituting indemnification obligations or obligations in respect of purchase price (including earnouts) or other similar adjustments, provided that in the case of a disposition, the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including non-cash proceeds (the fair market value of such non-cash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by the Lead Borrower and its Restricted Subsidiaries in connection with such Acquisition or Investment;
(k) Indebtedness consisting of obligations of the Lead Borrower or its Restricted Subsidiaries under deferred compensation or other similar arrangements incurred by such Person in connection with the Transaction and Permitted Acquisitions or any other Investment expressly permitted hereunder;
(l) Obligations with respect to Cash Management Services and other Indebtedness in respect of netting services, overdraft protections and similar arrangements in each case in connection with deposit accounts;
(m) Without duplication of, or accumulation with, any other clauses of this SECTION 6.03, Indebtedness in an aggregate principal amount not to exceed $90,000,000 at any time outstanding;
(n) As long as the Payment Conditions are satisfied after giving effect thereto, Subordinated Indebtedness and other unsecured non-amortizing long term Indebtedness;
(o) Indebtedness consisting of (a) the financing of insurance premiums or (b) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business;
(p) [Reserved];
(q) obligations in respect of performance, bid, appeal and surety bonds and performance and completion guarantees and similar obligations provided by the Lead Borrower or any of its Restricted Subsidiaries or obligations in respect of letters of credit, bank guarantees or similar instruments related thereto, in each case in the ordinary course of business or consistent with past practice;
(r) Indebtedness supported by a Letter of Credit, in a principal amount not to exceed the face amount of such Letter of Credit;
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(s) Indebtedness in respect of the Term Loan Facility in an aggregate principal amount at any time outstanding not to exceed the sum of (x) $820,000,000 plus (y) $200,000,000 minus (z) the aggregate principal amount of Commitment Increases made hereunder in accordance with SECTION 2.02 (whether or not outstanding);
(t) Indebtedness in respect of the Senior Notes in an aggregate principal amount not to exceed $400,000,000 at any time outstanding;
(u) Indebtedness incurred in connection with sale-leaseback transactions permitted hereunder;
(v) Unsecured Indebtedness owed to the Sponsor and/or other stockholders of Holdings, the Lead Borrower and their respective Affiliates, provided that such Indebtedness does not require the payment in cash of interest at a rate in excess of ten percent (10%) per annum or principal prior to the then Latest Maturity Date, has a maturity which extends beyond the then Latest Maturity Date, and is subordinated to the Obligations on terms reasonably acceptable to the Administrative Agent;
(w) Guarantees and letters of credit and surety bonds (other than Guarantees of, or letters of credit and surety bonds related to, Indebtedness) issued by the Lead Borrower and its Restricted Subsidiaries in connection with Permitted Acquisitions and Permitted Dispositions;
(x) Without duplications of any other Indebtedness, non-cash accruals of interest, accretion or amortization of original issue discount and payment-in-kind interest with respect to Indebtedness permitted hereunder;
(y) Indebtedness due to any landlord in connection with the financing by such landlord of leasehold improvements;
(z) All premiums (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (a) through (y) above;
(aa) Indebtedness of Restricted Subsidiaries that are not Loan Parties, in an aggregate principal amount at any time outstanding not to exceed $40,000,000; and
(bb) Extensions, renewals and replacements of any such Indebtedness described in clauses (b), (c), (d), (e), (f), (g), (m), (n), (s), (t), (u), (v), (w), (x) and (aa) above provided that such Indebtedness constitutes a Permitted Refinancing.
For purposes of calculating compliance with this SECTION 6.03 only, the amount of Indebtedness of a Person which is non-recourse to such Person shall be deemed to be equal to the lesser of (i) the aggregate unpaid amount of such Indebtedness, or (ii) the fair market value of the property upon which a Lien has been granted to secure such Indebtedness.
SECTION 6.04 Fundamental Changes.
The Lead Borrower shall not, nor shall it permit any Restricted Subsidiary to, merge, amalgamate, dissolve, liquidate, wind up, consolidate with or into another Person, or dispose of
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(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 may merge or amalgamate with (i) any Borrower (including a merger or amalgamation, the purpose of which is to reorganize such Borrower into a new jurisdiction); provided that such Borrower shall be the continuing or surviving Person and no Event of Default shall have occurred or resulted therefrom, or (ii) any one or more other Restricted Subsidiaries; provided that when any Restricted Subsidiary that is a Loan Party is merging or amalgamating with another Restricted Subsidiary, a Loan Party shall be the continuing or surviving Person except to the extent otherwise constituting an Investment permitted by SECTION 6.02 (other than SECTION 6.02 (e));
(b) (i) any Subsidiary that is not a Loan Party may merge, amalgamate or consolidate with or into any other Subsidiary that is not a Loan Party, (ii) any Loan Party may merge, amalgamate or consolidate with any other Loan Party, provided that if a Borrower is a party thereto, a Borrower shall be the continuing or surviving Person, and (iii) any Subsidiary may liquidate or dissolve or change its legal form if the Lead Borrower determines in good faith that such action is in the best interests of the Lead Borrower and its Subsidiaries and if not materially disadvantageous to the Lenders; provided that with respect to this clause (b)(iii), a certificate of a Responsible Officer shall be delivered to the Administrative Agent at least five (5) Business Days (or within such shorter period as the Administrative Agent shall agree in writing, in its sole discretion) prior to the liquidation, dissolution or change of legal form, together with a reasonably detailed description of the material terms and conditions thereof, stating that the Lead Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirement;
(c) any Restricted Subsidiary may dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Lead Borrower or to another Restricted Subsidiary; provided that if the transferor in such a transaction is a Loan Party, then (i) the transferee must be another Loan Party, or (ii) to the extent constituting an Investment, such Investment must be a Permitted Investment in or Indebtedness of a Restricted Subsidiary which is not a Loan Party in accordance with SECTION 6.02 and SECTION 6.03, respectively;
(d) so long as no Event of Default exists or would result therefrom, any Restricted Subsidiary may merge or amalgamate with any other Person in order to effect a Permitted Investment; provided that the continuing or surviving Person shall be a Restricted Subsidiary, which together with each of its Restricted Subsidiaries, shall have complied with the requirements of SECTION 5.11;
(e) so long as no Event of Default exists or would result therefrom, the Lead Borrower and its Restricted Subsidiaries may consummate a merger, amalgamation, dissolution, winding up, liquidation, consolidation or Disposition, the purpose of which is to effect a Permitted Disposition;
(f) Loan Parties and the Restricted Subsidiaries may consummate the Merger, related transactions contemplated by the Merger Agreement (and documents related thereto) and the Transactions and
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(g) so long as no Event of Default exists or would result therefrom, the Lead Borrower may merge with any other Person; provided that (i) the Lead Borrower shall be the continuing or surviving corporation or (ii) if the Person formed by or surviving any such merger or consolidation is not the Lead Borrower (any such Person, the Successor Lead Borrower), (A) the Successor Lead Borrower shall be an entity organized or existing under the Laws of the United States, any state thereof or the District of Columbia and such transaction shall not have an adverse effect on the attachment, perfection or priority of the Liens granted under the Security Documents, (B) the Successor Lead Borrower shall expressly assume all the obligations of the Lead Borrower under this Agreement and the other Loan Documents to which the Lead Borrower is a party pursuant to a supplement hereto or thereto in form and substance reasonably satisfactory to the Administrative Agent, (C) each other Borrower and Facility Guarantor, unless it is the other party to such merger or consolidation, shall have confirmed that its Guarantee shall apply to the Successor Lead Borrowers obligations under the Loan Documents, (D) each other Borrower and Facility Guarantor, unless it is the other party to such merger or consolidation, shall have by a supplement to the Security Agreement and other applicable Security Documents confirmed that its obligations thereunder shall apply to the Successor Lead Borrowers obligations under the Loan Documents, (E) if requested by the Collateral Agent, each mortgagor of a mortgaged property, unless it is the other party to such merger or consolidation, shall have by an amendment to or restatement of the applicable mortgage (or other instrument reasonably satisfactory to the Collateral Agent) confirmed that its obligations thereunder shall apply to the Successor Lead Borrowers obligations under the Loan Documents, (F) the Administrative Agent shall have received such financial information, collateral appraisals and examinations, projections (including Availability projections) and other information (all at the cost and expense of the Lead Borrower) as the Administrative may reasonably request in connection with such transaction, (G) the Administrative Agent, in good faith in the exercise of its Permitted Discretion, shall have approved such transaction and (H) the Lead Borrower shall have delivered to the Administrative Agent (x) an officers certificate and an opinion of counsel, each stating that such merger or consolidation and such supplement to this Agreement or any Security Document comply with this Agreement and (y) an updated Borrowing Base Certificate dated as of the date of such merger (after giving effect thereto); provided, further, that if the foregoing are satisfied, the Successor Lead Borrower will succeed to, and be substituted for, the Lead Borrower under this Agreement; and provided further that the Lead Borrower agrees to use commercially reasonable efforts to provide any documentation and other information about the Successor Lead Borrower as shall have been reasonably requested in writing by any Lender through the Administrative Agent that such Lender shall have reasonably determined is required by regulatory authorities under applicable know your customer and anti-money laundering rules and regulations, including without limitation the USA Patriot Act.
SECTION 6.05 Dispositions.
The Lead Borrower shall not, nor shall it permit any Restricted Subsidiary to, make any Disposition, except the following (each, a Permitted Disposition):
(a) Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business and dispositions of property no longer used or useful in the conduct of the business of the Lead Borrower and its Restricted Subsidiaries
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including, without limitation, the abandonment of or failure to maintain Intellectual Property and with respect to closed Stores;
(b) Dispositions of Inventory in the ordinary course of business;
(c) Dispositions of property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such disposition are promptly applied to the purchase price of such replacement property;
(d) Dispositions of property to the Lead Borrower or to a Restricted Subsidiary; provided that if the transferor of such property is a Loan Party (i) the transferee thereof must either be a Borrower or a Subsidiary Facility Guarantor, in which event the Collateral Agent shall retain its perfected Lien on the property so disposed of, subject to the same priority as existed prior to such disposition, or (ii) to the extent such transaction constitutes an Investment, such transaction is a Permitted Investment, provided further that (A) if the property being disposed of is transferred to a Subsidiary that is not a Loan Party, the Administrative Agent may require, in the exercise of its reasonable business judgment, that the transferee execute an agreement granting the Agents access to such property for purposes of conducting a Liquidation, and (B) if the property being disposed of constitutes Eligible Credit Card Receivables, Eligible Trade Receivables, Eligible Inventory, Eligible In-Transit Inventory, or Eligible Letters of Credit and is being transferred to a Subsidiary which is not a Borrower or a Subsidiary Facility Guarantor, such disposition shall be made only if the Payment Conditions are satisfied after giving effect thereto;
(e) Dispositions permitted by SECTION 6.02(other than SECTION 6.02(e)), SECTION 6.04 (other than SECTION 6.04(e)) and SECTION 6.06 (other than SECTION 6.06(c))and Permitted Encumbrances;
(f) Dispositions of Cash Equivalents;
(g) sales, discounting or forgiveness of Accounts in the ordinary course of business or in connection with the collection or compromise thereof;
(h) leases, subleases, licenses or sublicenses (including the provision of Software under an open source license), in each case in the ordinary course of business and which (i) do not materially interfere with the business of the Lead Borrower and its Restricted Subsidiaries, or (ii) relate to closed Stores;
(i) termination of Leases in the ordinary course of business;
(j) transfers of property subject to Casualty Events upon receipt (where practical) of the Net Proceeds of such Casualty Event;
(k) licenses for the conduct of licensed departments within the Loan Parties Stores in the ordinary course of business;
(l) as long as no Specified Default hereof then exists or would arise therefrom, and no Overadvance would result therefrom, bulk sales or other dispositions of the Loan
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Parties Inventory not in the ordinary course of business in connection with Store closings, at arms length, provided that (i) such Store closures and related Inventory dispositions shall not exceed, in any Fiscal Year of the Lead Borrower and its Subsidiaries, ten percent (10%) of the number of the Loan Parties Stores as of the beginning of such Fiscal Year (net of Store relocations (i) occurring substantially contemporaneously, but in no event later than ten (10) Business Days after the related Store closure date, or (ii) wherein a binding lease has been entered into prior to the related Store closure date) as set forth in the Compliance Certificate delivered pursuant to SECTION 5.02(b), and (ii) as of any date after the Closing Date, the aggregate number of such Store closures since the Closing Date shall not exceed twenty-five percent (25%) of the greater of (x) the number of the Loan Parties Stores in existence as of the Closing Date or (y) the number of the Loan Parties Stores as of the first day of any Fiscal Year beginning after the Closing Date (net of Store relocations (i) occurring substantially contemporaneously, but in no event later than ten (10) Business Days after the related Store closure date or (ii) wherein a binding lease has been entered into prior to the related Store closure date) as set forth in the Compliance Certificate delivered pursuant to SECTION 5.02(b), provided that all sales of Inventory in connection with Store closings in a transaction or series of related transactions shall be in accordance with liquidation agreements and with professional liquidators reasonably acceptable to the Administrative Agent; provided further that all Net Proceeds received in connection therewith are applied to the Obligations, if then required in accordance with SECTION 2.17, SECTION 2.18 or SECTION 7.04 hereof;
(m) sales of non-core assets acquired in connection with a Permitted Acquisition and sales of Real Estate acquired in a Permitted Acquisition which, within thirty days of the date of the Acquisition (or such longer period as the Administrative Agent shall agree in writing, in its sole discretion), are designated in writing to the Administrative Agent as being held for sale and not for the continued operation of a Store;
(n) exchanges or swaps, including, without limitation, transactions covered by Section 1031 of the Code, of Leases and other Real Estate of the Loan Parties so long as the exchange or swap is made for fair value and on an arms length basis, provided that upon the consummation of such exchange or swap, (x) the Collateral Agent has a perfected Lien having the same priority as any Lien held on the Leases or Real Estate so exchanged or swapped and (y) the Net Proceeds, if any, received in connection with any such exchange or swap are applied to the Obligations if then required in accordance with SECTION 2.17, SECTION 2.18 or SECTION 7.04 hereof;
(o) sale-leaseback transactions of Real Estate of any Loan Party as long as (A) no Specified Default then exists or would arise therefrom, and (B) with respect to any distribution center, warehouse, manufacturing facility or corporate offices, (1) such sale-leaseback is made pursuant to leases on market terms, and (2) the Loan Parties cause each purchaser of such Real Estate to enter into a Collateral Access Agreement with the Collateral Agent on terms reasonably satisfactory to the Collateral Agent; provided that the Loan Parties need not enter into such Collateral Access Agreements to the extent that the aggregate fair market value of the Real Estate disposed of pursuant to this SECTION 6.05(o) and with respect to which no Collateral Access Agreements have been executed does not exceed $40,000,000 (but the foregoing shall not impair the right of the Administrative Agent to impose an Availability Reserve);
(p) Dispositions listed on Schedule 6.05;
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(q) Dispositions of Investments in joint ventures to the extent required by, or made pursuant to customary buy/sell arrangements between, the joint venture parties set forth in joint venture arrangements and similar binding arrangements; and
(r) Dispositions of property (other than ABL Priority Collateral) not otherwise permitted under this SECTION 6.05, provided that (i) at the time of such Disposition (other than any such Disposition made pursuant to a legally binding commitment entered into at any time when no Event of Default exists), no Event of Default shall exist or would result from such Disposition, (ii) the aggregate book value of all property disposed of pursuant to this clause (r) and clause (s) below shall not exceed $250,000,000 in the aggregate after the Closing Date and (iii) in the event of a Disposition of Intellectual Property used or useful in connection with the ABL Priority Collateral, the purchaser, assignee or other transferee thereof agrees in writing to be bound by a non-exclusive royalty-free worldwide license of such Intellectual Property in favor of the Collateral Agent for use in connection with the exercise of the rights and remedies of the Secured Parties, which license shall be in form and substance reasonably satisfactory to the Collateral Agent, and provided further, that in the case of a Disposition of Intellectual Property licensed by the Lead Borrower or one of its Restricted Subsidiaries from a third party, the transferee thereof shall be required to provide such a license only to the extent to which the applicable license gives it a right to do so
(s) so long as no Event of Default exists or would arise as a result of the transaction, sales of a Subsidiary or any business segment which is a Non-Core Business Segment, or any portion thereof, (i) to any Person other than a Loan Party or a Subsidiary or a Sponsor, for fair market value and so long as the consideration received for such sale or transfer is at least 85% cash, or (ii) to a Subsidiary or Sponsor, if the Pro Forma Availability Condition is satisfied, such sale or transfer is for fair market value and the entire consideration received for such sale or transfer is paid in cash, provided that, in each case, such sale shall be in an amount at least equal to the greater of the amounts advanced or available to be advanced against the assets included in the sale under the Borrowing Base, and further provided that (A) all Net Proceeds, if any, received in connection with any such sales are applied to the Obligations if then required in accordance with SECTION 2.17 or SECTION 2.18 hereof and (B) the aggregate book value of all property disposed of pursuant to this clause (s) and clause (r) above shall not exceed $250,000,000 in the aggregate after the Closing Date;
provided that any disposition of any property pursuant to this SECTION 6.05 (except for Dispositions pursuant to SECTION 6.05(e), SECTION 6.05(j) and SECTION 6.05(q) and Dispositions from a Loan Party to another Loan Party), shall be for no less than the fair market value of such property at the time of such disposition and, (1) in the case of Accounts and Inventory owned by a Loan Party solely for cash consideration, and (2) in the case of a Disposition of any other assets pursuant to SECTION 6.05(r) for a purchase price in excess of $5,000,000, at least seventy-five percent (75%) of the consideration is payable in cash or Cash Equivalents at the time of consummation of the transaction; provided, however, that for the purposes of this clause (2), the following shall be deemed to be cash: (A) any liabilities (as shown on the Lead Borrowers most recent balance sheet provided hereunder or in the footnotes thereto) of the Lead Borrower or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the payment in cash of the Obligations, that are assumed by the transferee with respect to the applicable Disposition and for which the Lead Borrower and all of
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its Restricted Subsidiaries shall have been validly released by all applicable creditors in writing, (B) any securities received by the Lead Borrower or the applicable Restricted Subsidiary from such transferee that are converted by the Lead Borrower or such Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents received) within 180 days following the closing of the applicable Disposition, and (C) aggregate non-cash consideration received by the Led Borrower or the applicable Restricted Subsidiary having an aggregate fair market value (determined as of the closing of the applicable Disposition for which such non-cash consideration is received) not to exceed $10,000,000 at any time (net of any non-cash consideration converted into cash and Cash Equivalents). To the extent any Collateral is disposed of as expressly permitted by this SECTION 6.05 to any Person other than the Lead Borrower or any Restricted Subsidiary, such Collateral shall be sold free and clear of the Liens created by the Loan Documents, and, if requested by the Lead Borrower, upon the certification delivered to the Administrative Agent or the Collateral by the Lead Borrower that such Disposition is permitted by this Agreement, the Agents shall be authorized to take any actions deemed appropriate in order to effect the foregoing.
SECTION 6.06 Restricted Payments.
The Lead Borrower shall not, nor shall it permit any Restricted Subsidiary to declare or make, directly or indirectly, any Restricted Payment, except:
(a) each Restricted Subsidiary may make Restricted Payments to the Lead Borrower and to other Restricted Subsidiaries (and, in the case of a Restricted Payment by a non-wholly owned Restricted Subsidiary, to the Lead Borrower and any other Restricted Subsidiary and to each other owner of Capital Stock of such Restricted Subsidiary based on their relative ownership interests of the relevant class of Capital Stock);
(b) the Lead Borrower and each Restricted Subsidiary may declare and make dividend payments or other distributions payable solely in the Capital Stock (other than Disqualified Capital Stock not otherwise permitted by SECTION 6.03) of such Person;
(c) to the extent constituting Restricted Payments, the Lead Borrower and its Restricted Subsidiaries may enter into and consummate transactions expressly permitted by any provision of SECTION 6.02 (other than SECTION 6.02(e)), SECTION 6.04 or SECTION 6.08 (other than SECTION 6.08(h) and (k));
(d) the Lead Borrower or any Restricted Subsidiary may repurchase (or may make Restricted Payments to allow Holdings or any direct or indirect parent thereof to repurchase) Capital Stock in Holdings or any direct or indirect parent thereof, the Lead Borrower or any Restricted Subsidiary deemed to occur upon the exercise of stock options or warrants if such Capital Stock represents a portion of the exercise price of such options or warrants;
(e) the Lead Borrower or any Restricted Subsidiary may pay (or make Restricted Payments to allow Holdings or any direct or indirect parent thereof to pay) for the repurchase, retirement, or other acquisition of Capital Stock of Holdings or any of its direct or indirect parent companies held by any former or present officer, director, employee or consultant of Holdings, the Lead Borrower or any of its Restricted Subsidiaries or any of its direct or indirect
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parent companies, or any of their respective estates, spouses or former spouses pursuant to any management, director or employee equity plan or stock option plan or any other management, director or employee benefit plan or agreement (including, for the avoidance of doubt, any principal and interest payable on any notes issued by Holdings or the Lead Borrower or any direct or indirect parent company in connection with such repurchase, retirement or other acquisition); provided that amounts payable under this clause (e) do not exceed $10,000,000 in any fiscal year commencing with the fiscal year beginning January 30, 2011 (or $2,000,000 for the period from the Closing Date through January 29, 2011) (which shall increase to $20,000,000 subsequent to the consummation of an underwritten Qualifying IPO by Holdings, the Lead Borrower or any direct or indirect parent company of Holdings), with unused amounts in any calendar year being carried over to succeeding fiscal years, subject to a maximum (without giving effect to the following proviso) of $20,000,000 in any fiscal year unless the Pro Forma Availability Condition shall have been satisfied after giving effect to such Restricted Payment, in which case the maximum amount shall be $40,000,000 in any fiscal year after the consummation of an underwritten Qualifying IPO by Holdings, the Lead Borrower or any direct or indirect parent company of Holdings; provided further that such amount in any fiscal year may be increased by an amount not to exceed the Net Proceeds of Permitted Equity Issuances (other than Disqualified Capital Stock) after the Closing Date to the extent that such Net Proceeds shall have been actually received by the Lead Borrower, in each case to members of management, directors or consultants of Holdings or of its Restricted Subsidiaries or any direct or indirect parent company of Holdings that occurs after the Closing Date, plus, in respect of any sale of Capital Stock in connection with an exercise of stock options, an amount equal to the amount required to be withheld by Holdings, the Lead Borrower or any of its direct or indirect parent companies in connection with such exercise under applicable law to the extent such amount is repaid to Holdings or any of its direct or indirect parent companies, less (B) the amount of any Restricted Payments previously made with the cash proceeds described in clauses (A) of this clause (e);
(f) the Lead Borrower may make cash payments (or may make Restricted Payments to permit Holdings or any direct or indirect parent thereof to make cash payments) in lieu of the issuance of fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Capital Stock of Holdings (or any direct or indirect parent thereof), the Lead Borrower or any Restricted Subsidiary; provided, however, that any such cash payment shall not be for the purpose of evading the limitations of this Agreement;
(g) the Lead Borrower and its Restricted Subsidiaries may make Restricted Payments with the Net Proceeds of Permitted Equity Issuances;
(h) the Lead Borrower and its Restricted Subsidiaries may distribute, by dividend or otherwise, shares of Capital Stock of, or Indebtedness owed to Holdings, the Lead Borrower or a Restricted Subsidiary by, Unrestricted Subsidiaries (other than any Unrestricted Subsidiary whose primary assets are Cash Equivalents);
(i) The Lead Borrower may declare and pay dividends or distributions to, or make loans to, Holdings in amounts required for Holdings or any direct or indirect parent of Holdings to pay, in each case without duplication,
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(i) franchise taxes and other fees, Taxes and expenses required to maintain Holdings (or such parents) corporate existence;
(ii) for any taxable period in which the Lead Borrower and/or any of its Subsidiaries is a member of a consolidated, combined or similar income tax group of which a direct or indirect parent of the Lead Borrower is the common parent (a Tax Group), to pay federal, foreign, state and local income taxes of such Tax Group that are attributable to the taxable income of the Lead Borrower and/or its Subsidiaries; provided that, for each taxable period, the amount of such payments made in respect of such taxable period in the aggregate shall not exceed the amount that the Lead Borrower and its Subsidiaries would have been required to pay in respect of federal, foreign, state and local income taxes in the aggregate if such entities were corporations paying taxes separately from any Tax Group at the highest combined applicable federal, foreign, state and local tax rate for such fiscal year (it being understood and agreed that if the Lead Borrower or any Subsidiary pays any such federal, foreign, state or local income taxes directly to such taxing authority, that a Restricted Payment in duplication of such amount shall not be permitted to be made pursuant to this clause (ii)); provided further that the permitted payment pursuant to this clause (ii) with respect to any taxes of any Unrestricted Subsidiary for any taxable period shall be limited to the amount actually paid with respect to such period by such Unrestricted Subsidiary to the Lead Borrower or its Restricted Subsidiaries for the purposes of paying such consolidated, combined or similar taxes;
(iii) as long as no Event of Default then exists or would arise therefrom (or if such Event of Default exists or would so arise, with the written consent of the Administrative Agent or without such consent, by using the amounts in the Designated Account), for any Permitted Acquisition that would be permitted to be made pursuant to SECTION 6.02, assuming such recipient were subject to such section;
(iv) (A) its operating expenses incurred in the ordinary course of business and other corporate overhead costs and expenses (including administrative, legal, accounting and similar expenses provided by third parties), which are reasonable and customary and incurred in the ordinary course of business and attributable to the ownership or operations of the Lead Borrower and its Restricted Subsidiaries and (B) Transaction Expenses and any reasonable and customary indemnification claims made by directors or officers of such parent attributable to the ownership or operations of the Lead Borrower and its Restricted Subsidiaries;
(v) customary salary, bonus and other benefits payable to officers and employees of Holdings or any direct or indirect parent company of Holdings to the extent such salaries, bonuses and other benefits are attributable to the ownership or operation of the Lead Borrower and its Restricted Subsidiaries; and
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(vi) as long as no Event of Default then exists or would arise therefrom (or if such Event of Default exists or would so arise, with the written consent of the Administrative Agent or without such consent, by using the amounts in the Designated Account), reasonable and customary fees and expenses (other than to Affiliates) related to any unsuccessful equity or debt offering by Holdings (or any direct or indirect parent thereof) not prohibited by this Agreement that is directly attributable to the operations of the Lead Borrower and its Restricted Subsidiaries.
(j) the Lead Borrower or any of its Restricted Subsidiaries may make payments in respect of withholding or similar Taxes payable by any future, present or former employee, director, manager or consultant;
(k) without duplication of, or aggregation with, any Restricted Payments permitted under any other clause of this SECTION 6.06, (i) the Lead Borrower and its Restricted Subsidiaries may make other Restricted Payments to the holders of their respective Capital Stock as long as the Payment Conditions are satisfied and (ii) as long as the Pro Forma Availability Condition is satisfied and no Event of Default then exists or would arise therefrom, the Lead Borrower and its Restricted Subsidiaries may make other Restricted Payments to the holders of their respective Capital Stock, in the case of this clause (ii), in an aggregate amount, when added to the aggregate amount of voluntary prepayments, purchases, exchanges or redemptions of Indebtedness made pursuant to SECTION 6.11(g), not to exceed $40,000,000 over the term of this Agreement;
(l) the Lead Borrower or any of its Restricted Subsidiaries may make Restricted Payments made on the Closing Date to consummate the Transactions; and
(m) after a Qualifying IPO, so long as no Event of Default shall have occurred and be continuing or would result therefrom the Lead Borrower or any of its Restricted Subsidiaries may make any Restricted Payment to pay listing fees and other costs and expenses directly attributable to being a publicly traded company which are reasonable and customary.
SECTION 6.07 Change in Nature of Business.
(a) The Lead Borrower shall not, nor shall it permit any Restricted Subsidiary to, engage in any material line of business substantially different from those lines of business conducted by the Lead Borrower and its Restricted Subsidiaries on the date hereof or any business reasonably related or ancillary thereto or a reasonable extension thereof.
(b) Holdings shall not conduct, transact or otherwise engage in any business or operations other than those incidental to (i) its ownership of the Capital Stock of the Lead Borrower, (ii) the maintenance of its legal existence, (iii) the performance of the Loan Documents and the Term Loan Facility and other Indebtedness incurred by it, (iv) any public offering of its common stock or any other issuance of its Capital Stock not prohibited by this Article VI, (v) any transaction that Holdings is permitted to enter into or consummate under this Article VI, (vi) financing activities, including the issuance of securities, incurrence of debt, payment of dividends, making contributions to the capital of the Lead Borrower and guaranteeing the obligations of the Lead Borrower, (vii) participating in tax, accounting and other administrative matters as a member of the consolidated
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group of Holdings and the Lead Borrower, (viii) holding any cash or property (but not operate any property) and (ix) providing indemnification to officers and directors. Furthermore, notwithstanding anything to the contrary herein contained, Holdings shall not (i) own any material assets other than the Capital Stock of the Lead Borrower or (ii) grant any Liens in any of its assets (other than Liens granted to Collateral Agent, for the benefit of the Secured Parties, under the Loan Documents or to secure obligations under the Term Loan Facility or any Permitted Refinancing thereof).
SECTION 6.08 Transactions with Affiliates.
The Lead Borrower shall not, nor shall it permit any Restricted Subsidiary to, enter into any transaction of any kind with any Affiliate of the Lead Borrower, whether or not in the ordinary course of business, other than (a) transactions among the Loan Parties or any Restricted Subsidiary or a Person that becomes a Restricted Subsidiary as a result of such transaction, (b) on terms substantially as favorable to the Lead Borrower or such Restricted Subsidiary as would be obtainable by the Lead Borrower or such Restricted Subsidiary at the time in a comparable arms-length transaction with a Person other than an Affiliate, (c) payments due pursuant to the Sponsor Management Agreement on account of management, monitoring, consulting, and transaction and advisory fees (including termination fees), provided that such payments may not be made if a Specified Default has occurred and is continuing or would arise therefrom, provided further that such fees not paid may accrue and be payable on or after the date when the applicable Specified Default has been cured or waived and no additional Specified Default has occurred and is continuing or would arise as a result of such payment, (d) payments of indemnities and expense reimbursements under the Sponsor Management Agreements as in effect on the Closing Date, (e) equity issuances, repurchases, retirements or other acquisitions or retirements of Capital Stock of the Lead Borrower permitted under SECTION 6.06, (f) loans and other transactions by the Lead Borrower and its Restricted Subsidiaries to the extent permitted under this Article VI, (g) employment and severance arrangements between the Lead Borrower and its Restricted Subsidiaries and their respective officers and employees and transactions pursuant to stock option plans and employee benefit plans and similar arrangements in the ordinary course of business, (h) payments by the Restricted Subsidiaries pursuant to the tax sharing agreements among the Lead Borrower and its Restricted Subsidiaries on customary terms to the extent attributable to the ownership or operation of Holdings, the Lead Borrower and its Restricted Subsidiaries, (i) the payment of customary fees, compensation, and reasonable out of pocket costs to, and indemnities provided on behalf of, directors, officers and employees of Holdings, the Lead Borrower and its Restricted Subsidiaries in the ordinary course of business to the extent attributable to the ownership or operation of the Lead Borrower and its Restricted Subsidiaries, (j) transactions pursuant to permitted agreements in existence on the Closing Date and set forth on Schedule 6.08 or any amendment thereto to the extent such an amendment is not adverse to the Lenders in any material respect, (k) dividends, redemptions and repurchases permitted under SECTION 6.06, (l) the Transactions and the payment of fees and expenses (including Transaction Expenses) as part of or in connection with the Transactions, (m) any payments required to be made pursuant to the Merger Agreement, (n) so long as no Specified Default has occurred and is continuing or would result therefrom, customary payments by the Lead 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 the majority of the members of the board of directors or a majority of the
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disinterested members of the board of directors of the Lead Borrower, in good faith and (o) the payment of reasonable out-of-pocket costs and expenses relating to registration rights and indemnities provided to shareholders of Holdings or any direct or indirect parent thereof pursuant to the Stockholders Agreement (including any registration rights agreement or purchase agreement related thereto).
SECTION 6.09 Burdensome Agreements.
The Lead Borrower shall not, nor shall it permit any Restricted Subsidiary to, enter into or permit to exist any contractual obligation (including Material Indebtedness) (other than this Agreement or any other Loan Document) that limits the ability of (a) any Restricted Subsidiary of the Lead Borrower that is not a Borrower or a Facility Guarantor to make Restricted Payments to any Loan Party or to make or repay loans or advances to or otherwise transfer assets to or make Investments in the Borrowers or any Subsidiary Facility Guarantor or (b) the Lead Borrower or any other Loan Party to create, incur, assume or suffer to exist Liens on property of such Person for the benefit of the Secured Parties with respect to the Obligations or under the Loan Documents; provided that the foregoing clauses (a) and (b) shall not apply to contractual obligations (including Material Indebtedness) which (i) (x) exist on the Closing Date and (to the extent not otherwise permitted by this SECTION 6.09) are listed on Schedule 6.09 hereto and (y) to the extent contractual obligations permitted by clause (x) are set forth in an agreement evidencing Indebtedness, are set forth in any agreement evidencing any permitted renewal, extension or refinancing of such Indebtedness so long as such renewal, extension or refinancing does not expand the scope of such contractual obligation in any material respect, (ii) are binding on a Restricted Subsidiary at the time such Restricted Subsidiary first becomes a Restricted Subsidiary of Holdings, so long as such contractual obligations were not entered into solely in contemplation of such Person becoming a Restricted Subsidiary of Holdings; provided further that this clause (ii) shall not apply to contractual obligations that are binding on a Person that becomes a Restricted Subsidiary pursuant to SECTION 5.14, (iii) represent Indebtedness of a Restricted Subsidiary of the Lead Borrower which is not a Loan Party which is permitted pursuant to SECTION 6.03, (iv) arise in connection with any Permitted Disposition, (v) are customary provisions in joint venture agreements and other similar agreements applicable to joint ventures permitted under SECTION 6.02 and applicable solely to such joint venture entered into in the ordinary course of business, (vi) are negative pledges and restrictions on Liens in favor of any holder of Indebtedness permitted under SECTION 6.03 (other than Junior Financings) but solely to the extent any negative pledge relates to the property financed by or the subject of such Indebtedness, (vii) are customary restrictions on leases, subleases, licenses or asset sale agreements otherwise permitted hereby so long as such restrictions relate to the assets subject thereto, (viii) comprise restrictions imposed by any agreement relating to secured Indebtedness permitted pursuant to SECTION 6.03(e), SECTION 6.03(g) or SECTION 6.03(m) to the extent that such restrictions apply only to the property or assets securing such Indebtedness or, in the case of Indebtedness incurred pursuant to SECTION 6.03(g) only, to the Restricted Subsidiaries incurring or guaranteeing such Indebtedness, (ix) are customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Lead Borrower or any Restricted Subsidiary, (x) are customary provisions restricting assignment of any agreement entered into in the ordinary course of business, (xi) are restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business, (xii) are customary restrictions contained in the documentation relating to the Senior
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Notes or the Term Loan Facility, (xiii) arise in connection with cash or other deposits permitted under SECTION 6.01 and SECTION 6.02 and limited to such cash or deposit, (xiv) arise under applicable law or any applicable rule, regulation or order and (xv) comprise restrictions imposed by any agreement governing Indebtedness entered into after the Closing Date and permitted under SECTION 6.03 that are, taken as a whole, in the good faith judgment of the Lead Borrower, no more restrictive with respect to the Lead 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 Lead Borrower shall have determined in good faith that such restrictions will not affect its obligation or ability to make any payments required hereunder.
SECTION 6.10 Accounting Changes.
The Lead Borrower shall not, nor shall it permit any Restricted Subsidiary to, make any change in their Fiscal Year (it being understood that the Lead Borrowers fiscal year ends on the Saturday closest to January 31 of each year); provided, however, that the Lead 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, the Lead Borrower and the Administrative Agent will, and are hereby authorized by the Lenders to, make any adjustments to this Agreement that are necessary to reflect such change in Fiscal Year.
SECTION 6.11 Prepayments, Etc., of Indebtedness.
The Lead Borrower will not, nor will it permit any Restricted Subsidiary to, make or agree to pay or make any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on any Indebtedness, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Indebtedness, except:
(a) payments in Capital Stock (as long as no Change in Control would result therefrom), the conversion of Indebtedness to Capital Stock (other than Disqualified Capital Stock) or Indebtedness of Holdings (as long as no Change in Control would result therefrom) and payments of interest in-kind of the Loan Parties or the accretion of interest on Permitted Indebtedness;
(b) payments of principal and interest as and when due in respect of any Subordinated Indebtedness (subject to applicable subordination provisions relating thereto);
(c) scheduled or mandatory payments of principal (including mandatory prepayments) and interest as and when due in respect of any Permitted Indebtedness (other than Subordinated Indebtedness);
(d) voluntary prepayments, redemptions, purchases, and defeasances in whole or in part of the Senior Notes, the Term Loan Facility and other Indebtedness with the Net Proceeds of any Permitted Equity Issuances for the purpose of making such payment or prepayment;
(e) voluntary prepayments of, and exchanges for, in whole or in part, the Senior Notes or the Term Loan Facility from any Permitted Refinancing thereof;
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(f) if the Payment Conditions are satisfied, voluntary prepayments, purchases, redemptions, and defeasances, in whole or in part of the Senior Notes, the Term Loan Facility or any other Permitted Indebtedness;
(g) as long as the Pro Forma Availability Condition is satisfied and no Event of Default then exists or would arise therefrom, in an aggregate amount, when added to the aggregate amount of any Restricted Payments made pursuant to SECTION 6.06(k), not to exceed $40,000,000 over the term of this Agreement, voluntary prepayments, purchases, exchanges or redemptions, in whole or in part, of Indebtedness;
(h) the prepayment of Indebtedness of the Lead Borrower or any Restricted Subsidiary to the Lead Borrower or any Restricted Subsidiary to the extent permitted by the Security Documents;
(i) other Permitted Refinancings of Indebtedness;
(j) mandatory redemptions of the Senior Notes (and exchange notes issued in respect thereof) due to the existence of an AHYDO Amount (as defined in the indenture for the Senior Notes); and
(k) the conversion (or exchange) of any Indebtedness to (or with) Capital Stock or Indebtedness of Holdings or any direct or indirect parent thereof.
SECTION 6.12 Equity Interests of the Lead Borrower and Restricted Subsidiaries.
The Lead Borrower shall not, nor shall it permit any Restricted Subsidiary to, permit any Subsidiary that is a Restricted Subsidiary to be a non-wholly owned Subsidiary, except (i) as a result of or in connection with a dissolution, merger, amalgamation, consolidation or disposition of a Restricted Subsidiary permitted by SECTION 6.04 or SECTION 6.05 or a Permitted Investment in any Person or (ii) so long as such Restricted Subsidiary continues to be a Facility Guarantor or a Borrower.
SECTION 6.13 Amendment of Material Documents.
(a) The Lead Borrower will not, nor shall it permit any Restricted Subsidiary to, amend, modify or waive any of its rights under (i) its Organization Documents, (ii) the Sponsor Management Agreement, or (iii) any Material Indebtedness (other than as a result of a Permitted Refinancing thereof), in each case to the extent that such amendment, modification or waiver would either (A) reasonably likely have a Material Adverse Effect, (B) except with respect to the Term Loan Facility and any Permitted Refinancing thereof, be materially adverse to the interests of the Credit Parties (it being understood that, with respect to clause (ii), any amendment, modification or waiver which directly or indirectly increase the obligation of Holdings, the Lead Borrower or any of its Affiliates to make any payments thereunder shall be deemed materially adverse to the interests of the Credit Parties) or (C) with respect to clause (iii) only, (1) shorten the maturity date of any Material Indebtedness to a date which is prior to ninety-one (91) days after the then Latest Maturity Date, (2) except as provided in clause (1), shorten the date scheduled for any principal payment or increase the amount of any required principal payment, the result of which would be to require principal payments on account thereof in excess of the amounts previously required over the twenty-four (24) months
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following such amendment, modification or waiver, (3) grant any collateral security therefor on the ABL Priority Collateral, except to the extent that such collateral security constitutes a Permitted Encumbrance and is granted subject to an intercreditor agreement on terms substantially similar to those contained in the Intercreditor Agreement, (4) without duplication of any collateral security granted under clause (3) above, grant any other collateral therefor except to the extent such grant of security constitutes a Permitted Encumbrance, the Collateral Agent also has or obtains a Lien on such assets, and provided that to the extent that such collateral security consists of assets that would constitute Term Priority Collateral, such collateral security is granted subject to an intercreditor agreement on terms substantially similar to those contained in the Intercreditor Agreement, or (5) modify the subordination provisions thereof.
(b) The Lead Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, designate any Indebtedness (or related interest obligations) as Designated Senior Debt or any similar term (as defined in any documents or agreements evidencing the Junior Financing), in each case, except for the Obligations, the Term Loan Facility (and related obligations), the Senior Notes and any Permitted Refinancings thereof.
SECTION 6.14 Designated Account.
After the occurrence and during the continuance of a Cash Dominion Event, the Lead Borrower shall not, nor shall it permit any Restricted Subsidiary to, utilize the funds on deposit in the Designated Account for any purposes other than the payment of operating expenses incurred by the Loan Parties in the ordinary course of business (including payments of interest when due on account of the Senior Notes and the Term Loan Facility and any Permitted Refinancing thereof).
SECTION 6.15 Minimum Consolidated Fixed Charge Coverage Ratio.
Upon the occurrence and during the continuation of a FCCR Trigger Event (including, for the avoidance of doubt, on any FCCR Initial Test Date), the Lead Borrower shall not permit the Consolidated Fixed Charge Coverage Ratio to be less than 1.00 to 1.00 as of the last day of the applicable FCCR Test Period.
ARTICLE VII
Events of Default
SECTION 7.01 Events of Default.
The occurrence of any of the following events shall constitute an Event of Default hereunder:
(a) Non-Payment. Any Borrower or any other Loan Party fails to pay (i) when and as required to be paid herein, any amount of principal of any Revolving Credit Loan (including Swingline Loans), or any reimbursement obligation in respect of any Letter of Credit Disbursement, or (ii) within five (5) Business Days after the same becomes due, any interest on any Revolving Credit Loan (including Swingline Loans) or any other amount payable hereunder or with respect to any other Loan Document; or
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(b) Specific Covenants. Any Loan Party shall fail to observe or perform when due any covenant, condition or agreement contained in (i) any Section of Article VI, or (ii) SECTION 5.01(e) (after a two (2) Business Day grace period), (iii) [reserved], (iv) SECTION 2.18 (provided that for SECTION 2.18(f), after a five (5) Business Day grace period), or (v) any of SECTION 5.02(b), SECTION 5.03(a), SECTION 5.07 (but only with respect to casualty, loss and extended coverage policies maintained with respect to any Collateral), SECTION 5.10(b), SECTION 5.17 (provided that if (A) any such Default described in this clause (v) is of a type that can be cured within five (5) Business Days and (B) such Default could not materially adversely impact the Lenders Liens on the Collateral, such default shall not constitute an Event of Default for five (5) Business Days after the occurrence of such Default so long as the Loan Parties are diligently pursuing the cure of such Default); or
(c) Other Defaults. Any Loan Party fails to perform or observe any other covenant or agreement (not specified in SECTION 7.01(a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for thirty (30) days after notice thereof by the Administrative Agent to the Lead Borrower; or
(d) Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Lead Borrower or any other Loan Party herein, in any other Loan Document, or in any document required to be delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or
(e) Cross-Default. Any Loan Party or any Restricted Subsidiary (A) fails to make any payment beyond the applicable grace period with respect thereto, if any (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Material Indebtedness (other than the Obligations), or (B) fails to observe or perform any other agreement or condition relating to any such Material Indebtedness beyond the applicable grace period with respect thereto, or any other event occurs (other than, with respect to Indebtedness consisting of Swap Contracts, termination events or equivalent events pursuant to the terms of such Swap Contracts), the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) after the expiration of the applicable grace period with respect thereto, to cause, with the giving of notice if required, such Indebtedness to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Material Indebtedness to be made, prior to its stated maturity; provided that this clause (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 further provided that the occurrence of any event of default under the Term Loan Agreement by virtue of the breach of any financial maintenance covenant contained in Section 7.11 of the Term Loan Agreement (or any other financial maintenance covenant from time to time in effect under the Term Loan Agreement and not contained in this Agreement) shall not constitute an Event of Default until the earliest of (x) sixty (60) days after the date of such breach (during which period such breach is not waived by the lenders under the Term Loan Agreement or such breach is not cured pursuant to Section 8.05 of the Term Loan Agreement), or (y) the acceleration of the obligations under the Term Loan Agreement, or (z) the commencement
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of the Exercise of Any Secured Creditor Remedies (as defined in the Intercreditor Agreement as in effect on the Closing Date) by the Term Loan Agent and/or the Term Loan Lenders under the Term Loan Agreement as a result of such breach; or
(f) Insolvency Proceedings, Etc. Any Loan Party or any of the Lead Borrowers Restricted Subsidiaries institutes or consents to the institution of any proceeding under the Bankruptcy Code or any other federal, state, provincial, or foreign bankruptcy, insolvency, receivership or similar law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, monitor, liquidator, rehabilitator, administrator, administrative receiver or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, monitor, liquidator, rehabilitator, administrator, administrative receiver or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under the Bankruptcy Code or any other federal, state, provincial, or foreign bankruptcy, insolvency, receivership or similar law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for sixty (60) calendar days, or an order for relief is entered in any such proceeding; or
(g) Inability to Pay Debts; Attachment. (i) Any Loan Party or any Restricted 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 the Loan Parties, taken as a whole, and is not released, vacated or fully bonded within forty-five (45) days after its issue or levy; or
(h) Judgments. There is entered against any Loan Party or any Restricted Subsidiary a final judgment or order for the payment of money in an aggregate amount in excess of $25,000,000 (to the extent not covered by independent third-party insurance as to which the insurer has been notified of such judgment or order and has not denied coverage) and such judgment or order shall not have been satisfied, vacated, discharged or stayed or bonded pending an appeal for a period of forty-five (45) consecutive days; or
(i) ERISA. (a)(i) An ERISA Event occurs with respect to a Plan subject to ERISA or Multiemployer Plan subject to ERISA which, together with any other ERISA Events that have occurred, has resulted or could reasonably be expected to result in liability of any Loan Party under Title IV of ERISA in an aggregate amount in excess of $25,000,000, or (ii) any Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $25,000,000; or (b) except as could not reasonably be expected to result in a Material Adverse Effect, (i) the appointment by the appropriate Governmental Authority of a trustee for any Plan or (ii) if any Plan shall be terminated or any such trustee shall be requested or appointed; or
(j) Invalidity of Loan Documents. (i) Any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder (including as a result of a transaction permitted under
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SECTION 6.04 or SECTION 6.05) or as a result of acts or omissions by any Agent or any Lender or the satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party contests in writing (or supports any other Person in contesting) the validity or enforceability of any provision of any Loan Document; or any Loan Party denies in writing that it has any or further liability or obligation under any Loan Document (other than as a result of repayment in full of the Obligations and termination of the Commitments), or purports in writing to revoke or rescind any Loan Document; or (ii) any challenge by or on behalf of any Loan Party, receiver, trustee, custodian, conservator, monitor, liquidator, rehabilitator, administrator, administrative receiver or similar officer for any Loan Party or for all or any material part of its property to the validity of any Loan Document or the applicability or enforceability of any Loan Document strictly in accordance with the subject Loan Documents terms or which seeks to void, avoid, limit, or otherwise adversely affect any security interest created by or in any Loan Document or any payment made pursuant thereto; or
(k) Change in Control. There occurs any Change in Control; or
(l) Security Documents. (i) Any Security Document shall for any reason (other than pursuant to the terms thereof including as a result of a transaction permitted under SECTION 6.04 or SECTION 6.05) cease to create a valid and perfected or recorded Lien, with the priority required by the Security Documents, (or other security purported to be created on the applicable Collateral) on, security interest in, and hypothecs of any material portion of the Collateral purported to be covered thereby, subject to Permitted Encumbrances, except to the extent that any such loss of perfection or priority results from the failure of the Administrative Agent or the Collateral Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Security Documents or to file Uniform Commercial Code continuation statements and except as to Collateral consisting of real property to the extent that such losses are covered by a lenders title insurance policy and such insurer has not denied coverage, or (ii) any of the Capital Stock of the Lead Borrower ceasing to be pledged pursuant to the Security Agreement free of Liens other than Liens created by the Security Agreement (other than Liens to secure the Term Loan Facility or Liens securing any Permitted Refinancing thereof) or any nonconsensual Liens arising solely by operation of Law;
(m) Junior Financing. (i) Any of the Obligations of the Loan Parties under the Loan Documents for any reason shall cease to be Senior Indebtedness (or any comparable term) or Senior Secured Financing (or any comparable term) under any Junior Financing, or (ii) the subordination provisions set forth in any Junior Financing shall, in whole or in part, cease to be effective or cease to be legally valid, binding and enforceable against the holders of any Junior Financing;
(n) Termination of Business. Except as permitted under SECTION 6.05, the determination of the Loan Parties, whether by vote of the Loan Parties board of directors or otherwise to: suspend the operation of the Loan Parties business in the ordinary course, liquidate all or substantially all of the Loan Parties assets or Store locations, or employ an agent or other third party to conduct any so-called store closing, store liquidation or Going-Out-Of-Business sales for all or substantially all of the Loan Parties Stores;
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(o) Termination of Guaranty. The termination of the Facility Guaranty or any other guaranty of the Obligations (except for any release or termination permitted hereunder); or
(p) Indictment. The indictment of any Loan Party under any Applicable Law where the crime alleged would constitute a felony under Applicable Law and such indictment remains unquashed or such legal process remains undismissed for a period of ninety (90) days or more, unless either (i) the Administrative Agent, in its reasonable discretion, determines that the indictment is not material or (ii) such indictment relates to the Lead Borrowers stock option practices.
SECTION 7.02 Remedies Upon Event of Default.
If any Event of Default occurs and is continuing, the Administrative Agent may and, at the request of the Required Lenders, shall take any or all of the following actions:
(a) declare the Commitment of each Lender to make Revolving Credit Loans (including Swingline Loans) and any obligation of the Issuing Banks to issue Letters of Credit to be terminated, whereupon such Commitments and obligation shall be terminated;
(b) declare the unpaid principal amount of all outstanding Revolving Credit Loans (including Swingline Loans), all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrowers;
(c) require that the Borrowers cash collateralize the amount of the Letter of Credit Outstandings (in an amount equal to 103% of the then Stated Amount of outstanding Letters of Credit plus 103% of the then unreimbursed amounts due to the Issuing Banks); and
(d) exercise on behalf of itself and the Secured Parties all rights and remedies available to it and the Secured Parties under the Loan Documents or Applicable Law;
provided that upon the occurrence of an actual or deemed entry of an order for relief with respect to the any Loan Party under the Bankruptcy Code, the obligation of each Lender to make Revolving Credit Loans (including Swingline Loans) and any obligation of the Issuing Banks to issue Letters of Credit shall automatically terminate, the unpaid principal amount of all outstanding Revolving Credit Loans (including Swingline Loans) and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrowers to cash collateralize the amount of Letter of Credit Outstandings as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.
SECTION 7.03 Exclusion of Immaterial Subsidiaries.
Solely for the purpose of determining whether a Default or Event of Default has occurred under clause (f) or (g) of SECTION 7.01, any reference in any such clause to any Restricted Subsidiary or Loan Party shall be deemed not to include any Immaterial Subsidiary affected by any event or circumstances referred to in any such clause (it being agreed that all Immaterial
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Subsidiaries affected by any event or circumstance referred to in any such clause shall be considered together, as a single consolidated Restricted Subsidiary, for purposes of determining whether they constitute Immaterial Subsidiaries).
SECTION 7.04 Application of Proceeds.
After the occurrence and during the continuance of (i) any Cash Dominion Event, or (ii) any Event of Default and acceleration of the Obligations, all proceeds realized from any Loan Party or on account of any Collateral owned by a Loan Party or any payments in respect of any Obligations and all proceeds of the Collateral, shall be applied in the following order:
(a) FIRST, ratably to pay the Obligations in respect of any Credit Party Expenses, indemnities and other amounts then due to the Administrative Agent and the Collateral Agent until paid in full;
(b) SECOND, ratably to pay any Credit Party Expenses and indemnities, and to pay any fees then due to the Lenders (other than any fees owed to FILO Lenders), until paid in full;
(c) THIRD, ratably to pay interest accrued in respect of the Obligations (other than the FILO Loans) until paid in full;
(d) FOURTH, to pay principal due in respect of the Swingline Loans until paid in full;
(e) FIFTH, ratably to pay principal due in respect of the Revolving Credit Loans (other than FILO Loans) until paid in full;
(f) SIXTH, to the Administrative Agent, to be held by the Administrative Agent, for the ratable benefit of the Issuing Banks and the Tranche A Lenders as cash collateral in an amount up to 103% of the then Stated Amount of Letters of Credit (other than those in which the FILO Lenders participate) until paid in full;
(g) SEVENTH, ratably to pay any fees then due to the FILO Lenders until paid in full;
(h) EIGHTH, ratably to pay interest accrued in respect of the FILO Loans until paid in full;
(i) NINTH, ratably to pay principal due in respect of FILO Loans until paid in full;
(j) TENTH, to the Administrative Agent, to be held by the Administrative Agent, for the ratable benefit of the Issuing Banks and the FILO Lenders, as cash collateral in an amount up to 103% of the then Stated Amount of Letters of Credit in which the FILO Lenders participate until paid in full;
(k) ELEVENTH, ratably to pay any other outstanding Obligations (including any Cash Management Services, Bank Products and other outstanding Other Liabilities); and
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(l) TWELFTH, to the Lead Borrower or such other Person entitled thereto under Applicable Law.
SECTION 7.05 Lead Borrowers Right to Cure.
(a) Notwithstanding anything to the contrary contained in SECTION 7.01 or SECTION 7.02, in the event of any Event of Default under the covenant set forth in SECTION 6.15 and until the expiration of the tenth (10th) day after the date on which financial statements are required to be delivered with respect to the applicable Fiscal Quarter hereunder, any Permitted Holder may directly or indirectly make a Specified Equity Contribution to the Lead Borrower, and the Lead Borrower shall apply the amount of the net cash proceeds thereof to increase Consolidated EBITDA with respect to such applicable Fiscal Quarter; provided that such net cash proceeds (i) are actually received by the Lead Borrower as cash common equity (including through capital contribution of such net cash proceeds to the Lead Borrower) no later than ten (10) days after the date on which financial statements are required to be delivered with respect to such Fiscal Quarter hereunder (ii) are Not Otherwise Applied and (iii) are identified in a certificate of a Responsible Officer of the Lead Borrower delivered to the Administrative Agent as a Specified Equity Contribution. The parties hereby acknowledge that this SECTION 7.05(a) may not be relied on for purposes of calculating any financial ratios other than as applicable to SECTION 6.15 and shall not result in any adjustment to any amounts other than the amount of the Consolidated EBITDA referred to in the immediately preceding sentence.
(b) (i) In each period of four consecutive fiscal quarters, there shall be at least two fiscal quarters in which no Specified Equity Contribution is made, (ii) no more than five Specified Equity Contributions will be made in the aggregate during the term of this Agreement, (iii) the amount of any Specified Equity Contribution shall be no more than the amount required to cause the Lead Borrower to be in Pro Forma Compliance with SECTION 6.15 for any applicable period, (iv) all Specified Equity Contributions shall be disregarded for the purposes of determining pricing, financial ratio-based conditioning or any baskets with respect to the covenants contained in this Agreement, (v) there shall not have been a breach of any covenant under this Agreement by reason of having no longer included such Specified Equity Contribution in any basket during the relevant period and (vi) there shall be no pro forma reduction in Indebtedness with the proceeds of any Specified Equity Contribution for determining compliance with SECTION 6.15.
ARTICLE VIII
The Administrative Agent
SECTION 8.01 Appointment of Administrative Agent.
Each Credit Party hereby irrevocably designates Bank of America as Administrative Agent under this Agreement and the other Loan Documents. The general administration of the Loan Documents shall be by the Administrative Agent. The Credit Parties each hereby (a) irrevocably authorizes the Administrative Agent (i) to enter into the Loan Documents to which it is a party, and (ii) at its discretion, to take or refrain from taking such actions as agent on its behalf and to exercise or refrain from exercising such powers under the Loan Documents as are delegated by the terms hereof or thereof, as appropriate, together with all powers reasonably
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incidental thereto, and (b) agrees and consents to all of the provisions of the Security Documents. The Administrative Agent shall have no duties or responsibilities except as set forth in this Agreement and the other Loan Documents, nor shall it have any fiduciary relationship with any other Credit Party, and no implied covenants, responsibilities, duties, obligations, or liabilities shall be read into the Loan Documents or otherwise exist against the Administrative Agent.
SECTION 8.02 Appointment of Collateral Agent.
Each Secured Party hereby irrevocably designates Bank of America as Collateral Agent under this Agreement and the other Loan Documents. The Secured Parties each hereby (i) irrevocably authorizes the Collateral Agent (x) to enter into the Loan Documents to which it is a party, and (y) at its discretion, to take or refrain from taking such actions as agent on its behalf and to exercise or refrain from exercising such powers under the Loan Documents as are delegated by the terms hereof or thereof, as appropriate, together with all powers reasonably incidental thereto, and (ii) agrees and consents to all of the provisions of the Security Documents. All Collateral shall be held or administered by the Collateral Agent (or its duly-appointed agent) for its own benefit and for the ratable benefit of the other Credit Parties. Any proceeds received by the Collateral Agent from the foreclosure, sale, lease or other disposition of any of the Collateral and any other proceeds received pursuant to the terms of the Security Documents or the other Loan Documents shall be paid over to the Administrative Agent for application as provided in SECTION 7.04 (if applicable) and, otherwise, in accordance with this Agreement and the other Loan Documents. The Collateral Agent shall have no duties or responsibilities except as set forth in this Agreement and the other Loan Documents, nor shall it have any fiduciary relationship with any other Secured Party, and no implied covenants, responsibilities, duties, obligations, or liabilities shall be read into the Loan Documents or otherwise exist against the Collateral Agent.
SECTION 8.03 Reserved.
SECTION 8.04 Sharing of Excess Payments.
If at any time or times any Secured Party shall receive (i) by payment, foreclosure, setoff, bankers lien, counterclaim, or otherwise, or any payments with respect to the Obligations owing to such Secured Party arising under, or relating to, this Agreement or the other Loan Documents, or (ii) payments from the Administrative Agent in excess of such Secured Partys ratable portion of all such distributions by the Administrative Agent, such Secured Party shall promptly (1) turn the same over to the Administrative Agent, in kind, and with such endorsements as may be required to negotiate the same to the Administrative Agent, or in same day funds, as applicable, for the account of all of the Secured Parties and for application to the Obligations in accordance with the applicable provisions of this Agreement, or (2) purchase, without recourse or warranty, an undivided interest and participation in the Obligations owed to the other Secured Parties so that such excess payment received shall be applied ratably as among the Secured Parties in accordance with the provisions of SECTION 2.17 or SECTION 7.04, as applicable; provided, however, that if all or part of such excess payment received by the purchasing party is thereafter recovered from it, those purchases of participations shall be rescinded in whole or in part, as applicable, and the applicable portion of the purchase price paid therefor shall be returned to such purchasing party, but without interest except to the extent that such purchasing party is
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required to pay interest in connection with the recovery of the excess payment. In no event shall the provisions of this paragraph be construed to apply to any payment made by the Borrowers pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Revolving Credit Loans or participations in Swingline Loans or in drawings under Letters of Credit to any Eligible Assignee or participant, other than to the Borrowers (as to which the provisions of this paragraph shall apply).
SECTION 8.05 Agreement of Applicable Lenders.
Upon any occasion requiring or permitting an approval, consent, waiver, election or other action on the part of the Applicable Lenders, action shall be taken by each Agent for and on behalf or for the benefit of all Credit Parties upon the direction of the Applicable Lenders, and any such action shall be binding on all Credit Parties. No amendment, modification, consent, or waiver shall be effective except in accordance with the provisions of SECTION 9.01.
SECTION 8.06 Liability of Agents.
(a) The Agents, when acting on behalf of the Credit Parties, may execute any of their respective duties under this Agreement or any of the other Loan Documents by or through any of their respective officers, agents and employees, and none of the Agents nor any of their respective directors, officers, agents or employees shall be liable to any other Secured Party for any action taken or omitted to be taken in good faith, or be responsible to any other Secured Party for the consequences of any oversight or error of judgment, or for any loss, except to the extent of any liability imposed by law by reason of such Agents own gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision). None of the Agents nor any of their respective directors, officers, agents and employees shall in any event be liable to any other Secured Party for any action taken or omitted to be taken by it pursuant to instructions received by it from the Applicable Lenders, or in reliance upon the advice of counsel selected by it. Without limiting the foregoing none of the Agents, nor any of their respective directors, officers, employees, or agents shall be: (i) responsible to any other Secured Party for the due execution, validity, genuineness, effectiveness, sufficiency, or enforceability of, or for any recital, statement, warranty or representation in, this Agreement, any other Loan Document or any related agreement, document or order; (ii) required to ascertain or to make any inquiry concerning the performance or observance by any Loan Party of any of the terms, conditions, covenants, or agreements of this Agreement or any of the Loan Documents; (iii) responsible to any other Secured Party for the state or condition of any properties of the Loan Parties or any other obligor hereunder constituting Collateral for the Obligations or any information contained in the books or records of the Loan Parties; (iv) responsible to any other Secured Party for the validity, enforceability, collectibility, effectiveness or genuineness of this Agreement or any other Loan Document or any other certificate, document or instrument furnished in connection therewith; or (v) responsible to any other Secured Party for the validity, priority or perfection of any Lien securing or purporting to secure the Obligations or for the value or sufficiency of any of the Collateral.
(b) The Agents may execute any of their duties under this Agreement or any other Loan Document by or through their agents or attorneys-in-fact, and shall be entitled to the advice of counsel concerning all matters pertaining to its rights and duties hereunder or under the other Loan
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Documents. The Agents shall not be responsible for the negligence or misconduct of any agent or attorneys-in-fact selected by them with reasonable care.
(c) None of the Agents nor any of their respective directors, officers, employees, or agents shall have any responsibility to any Loan Party on account of the failure or delay in performance or breach by any other Secured Party (other than by each such Agent in its capacity as a Lender) of any of its respective obligations under this Agreement or any of the other Loan Documents or in connection herewith or therewith.
(d) The Agents shall be entitled to rely, and shall be fully protected in relying, upon any notice, consent, certificate, affidavit, or other document or writing believed by them to be genuine and correct and to have been signed, sent or made by the proper person or persons, and upon the advice and statements of legal counsel (including, without, limitation, counsel to the Loan Parties), independent accountants and other experts selected by any Loan Party or any Secured Party. The Agents shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless they shall first receive such advice or concurrence of the Applicable Lenders as they deem appropriate or they shall first be indemnified to their satisfaction by the other Secured Parties against any and all liability and expense which may be incurred by them by reason of the taking or failing to take any such action.
SECTION 8.07 Notice of Default.
No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless such Agent has actual knowledge of the same or has received notice from a Secured Party or Loan Party referring to this Agreement, describing such Default or Event of Default and stating that such notice is a notice of default. In the event that an Agent obtains such actual knowledge or receives such a notice, such Agent shall give prompt notice thereof to each of the other Secured Parties. Upon the occurrence of an Event of Default, the Agents shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders. Unless and until the Agents shall have received such direction, the Agents may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to any such Default or Event of Default as they shall deem advisable in the best interest of the Secured Parties. In no event shall the Agents be required to comply with any such directions to the extent that the Agents believe that their compliance with such directions would be unlawful.
SECTION 8.08 Credit Decisions.
Each Secured Party (other than the Agents) acknowledges that it has, independently and without reliance upon the Agents or any other Secured Party, and based on the financial statements prepared by the Loan Parties and such other documents and information as it has deemed appropriate, made its own credit analysis and investigation into the business, assets, operations, property, and financial and other condition of the Loan Parties and has made its own decision to enter into this Agreement and the other Loan Documents. Each Credit Party (other than the Agents) also acknowledges that it will, independently and without reliance upon the Agents or any other Secured Party, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in determining whether
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or not conditions precedent to closing any Revolving Credit Loan hereunder have been satisfied and in taking or not taking any action under this Agreement and the other Loan Documents.
SECTION 8.09 Reimbursement and Indemnification.
Each Secured Party (other than the Administrative Agent and the Collateral Agent) agrees to (i) reimburse the Administrative Agent and the Collateral Agent for such Secured Partys pro rata share of outstanding Credit Extensions held by such Secured Party (or, in the case of any Lender that has assigned its Commitments pursuant to SECTION 9.07 hereof, where the applicable assignee has not ratably assumed such Lenders obligations under this SECTION 8.09 with respect to acts or omissions that occurred prior to such assignment, such assigning Lenders Commitment Percentage prior to such assignment) of (x) any expenses and fees incurred by such Agent for the benefit of Secured Parties under this Agreement and any of the other Loan Documents, including, without limitation, counsel fees and compensation of agents and employees paid for services rendered on behalf of the Secured Parties, and any other expense incurred in connection with the operation or enforcement thereof not reimbursed by the Loan Parties, and (y) any expenses of such Agent incurred for the benefit of the Secured Parties that the Loan Parties have agreed to reimburse pursuant to this Agreement or any other Loan Document and have failed to so reimburse, and (ii) indemnify and hold harmless such Agent and any of its directors, officers, employees, or agents, on demand, in the amount of such Secured Partys Commitment Percentage (or, in the case of any Lender that has assigned its Commitments pursuant to SECTION 9.07 hereof, where the applicable assignee has not ratably assumed such Lenders obligations under this SECTION 8.09 with respect to acts or omissions that occurred prior to such assignment, such assigning Lenders Commitment Percentage prior to such assignment), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against such Agent or any Secured Party in any way relating to or arising out of this Agreement or any of the other Loan Documents or any action taken or omitted by it or any of them under this Agreement or any of the other Loan Documents, to the extent not reimbursed by the Loan Parties, including, without limitation, costs of any suit initiated either by such Agent against any Secured Party or against such Agent or Secured Party (except such as shall have been determined by a court of competent jurisdiction or another independent tribunal having jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of such Agent); provided, however, that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against such Secured Party in its capacity as such. The provisions of this SECTION 8.09 shall survive the repayment or assignment of the Obligations and the termination of the Commitments and, in the case of any Lender that has assigned its Commitments pursuant to SECTION 9.07 hereof where the applicable assignee has not ratably assumed such Lenders obligations under this SECTION 8.09 with respect to acts or omissions that occurred prior to such assignment, with respect to events which have occurred prior to any such assignment.
SECTION 8.10 Rights of Agents.
It is understood and agreed that the Agents shall have the same rights and powers hereunder (including the right to give such instructions) as the other Lenders and may exercise
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such rights and powers, as well as their rights and powers under other agreements and instruments to which they are or may be party, and engage in other transactions with the Loan Parties, as though they were not the Agents. Each Agent and their respective Affiliates may accept deposits from, lend money to, and generally engage in any kind of commercial or investment banking, trust, advisory or other business with the Loan Parties and their Affiliates as if it were not an Agent thereunder.
SECTION 8.11 Notice of Transfer.
The Administrative Agent 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 Acceptance shall have become effective as set forth in SECTION 9.07.
SECTION 8.12 Successor Agents.
Any Agent may resign at any time by giving thirty (30) Business Days written notice thereof to the other Secured Parties and the Lead Borrower. Upon any such resignation of an Agent, the Required Lenders shall have the right to appoint a successor Agent, which, so long as there is no Specified Default, shall be reasonably satisfactory to the Lead Borrower (whose consent in any event shall not be unreasonably withheld or delayed). If no successor Agent shall have been so appointed by the Required Lenders and/or none shall have accepted such appointment within thirty (30) days after the retiring Agents giving of notice of resignation, the retiring Agent may, on behalf of the other Secured Parties, appoint a successor Agent which shall be a commercial bank (or affiliate thereof) organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of a least $1,000,000,000, or capable of complying with all of the duties of such Agent hereunder (in the opinion of the retiring Agent and as certified to the other Secured Parties in writing by such successor Agent) which, so long as there is no Specified Default, shall be reasonably satisfactory to the Lead Borrower (whose consent shall not in any event be unreasonably withheld or delayed). Upon the acceptance of any appointment as Agent by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agents resignation hereunder as such Agent, the provisions of this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was such Agent under this Agreement.
SECTION 8.13 Relation Among the 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 any Agent) authorized to act for, any other Lender.
SECTION 8.14 Reports and Financial Statements.
By signing this Agreement, each Lender (and with respect to clause (a), each Secured Party):
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(a) agrees to furnish the Administrative Agent at its written request, after the occurrence and during the continuance of a Cash Dominion Event (and thereafter at such frequency as the Administrative Agent may reasonably request in writing), with a summary of all Other Liabilities due or to become due to such Lender or its Affiliates;
(b) is deemed to have requested that the Agents furnish such Lender, promptly after they become available, copies of all financial statements required to be delivered by the Lead Borrower under SECTION 5.01(a) through and including SECTION 5.01(g), all commercial finance examinations and appraisals of the Collateral received by the Agents (collectively, the Reports), the certificates and other information delivered by the Lead Borrower under SECTION 5.02, and the notices delivered by the Lead Borrower under SECTION 5.03, and the Agents agree to furnish the same promptly to the Lenders (which Reports may be furnished in accordance with the final paragraph of SECTION 5.01;
(c) expressly agrees and acknowledges that no Agent makes any representation or warranty as to the accuracy of the Reports, and 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 and strictly for its internal use, and not to distribute except to its participants, 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 each Agent and any such other Lender preparing a Report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any Report in connection with any Credit Extensions that the indemnifying Lender has made or may make to the Borrowers, or the indemnifying Lenders participation in Swingline Loans and Letters of Credit, or the indemnifying Lenders purchase of, Revolving Credit Loans of the Borrowers; and (ii) to pay and protect, and indemnify, defend, and hold each Agent and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including attorney costs) incurred by the 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 in violation of the terms hereof.
SECTION 8.15 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 Secured Parties, in assets which, in accordance with Article 9 of the UCC or any other Applicable Law of the United States of America can be perfected only by possession. Should any Secured Party (other than an Agent) obtain possession of any such Collateral, such Secured Party shall notify the Collateral Agent thereof, and, promptly upon the Collateral Agents request therefor shall deliver such Collateral to the
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Collateral Agent, or otherwise deal with such Collateral in accordance with the Collateral Agents instructions.
SECTION 8.16 Delinquent Lender.
(a) If for any reason any Lender (in each case, as determined by the Administrative Agent) (i) shall fail or refuse to abide by its obligations under this Agreement, including without limitation its obligation to make available to Administrative Agent its Commitment Percentage of any Revolving Credit Loans, expenses or setoff or purchase its Commitment Percentage of a participation interest in the Swingline Loans or Letter of Credit Outstandings and such failure is not cured within one (1) Business Day of receipt from the Administrative Agent of written notice thereof, (ii) shall fail, within three (3) Business Days after request by the Administrative Agent, to confirm that it will comply with the terms of this Agreement relating to its Commitments, (iii) has notified the Lead Borrower or the Administrative Agent or any other Lender that it does not intend to comply with its funding obligations or has made a public statement to that effect with respect to its funding obligations hereunder or under other agreements in which it commits to extend credit or (iv) has, or has a direct or indirect parent has, been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding or had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or a custodian appointed for it (or taken any action in furtherance of any such proceeding or appointment) (each, a Delinquent Lender); provided that a Lender shall not be deemed a Delinquent Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority, then, in addition to the rights and remedies that may be available to the other Secured Parties, the Loan Parties or any other party at law or in equity, and not at limitation thereof, (i) such Delinquent Lenders right to participate in the administration of, or decision-making rights related to, the Revolving Credit Loans, this Agreement or the other Loan Documents shall be suspended during the pendency of such failure or refusal, (ii) a Delinquent Lender shall be deemed to have assigned any and all payments due to it from the Loan Parties, whether on account of outstanding Revolving Credit Loans, interest, fees or otherwise, to the remaining non-Delinquent Lenders for application to, and reduction of, their proportionate shares of all outstanding Obligations until, as a result of application of such assigned payments the Lenders respective Commitment Percentages of all outstanding Obligations (other than Other Liabilities) shall have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency, and (iii) at the option of the Administrative Agent, any amounts payable to such Delinquent Lender hereunder (whether on account of principal, interest, fees or otherwise) shall, in lieu of being distributed to such Delinquent Lender, be retained by the Administrative Agent as cash collateral and may be utilized for future funding obligations of the Delinquent Lender in respect of any Revolving Credit Loan or existing or future participating interest in any Swingline Loan or Letter of Credit. The Delinquent Lenders decision-making and participation rights and rights to payments as set forth in clauses (i) and (ii) hereinabove shall be restored only upon the payment by the Delinquent Lender of its Commitment Percentage of any Obligations (other than Other Liabilities), any participation obligation, or expenses as to which it is delinquent, together with interest thereon at the Default Rate from the date when originally due until the date upon which any such amounts are actually paid. Any payments, prepayments or other amounts paid or payable to a Delinquent Lender that are applied (or held) to pay amounts owed by a Delinquent Lender or to post cash collateral pursuant to this SECTION 8.16(a) shall be deemed paid to and redirected by that Delinquent Lender, and each Lender irrevocably consents hereto.
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(b) The non-Delinquent Lenders shall also have the right, but not the obligation, in their respective, sole and absolute discretion, to cause the termination and assignment without any further action by the Delinquent Lender for no cash consideration (pro rata, based on the respective Commitments of those Lenders electing to exercise such right), the Delinquent Lenders Commitment to fund future Credit Extensions. Upon any such purchase of the Commitment Percentage of any Delinquent Lender, the Delinquent Lenders share in future Credit Extensions and its rights under the Loan Documents with respect thereto shall terminate on the date of purchase, and the Delinquent Lender shall promptly execute all documents reasonably requested to surrender and transfer such interest, including, if so requested, an Assignment and Acceptance. The Borrowers may, on ten (10) days prior written notice to the Administrative Agent and such Delinquent Lender, replace such Delinquent Lender (in its capacity as a Lender) by causing such Delinquent Lender to (and such Delinquent Lender shall be obligated to) assign (with the assignment fee to be paid by the Borrowers in such instance) all of its rights and obligations under this Agreement to one or more Eligible Assignees.
(c) During any period in which there is a Delinquent Lender, for purposes of computing the amount of the obligation of each non-Delinquent Lender to acquire, refinance or fund participations in Letters of Credit or Swingline Loans under this Agreement, the Commitment Percentage of each applicable non-Delinquent Lender holding a Tranche A Commitment or a FILO Commitment (as applicable) shall be computed without giving effect to the Tranche A Commitment or a FILO Commitment (as applicable) of that Delinquent Lender; provided that (i) each such reallocation shall be given effect only if, at the date the applicable Lender becomes a Delinquent Lender, no Default or Event of Default exists; and (ii) the aggregate obligation of each non-Delinquent Lender to acquire, refinance or fund participations in Letters of Credit and Swingline Loans shall not exceed the positive difference, if any, of (1) the Tranche A Commitment or a FILO Commitment (as applicable) of that non-Delinquent Lender minus (2) the aggregate outstanding amount of the Credit Extensions of that Lender in respect of its Tranche A Commitment or FILO Commitment (as applicable).
(d) At any time that there shall exist a Delinquent Lender, immediately upon the request of the Administrative Agent, an Issuing Bank or the Swingline Lender, the Borrowers shall deliver to the Administrative Agent cash collateral in an amount sufficient to cover all fronting exposure of such Person in respect of such Delinquent Lender (after giving effect to SECTION 8.16(c) and any cash collateral provided by the Delinquent Lender).
(e) Each Delinquent Lender shall indemnify the Administrative Agent and each non-delinquent Lender from and against any and all loss, damage or expenses, including but not limited to reasonable attorneys fees and funds advanced by the Administrative Agent or by any non-delinquent Lender, on account of a Delinquent Lenders failure to timely fund its Commitment Percentage of a Revolving Credit Loan, or its participation in Swingline Loans and Letters of Credit or to otherwise perform its obligations under the Loan Documents.
SECTION 8.17 Collateral Matters.
(a) The Lenders hereby irrevocably authorize the Collateral Agent to release any Lien upon any Collateral (i) upon the termination of the Commitments and payment and satisfaction in full of all Obligations (other than (A) contingent indemnification obligations and (B) Obligations in
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respect of obligations that may thereafter arise with respect to Other Liabilities not yet due and payable; unless the Administrative Agent has received written notice, at least two (2) Business Days prior to the proposed date of any such release of Liens, stating that arrangements reasonably satisfactory to the applicable provider thereof in respect of obligations and liabilities under Cash Management Services and Bank Products constituting Obligations have not been made), all Letters of Credit shall have expired or terminated (or been collateralized or backstopped in a manner reasonably satisfactory to the applicable Issuing Bank) and all Letter of Credit Outstandings have been reduced to zero (or collateralized or backstopped in a manner reasonably satisfactory to the applicable Issuing Bank), or (ii) of a Borrower or a Facility Guarantor upon the consummation of any transaction permitted by this Agreement as a result of which such Borrower or Facility Guarantor (as applicable) ceases to be a Borrower or a Facility Guarantor (provided that the Required Lenders shall have consented to such transaction (to the extent required by the Credit Agreement) and the terms of such consent did not provide otherwise) or (iii) constituting property being sold, transferred or disposed of in a Permitted Disposition (other than a Permitted Disposition to a Person required to grant a Lien to the Administrative Agent or the Collateral Agent under the Loan Documents), subject to the conditions thereof, or upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 9.01 of this Agreement. Except as provided above, the Collateral Agent will not release any of the Collateral Agents Liens without the prior written authorization of the Applicable Lenders. Upon request by any Agent or any Loan Party at any time, the Lenders will confirm in writing the Collateral Agents authority to release any Liens upon particular types or items of Collateral pursuant to this SECTION 8.17.
(b) Upon at least two (2) Business Days prior written request by the Lead Borrower (or within such shorter period as the Collateral Agent may agree in writing), the Collateral Agent shall (and is hereby irrevocably authorized by the Lenders to) execute such documents as may be necessary to evidence the release of the Liens upon any Collateral described in SECTION 8.17(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 create any obligation 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 Obligations or any Liens (other than those expressly being released) upon (or obligations of any Loan Party in respect of) all interests retained by any Loan Party, including (without limitation) the proceeds of any sale, all of which shall continue to constitute part of the Collateral.
SECTION 8.18 Additional Secured Parties. The benefit of the provisions of the Loan Documents directly relating to the Collateral or any Lien granted thereunder shall extend to and be available to any Secured Party that is not an Agent, a Lender or an Issuing Bank party hereto as long as, by accepting such benefits, such Secured Party agrees, as among Agent and all other Secured Parties, that such Secured Party is bound by (and, if requested by Agent, shall confirm such agreement in a writing in form and substance reasonably acceptable to Agent) this ARTICLE VIII and SECTION 2.23, SECTION 9.08, SECTION 9.09, SECTION 9.18, and SECTION 9.20 and the Intercreditor Agreement, and the decisions and actions of any Agent and the Required Lenders (or, where expressly required by the terms of this Agreement, a greater proportion of the Lenders or other parties hereto as required herein) to the same extent a Lender is bound; provided, however, that, notwithstanding the foregoing, (a) such Secured Party shall be bound by SECTION 8.09 only to the extent of liabilities, reimbursement obligations, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements with
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respect to or otherwise relating to the Liens and Collateral held for the benefit of such Secured Party, in which case the obligations of such Secured Party thereunder shall not be limited by any concept of pro rata share or similar concept, (b) each of Agents, the Lenders and the Issuing Banks party hereto shall be entitled to act at its sole discretion, without regard to the interest of such Secured Party, regardless of whether any Obligation to such Secured Party thereafter remains outstanding, is deprived of the benefit of the Collateral, becomes unsecured or is otherwise affected or put in jeopardy thereby, and without any duty or liability to such Secured Party or any such Obligation and (c) except as otherwise set forth herein and in the other Loan Documents, such Secured Party shall not have any right to be notified of, consent to, direct, require or be heard with respect to, any action taken or omitted in respect of the Collateral or under any Loan Document.
SECTION 8.19 Syndication Agent, Documentation Agent, Arranger and Joint Bookrunners.
Notwithstanding the provisions of this Agreement or any of the other Loan Documents, the Syndication Agent, the Documentation Agent, the Arranger and Joint Bookrunners shall have no powers, rights, duties, responsibilities or liabilities with respect to this Agreement and the other Loan Documents.
SECTION 8.20 Intercreditor Agreements.
Each Lender that has signed this Agreement shall be deemed to have consented to and hereby irrevocably authorizes the Agents (or any of them) to enter into any Intercreditor Agreement (including any and all amendments, amendments and restatements, modification, supplements and acknowledgements thereto) from time to time, and agree to be bound by the provisions thereof.
ARTICLE IX
Miscellaneous
SECTION 9.01 Amendments, Etc.
Except as otherwise set forth in this Agreement, no amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Lead Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Lead Borrower or the applicable Loan Party, as the case may be, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that, no such amendment, waiver or consent shall:
(a) extend or increase the Commitment of any Lender without the written consent of such Lender (it being understood that a waiver of any condition precedent set forth in SECTION 4.02 or the waiver of any Default, mandatory prepayment or mandatory reduction of the Commitments shall not constitute an extension or increase of any Commitment of any Lender);
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(b) postpone any date scheduled for, or reduce the amount of, any payment of principal, interest, fees or other amounts payable under the Loan Documents or reduce the amount of, waive or excuse any such payment or postpone the expiration of the Commitments or the Maturity Date, without the prior written consent of all Lenders directly affected thereby provided that, only the consent of the Required Lenders shall be necessary to amend the definition of Default Rate or to waive any obligation of the Borrowers to pay interest at the Default Rate;
(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 prior written consent of all Lenders directly affected thereby; provided that, only the consent of the Required Lenders shall be necessary to amend the definition of Default Rate or to waive any obligation of the Borrowers to pay interest at the Default Rate;
(d) change any provision of this SECTION 9.01, the definition of Required Lenders, Supermajority Consent of the Lenders, Supermajority Consent of the FILO Lenders or any other provision of any Loan Document specifying the number or percentage of Lenders required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, without the prior written consent of all Lenders directly affected thereby;
(e) other than in a transaction permitted under SECTION 6.05, release all or substantially all of the Collateral in any transaction or series of related transactions, without the prior written consent of all Lenders directly affected thereby; or
(f) other than in connection with a transaction permitted under SECTION 6.04 or SECTION 6.05, release any Loan Party from its obligations under any Loan Document or limit its liability in respect of such Loan Document, without the prior written consent of all Lenders directly affected thereby; or
(g) increase any advance rate under the Tranche A Borrowing Base or FILO Borrowing Base above the advance rates as in effect on the Closing Date, without the prior written consent of all Lenders directly affected thereby
(h) without the prior written Supermajority Consent of the Lenders, change the definition of the terms Availability or Tranche A Borrowing Base or FILO Borrowing Base or any component definition of any such terms if as a result thereof the amounts available to be borrowed by the Borrowers would be increased, provided that in the event that the FILO Lenders are affected by any such change described under this clause (h), the prior written Supermajority Consent of the FILO Lenders shall also be required; and provided, however, that the foregoing shall not limit the discretion of the Administrative Agent to change, establish or eliminate any Reserves or to add Inventory and Accounts acquired in a Permitted Acquisition to the Borrowing Base as provided herein; or
(i) without the prior written Supermajority Consent of the Lenders, modify the definition of Permitted Overadvance so as to increase the amount thereof, or to cause the
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aggregate Commitments (or the Commitment of any Lender) to be exceeded as a result thereof, or, except as provided in such definition, the time period for a Permitted Overadvance;
(j) without the prior written consent of all Lenders directly affected thereby, change SECTION 2.16(a)(i), SECTION 2.17, SECTION 2.18, SECTION 7.04, or SECTION 8.04 or amend or modify the ratable requirement of SECTION 2.21(b);
(k) without the prior written consent of all Lenders directly affected thereby, (i) subordinate the Obligations hereunder to any other Indebtedness, or (ii) except as provided by operation of Applicable Law or in the Intercreditor Agreement, subordinate the Liens granted hereunder or under the other Loan Documents to any other Lien; or
(l) without the prior written consent of all Lenders directly affected thereby, modify the definition of Excess Swingline Loans;
and provided further that (i) no amendment, waiver or consent shall, unless in writing and signed by each Issuing Bank in addition to the Lenders required above, affect the rights or duties of an Issuing Bank under this Agreement or any Letter of Credit application 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 Swingline Lender in addition to the Lenders required above, affect the rights or duties of the Swingline Lender under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent and the Collateral Agent in addition to the Lenders required above, affect the rights or duties of, or any fees or other amounts payable to, the Administrative Agent or the Collateral Agent under this Agreement or any other Loan Document, (iv) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto, (v) no Lender consent is required to effect an Extension (except as expressly provided in SECTION 2.27), (vi) modifications to SECTION 2.21 or any other provision requiring pro rata payments or sharing of payments in connection with any Extension, shall only require approval (to the extent any such approval is otherwise required) of the Required Lenders, (vii) no Lender consent is required to effect the Canadian Credit Facility (except as expressly provided in SECTION 2.26) and (viii) no Lender consent is required to effect any amendment or supplement to the Intercreditor Agreement (I) that is for the purposes of adding the holders of any Indebtedness constituting a Permitted Refinancing of the Term Loan Facility (or any agent or trustee of such holders) as parties thereto, as expressly contemplated by the terms of the Intercreditor Agreement (it being understood that any such amendment or supplement may make such other changes to the Intercreditor Agreement as, in the good faith determination of the Administrative Agent, are required to effectuate the foregoing and provided, that such other changes are not adverse, in any material respect, to the interests of the Lenders) and (II) that is expressly contemplated by Section 5.2(c) or the second paragraph of Section 7.4 of the Intercreditor Agreement (or the comparable provisions, if any, of any successor intercreditor agreement with respect to a Permitted Refinancing of the Term Loan Facility). Notwithstanding anything to the contrary herein, no Delinquent Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender (it being understood that any Commitments or Loans held or deemed held by any Delinquent Lender shall be excluded for a vote of the Lenders hereunder requiring any consent of the Lenders).
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Notwithstanding anything to the contrary contained in this SECTION 9.01, (a) in the event that the Lead Borrower shall request that this Agreement or any other Loan Document be modified, amended or waived in a manner which would require the consent of all Lenders directly affected thereby and such amendment is approved by the Required Lenders, but not by all the Lenders, the Lead Borrower and the Administrative Agent shall be permitted to amend this Agreement without the consent of the Lender or Lenders which did not agree to the modification or amendment requested by the Lead Borrower (such Lender or Lenders, collectively the Minority Lenders) subject to their providing for (i) the termination of the Commitment of each of the Minority Lenders, (ii) the addition to this Agreement of one or more other financial institutions which would qualify as an Eligible Assignee, subject to the reasonable approval of the Administrative Agent, or an increase in the Commitment of one or more of the Required Lenders, so that the Total Commitments after giving effect to such amendment shall be in the same amount as the aggregate Commitments immediately before giving effect to such amendment, (iii) if any Revolving Credit Loans are outstanding at the time of such amendment, the making of such additional Revolving Credit Loans by such new or increasing Lender or Lenders, as the case may be, as may be necessary to repay in full the outstanding Revolving Credit Loans (including principal, interest, fees and other amounts due and owing under the Loan Documents) of the Minority Lenders immediately before giving effect to such amendment and (iv) such other modifications to this Agreement or the Loan Documents as may be appropriate and incidental to the foregoing and (b) the Administrative Agent and the Lead Borrower may amend any Loan Document to correct administrative errors or omissions, or to effect administrative changes that are not adverse to any Lender and, notwithstanding anything to the contrary contained herein, such amendment shall become effective without any further consent of any other party to such Loan Document.
SECTION 9.02 Notices and Other Communications; Facsimile Copies.
(a) General. Unless otherwise expressly provided herein, all notices and other communications provided for hereunder or under any other Loan Document shall be in writing (including by facsimile transmission). All such written notices shall be mailed, faxed or delivered to the applicable address, facsimile number or electronic mail address, 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 any Loan Party, to it at The Gymboree Corporation, Attention: Kimberly Holtz MacMillan, Vice President and General Counsel, 500 Howard Street, San Francisco, CA 94105 (Telecopy No. 415-278-7562) (E-Mail: kimberly_macmillan@gymboree.com), with a copy to the attention of Jeffrey P. Harris, Chief Financial Officer, 500 Howard Street, San Francisco, CA 94105 (Telecopy No. 415-278-7196) (E-mail: jeff_harris@gymboree.com), and, with a copy to Ropes & Gray LLP, Prudential Tower, 800 Boylston Street, Boston, Massachusetts 02199-3600, Attention: Byung W. Choi, Esquire (Telecopy No. (617) 235-0452), (E-Mail: byung.choi@ropesgray.com); and
(ii) if to the Administrative Agent, the Collateral Agent or the Swingline Lender to Bank of America, N.A., 100 Federal Street, Boston, Massachusetts 02110, Attention: Rick Hill (Telecopy No. (617) 310-2156), (E-Mail:
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rick.hill@baml.com), with a copy to Morgan, Lewis & Bockius LLP, 225 Franklin Street, Boston, Massachusetts 02109, Attention: Matthew F. Furlong, Esquire (Telecopy No. (617) 341-7701), (E-Mail: mfurlong@morganlewis.com);
(iii) if to any other Credit Party, to it at its address (or telecopy number or electronic mail address) set forth on the signature pages hereto or on any Assignment and Acceptance.
All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the relevant party hereto and (ii) (A) if delivered by hand or by courier, when signed for by or on behalf of the relevant party hereto; (B) if delivered by mail, four (4) Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone; and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of SECTION 5.02), when delivered; provided that notices and other communications to the Administrative Agent, the Issuing Banks and the Swingline Lender pursuant to Article II shall not be effective until actually received by such Person. In no event shall a voice mail message be effective as a notice, communication or confirmation hereunder.
Notwithstanding the foregoing, any notice hereunder sent by e-mail shall be solely for the distribution of (i) routine communications such as financial statements and (ii) documents and signature pages for execution by the parties hereto, and for no other purpose. Unless the Administrative Agent otherwise prescribes, 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. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto.
(b) Effectiveness of Facsimile Documents and Signatures. Loan Documents may be transmitted and/or signed by facsimile or by electronic pdf copy. The effectiveness of any such documents and signatures shall, subject to Applicable Law, have the same force and effect as manually signed originals and shall be binding on all Loan Parties, the Administrative Agent, the Collateral Agent, the Issuing Banks, and the Lenders.
(c) Reliance by Agents and Lenders. The Administrative Agent, the Collateral Agent, the Issuing Banks and the Lenders shall be entitled to rely and act upon any notices (including telephonic Borrowing Requests) purportedly given by or on behalf of any 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 Borrowers shall indemnify the Credit Parties and each Related Person from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrowers in the absence of gross negligence or willful misconduct. All telephonic
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notices to the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.
SECTION 9.03 No Waiver; Cumulative Remedies.
No failure or delay by any Credit Party in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Credit Parties hereunder and under the other Loan Documents are cumulative and are not exclusive of any other rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by SECTION 9.01, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Revolving Credit Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether any Credit Party may have had notice or knowledge of such Default or Event of Default at the time.
SECTION 9.04 Attorney Costs and Expenses.
The Lead Borrower agrees (a) to pay or reimburse the Administrative Agent, the Collateral Agent and the Arrangers for all Credit Party Expenses incurred in connection with (i) the preparation, negotiation, syndication and execution of this Agreement and the other Loan Documents, and (ii) any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated thereby are consummated), and (iii) the consummation and administration of the transactions contemplated hereby and thereby, including, in each case, all reasonable fees and expenses of Morgan, Lewis & Bockius, LLP, and (b) to pay or reimburse the Administrative Agent, the Collateral Agent and each Lender for all Credit Party Expenses incurred in connection with the enforcement of any rights or remedies under this Agreement or the other Loan Documents (including, without limitation, all such costs and expenses incurred during any legal proceeding, including any proceeding under the Bankruptcy Code, and including all fees and expenses of counsel to the Administrative Agent, the Collateral Agent and, to the extent constituting Credit Party Expenses, the other Credit Parties). The agreements in this SECTION 9.04 shall survive the termination of the Commitments, repayment of all other Obligations and assignment of any portion of the Obligations. All amounts due under this SECTION 9.04 for Credit Party Expenses incurred after the Closing Date shall be paid within ten (10) Business Days of receipt by the Lead Borrower of an invoice relating thereto setting forth such Credit Party Expenses in reasonable detail. If any Loan Party fails to pay when due any Credit Party Expenses payable by it hereunder or under any Loan Document, such amount may be paid on behalf of such Loan Party by the Administrative Agent in its sole discretion, without notice to or consent from the Loan Parties, and any amounts so paid shall constitute Revolving Credit Loans hereunder.
SECTION 9.05 Indemnification by the Lead Borrower.
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Whether or not the transactions contemplated hereby are consummated, the Lead Borrower shall indemnify and hold harmless each Credit Party, their respective Related Parties and their respective Affiliates (collectively the Indemnitees) from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements (including fees and expenses of one counsel to the Administrative Agent, the Collateral Agent, the Arranger and the Lenders (and, if reasonably necessary, one local counsel in each applicable jurisdiction for all Indemnities, taken as a whole, and, in the event of any actual conflict of interest, one additional counsel of each type for all similarly situated affected parties, taken as a whole) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Loan Document, the Existing Credit Agreement or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) any Commitment, Revolving Credit Loan (including Swingline Loans) or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by an Issuing Bank 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), or (c) any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by the Lead Borrower, any Subsidiary or any other Loan Party, or any Environmental Liability related in any way to the Lead Borrower, any Subsidiary or any other Loan Party, or (d) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto and, in each case, whether or not caused by or arising, in whole or in part, out of the negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements (i) resulted from the gross negligence, bad faith, or willful misconduct of such Indemnitee or of any Affiliate or Related Party of such Indemnitee, as determined by the final non-appealable judgment of a court of competent jurisdiction, (ii) are relating to disputes amongst Indemnitees other than (1) any claim against an Indemnitee or its Related Parties in its capacity or in fulfilling its role as Administrative Agent, Collateral Agent, Arranger or similar role and (2) any claim arising out of the any act or omission of the Lead Borrower or any of its Affiliates or (iii) relate to Taxes (other than Taxes relating to liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses or disbursements indemnified under this SECTION 9.05). No Indemnitee shall be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information transmission systems in connection with this Agreement, nor shall any Indemnitee or any Loan Party have any liability and each party hereby waives, any claim against any other party to this Agreement or any Indemnitee, for any special, punitive, indirect or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date). In the case of an investigation, litigation or other proceeding to which the indemnity in this SECTION 9.05 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors,
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stockholders or creditors or an Indemnitee or any other Person, whether or not any Indemnitee is otherwise a party thereto and whether or not any of the transactions contemplated hereunder or under any of the other Loan Documents is consummated. All amounts due under this SECTION 9.05 shall be paid within ten (10) Business Days after demand therefor; provided, however, that such Indemnitee shall promptly refund such amount to the extent that there is a final judicial or arbitral determination that such Indemnitee was not entitled to indemnification or contribution rights with respect to such payment pursuant to the express terms of this SECTION 9.05. The agreements in this SECTION 9.05 shall survive the resignation of the Administrative Agent or the Collateral Agent, the replacement of any Lender, the termination of the Commitments, the repayment, satisfaction or discharge of all the other Obligations and the assignment of any of the Obligations to a third party.
SECTION 9.06 Payments Set Aside.
To the extent that any payment by or on behalf of the Lead Borrower is made to any Credit Party, or any Credit Party exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Credit Party in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under the Bankruptcy Code or any other debtor relief law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by the Administrative Agent or the Collateral 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 Effective Rate from time to time in effect.
SECTION 9.07 Successors and Assigns.
The provisions of this Agreement shall be binding upon and inure to the benefit of the Secured Parties, the Loan Parties and their respective successors and assigns permitted hereby, except that no Loan Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee, (ii) by way of participation in accordance with the provisions of SECTION 9.07(d) or SECTION 9.07(e), or (iii) by way of pledge or assignment of a security interest subject to the restrictions of SECTION 9.07(g) or SECTION 9.07(h) (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 Secured Parties, the Loan Parties and their respective successors and assigns permitted hereby, Participants to the extent provided in SECTION 9.07(e) and, to the extent expressly contemplated hereby, the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(a) (i) Subject to the conditions set forth in paragraph (a)(ii) below, any Lender may 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 and the Revolving Credit
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Loans (including for purposes of this SECTION 9.07(a), participations in Letters of Credit and in Swingline Loans) at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:
(A) the Lead Borrower, provided that no consent of the Lead Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if a Specified Default has occurred and is continuing, any Eligible Assignee;
(B) the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment to a Lender, an Affiliate of a Lender, or an Approved Fund; and
(C) the Issuing Banks and the Swingline Lender for any assignment of the Tranche A Commitments that increases the obligation of the assignee to participate in exposure under one or more Letters of Credit or Swingline Loans (in each case, whether or not then outstanding);
(ii) Assignments shall be subject to the following additional conditions:
(A) except in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lenders Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than (x) with respect to Tranche A Commitments, $5,000,000 or (y) in the case of FILO Commitments, $1,000,000 unless each of the Lead Borrower and the Administrative Agent otherwise consents, provided that (1) no such consent of the Lead Borrower shall be required if a Specified Default has occurred and is continuing and (2) such amounts shall be aggregated in respect of each Lender and its Affiliates or Approved Funds, if any;
(B) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500 (unless such fee is waived by the Administrative Agent);
(C) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an administrative questionnaire satisfactory in form and content to the Administrative Agent; and
(D) the assignment shall be recorded in the Register.
(b) Subject to acceptance and recording thereof by the Administrative Agent pursuant to SECTION 9.07(c), from and after the effective date specified in each Assignment and Acceptance, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a
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Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (except to the extent provided in SECTION 8.09, and, in the case of an Assignment and Acceptance 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 SECTION 9.05 with respect to facts and circumstances occurring prior to the effective date of such assignment). Upon request, and the surrender by the assigning Lender of its Note, the Borrowers (at their 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 clause (b) 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 9.07(d).
(c) The Administrative Agent, acting solely for this purpose as an agent of the Borrowers, shall maintain at the Administrative Agents Office a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and related interest amounts) of the Revolving Credit Loans (including Swingline Loans) and Obligations with respect to Letters of Credit owing to, each Lender pursuant to the terms hereof from time to time (the Register). The entries in the Register shall be conclusive, absent manifest error, and the Administrative Agent, the Borrowers and the Credit Parties shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as the owner of the related Commitments and Obligations as set forth next to the name of such Person in the Register, notwithstanding notice to the contrary. The Register shall be available for inspection by any Borrower and any Credit Party, at any reasonable time and from time to time upon reasonable prior notice.
(d) Any Lender may at any time, without the consent of, or notice to, the Borrowers or the Administrative Agent, sell participations to any Person (other than (x) any Loan Party, (y) any natural person, or (z) the Sponsors or any of their respective Affiliates (other than a Sponsor Related Investment Funds)) (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 Revolving Credit Loans (including such Lenders participations in Letters of Credit and/or Swingline Loans) owing to it); provided that (i) such Lenders obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrowers and the other Credit Parties shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement or the other Loan Documents; 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 SECTION 9.01(b), (c), (e) or (f) that directly affects such Participant. Subject to SECTION 9.07(e), the Borrowers agree that each Participant shall be entitled to the benefits of SECTION 2.14 and SECTION 2.23 (subject to the terms thereof as if it were a Lender) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to SECTION 9.07(b). To the extent permitted by Applicable Law, each Participant also shall be entitled to the benefits of
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SECTION 9.09 as though it were a Lender; provided that such Participant agrees to be subject to SECTION 8.04 as though it were a Lender.
(e) Each Lender that sells a participation shall, acting solely for this purposes as an agent of the Borrowers, maintain a register on which it enters the name and address of each participant and the principal amounts (and interest thereon) of each participants interest in the Loans or other Obligations under this Agreement (the Participant Register). Notwithstanding any other provision of this Agreement, no sale, grant or other transfer of a participation shall be effective until recorded in the Participant Register. The entries in Participant Register shall be conclusive and the Borrower, Lenders and each Agent 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 notice to the contrary. The Participant register shall be available for inspection by the Borrower and any Credit Party at any reasonable time and from time to time upon reasonable prior notice.
(f) A Participant shall not be entitled to receive any greater payment under SECTION 2.14 or SECTION 2.23 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Lead Borrowers prior written consent.
(g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
(h) Notwithstanding anything to the contrary contained herein, (1) any Lender may in accordance with Applicable Law create a security interest in all or any portion of the Revolving Credit Loans owing to it and the Note, if any, held by it and (2) any Lender that is a fund that invests in loans may create a security interest in all or any portion of the Revolving Credit Loans owing to it and the Note, if any, held by it to the trustee for holders of obligations owed, or securities issued, by such fund as security for such obligations or securities; provided that unless and until such trustee actually becomes a Lender in compliance with the other provisions of this SECTION 9.07, (i) no such pledge shall release the pledging Lender from any of its obligations under the Loan Documents and (ii) such trustee shall not be entitled to exercise any of the rights of a Lender under the Loan Documents even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise.
(i) Notwithstanding anything to the contrary contained herein, any Issuing Bank or the Swingline Lender may, upon thirty (30) days notice to the Lead Borrower and the Lenders, resign as an Issuing Bank or the Swingline Lender, respectively; provided that on or prior to the expiration of such 30-day period with respect to such resignation, the relevant Issuing Bank or the Swingline Lender shall have identified a successor Issuing Bank or Swingline Lender reasonably acceptable to the Lead Borrower willing to accept its appointment as successor Issuing Bank or Swingline Lender, as applicable. In the event of any such resignation of an Issuing Bank or the Swingline Lender, the Lead Borrower shall be entitled to appoint from among the Lenders
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willing to accept such appointment a successor Issuing Bank or Swingline Lender hereunder; provided that no failure by the Lead Borrower to appoint any such successor shall affect the resignation of the relevant Issuing Bank or the Swingline Lender, as the case may be, except as expressly provided above. If an Issuing Bank resigns as an Issuing Bank, it shall retain all the rights and obligations of an Issuing Bank hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as an Issuing Bank and all Obligations with respect thereto (including the right to require the Lenders to make Prime Rate Loans or fund risk participations in Letters of Credit). If the Swingline Lender resigns as Swingline Lender, it shall retain all the rights of the Swingline Lender provided for hereunder with respect to Swingline Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Prime Rate Loans or fund risk participations in outstanding Swingline Loans.
SECTION 9.08 Confidentiality.
Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information, except that Information may be disclosed (a) to its Affiliates and its Affiliates directors, officers, employees, trustees, investment advisors and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and shall agree to keep such Information confidential); (b) to the extent requested by any Governmental Authority; (c) to the extent required by Applicable Law or regulations or by any subpoena or similar legal process; (d) to any other party to this Agreement; (e) subject to an agreement containing provisions substantially the same as those of this SECTION 9.08 (or as may otherwise be reasonably acceptable to the Lead Borrower), to any pledgee referred to in SECTION 9.07(g), counterparty to a Swap Contract, Eligible Assignee of or Participant in, or any prospective Eligible Assignee of or Participant in, any of its rights or obligations under this Agreement; (f) with the written consent of the Lead Borrower; (g) to the extent such Information becomes publicly available other than as a result of a breach of this SECTION 9.08; (h) to any Governmental Authority or examiner (including the National Association of Insurance Commissioners or any other similar organization) regulating any Lender; (i) to any rating agency when required by it (it being understood that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Information relating to the Loan Parties received by it from such Lender); (j) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder; (k) to the extent such Information becomes available to any Credit Party on a nonconfidential basis from a source other than the Loan Parties; and (l) to the extent that such Information is independently developed by such Credit Party. In addition, the Credit Parties may disclose the existence of this Agreement and information about this Agreement to market data collectors, similar service providers to the lending industry, and service providers to the Credit Parties in connection with the administration and management of this Agreement, the other Loan Documents, the Commitments, and the Credit Extensions. For the purposes of this SECTION 9.08, Information means all information received from any Loan Party relating to any Loan Party or its business, other than any such information that is publicly available to any Credit Party prior to disclosure by any Loan Party other than as a result of a breach of this SECTION 9.08; provided that, in the case of information received from a Loan Party after the Closing Date, such information is clearly identified at the
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time of delivery as confidential or (ii) is delivered pursuant to SECTION 5.01, SECTION 5.02 or SECTION 5.03 hereof.
SECTION 9.09 Setoff.
In addition to any rights and remedies of the Lenders provided by Applicable Law, upon the occurrence and during the continuance of any Event of Default, each Lender and its Affiliates is authorized at any time and from time to time, without prior notice to the Lead Borrower or any other Loan Party, any such notice being waived by the Lead Borrower (on its own behalf and on behalf of each Loan Party and its Subsidiaries) to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other Indebtedness at any time owing by, such Lender and its Affiliates to or for the credit or the account of the respective Loan Parties against any and all Obligations owing to such Lender and its Affiliates hereunder or under any other Loan Document or document governing any Other Liabilities, now or hereafter existing, irrespective of whether or not such Lender or Affiliate shall have made demand under this Agreement or any other Loan Document or document governing any Other Liabilities and although such Obligations may be contingent or unmatured or denominated in a currency different from that of the applicable deposit or Indebtedness. Each Lender agrees promptly to notify the Lead Borrower and the Administrative Agent after any such set off and application made by such Lender; provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of the Administrative Agent and each Lender under this SECTION 9.09 are in addition to other rights and remedies (including other rights of setoff) that the Agents and such Lender may have.
SECTION 9.10 Interest Rate Limitation.
Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by Applicable Law (the Maximum Rate). If any Credit Party shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Revolving Credit Loans (including Swingline Loans) or, if it exceeds such unpaid principal, refunded to the Borrowers. In determining whether the interest contracted for, charged, or received by a Credit Party exceeds the Maximum Rate, such Person may, to the extent permitted by Applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.
SECTION 9.11 Counterparts.
This Agreement and each other Loan Document may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery by telecopier or by electronic .pdf copy of an executed counterpart of a signature page to this Agreement and each other Loan Document shall be effective as delivery of an original executed counterpart of this Agreement and such other Loan Document. The Administrative Agent and the Collateral Agent may also require that any such
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documents and signatures delivered by telecopier be confirmed by a manually signed original thereof; provided that the failure to request or deliver the same shall not limit the effectiveness of any document or signature delivered by telecopier.
SECTION 9.12 Integration.
This Agreement, together with the Fee Letter and the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Credit Parties in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.
SECTION 9.13 Severability.
If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 9.14 Governing Law.
(a) THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT IF THE LAWS OF ANY JURISDICTION OTHER THAN NEW YORK SHALL GOVERN IN REGARD TO THE VALIDITY, PERFECTION OR EFFECT OF PERFECTION OF ANY LIEN OR IN REGARD TO PROCEDURAL MATTERS AFFECTING ENFORCEMENT OF ANY LIENS IN COLLATERAL, SUCH LAWS OF SUCH OTHER JURISDICTIONS SHALL CONTINUE TO APPLY TO THAT EXTENT.
(b) ANY LEGAL ACTION OR PROCEEDING ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH LOAN PARTY AND EACH CREDIT PARTY CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH BORROWER, EACH FACILITY GUARANTOR AND EACH CREDIT PARTY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
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GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION OR OTHER JURISDICTION CHOSEN BY THE ADMINISTRATIVE AGENT IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO.
SECTION 9.15 Waiver of Right to Trial by Jury.
EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 9.15 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
SECTION 9.16 Binding Effect.
This Agreement shall become effective when it shall have been executed by the Borrowers and the Administrative Agent shall have been notified by each Lender, Swingline Lender and Issuing Bank that each such Lender, Swingline Lender and Issuing Bank has executed it and thereafter shall be binding upon and inure to the benefit of each Borrower and each Credit Party and their respective successors and assigns, except that no Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders except as otherwise permitted hereby.
SECTION 9.17 Judgment Currency.
If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder or any other Loan Document in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given. The obligation of each Borrower in respect of any such sum due from it to the Administrative Agent or the Lenders hereunder or under the other Loan Documents shall, notwithstanding any judgment in a currency (the Judgment Currency) other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement (the Agreement Currency), be discharged only to the extent that on the Business Day following receipt by the Administrative Agent of any sum adjudged to be so due in the Judgment Currency, the Administrative Agent may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to the Administrative Agent from any Borrower in the Agreement Currency, such Borrower agrees, as
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a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent or the Person to whom such obligation was owing against such loss. If the amount of the Agreement Currency so purchased is greater than the sum originally due to the Administrative Agent in such currency, the Administrative Agent agrees to return the amount of any excess to such Borrower (or to any other Person who may be entitled thereto under Applicable Law).
SECTION 9.18 Lender Action.
Each Lender agrees that it shall not take or institute any actions or proceedings, judicial or otherwise, for any right or remedy against any Loan Party or any other obligor under any of the Loan Documents (including the exercise of any right of setoff, rights on account of any bankers lien or similar claim or other rights of self-help), or institute any actions or proceedings, or otherwise commence any remedial procedures, with respect to any Collateral or any other property of any such Loan Party, without the prior written consent of the Administrative Agent. The provision of this SECTION 9.18 are for the sole benefit of the Lenders and shall not afford any right to, or constitute a defense available to, any Loan Party.
SECTION 9.19 USA PATRIOT ACT, ETC.; PROCEEDS OF CRIME ACT.
Each Lender hereby notifies the Loan Parties that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the Act) and other know your customer rules, regulations, laws and policies (together with the Act, collectively, the KYC Provisions), it is required to obtain, verify and record information that identifies the Loan Parties, which information includes the name and address of each Loan Party and other information that will allow such Lender to identify such Loan Party in accordance with KYC Provisions. Each Loan Party is in compliance, in all material respects, with the KYC Provisions and the Proceeds of Crime Act. No part of the proceeds of the Revolving Credit 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.
SECTION 9.20 No Advisory or Fiduciary Responsibility.
In connection with all aspects of each transaction contemplated hereby, the Loan Parties each acknowledge and agree that: (i) the credit facility provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arms-length commercial transaction between the Loan Parties, on the one hand, and the Credit Parties, on the other hand, and each of the Loan Parties is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, each Credit Party is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Loan Parties or any of their respective Affiliates, stockholders, creditors or employees or any other Person; (iii) none of the Credit Parties has assumed or will assume an
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advisory, agency or fiduciary responsibility in favor of the Loan Parties with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether any of the Credit Parties has advised or is currently advising any Loan Party or any of its Affiliates on other matters) and none of the Credit Parties has any obligation to any Loan Party or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Credit Parties and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Loan Parties and their respective Affiliates, and none of the Credit Parties has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Credit Parties have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and each of the Loan Parties has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate. Each of the Loan Parties hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against each of the Credit Parties with respect to any breach or alleged breach of agency or fiduciary duty.
SECTION 9.21 Foreign Asset Control Regulations.
Neither of the advance of the Revolving Credit Loans nor the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the Trading With the Enemy Act) or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the Foreign Assets Control Regulations) or any enabling legislation or executive order relating thereto (which for the avoidance of doubt shall include, but shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the Executive Order) and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)). Furthermore, none of the Borrowers or their Subsidiaries (a) is or will become a blocked person as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations or (b) knowingly engages or will engage in any dealings or transactions, or be otherwise associated, with any such blocked person or in any manner violative of any such order.
SECTION 9.22 Survival.
All covenants, agreements, indemnities, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Revolving Credit Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and, notwithstanding that any Credit Party may have had notice or knowledge of any Default or Event of Default or incorrect representation or warranty at the time any credit is extended
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hereunder, and shall continue in full force and effect until (i) the Commitments have expired or been terminated, (ii) the principal of and interest on each Revolving Credit Loan (including Swingline Loans) and all fees and other Obligations (other than contingent indemnity obligations with respect to then unasserted claims) shall have been paid in full, (iii) all Letters of Credit shall have expired or terminated (or been cash collateralized or backstopped in a manner reasonably satisfactory to the applicable Issuing Bank) and (iv) all Letter of Credit Outstandings have been reduced to zero (or cash collateralized in a manner reasonably satisfactory to the applicable Issuing Bank). In connection with the termination of this Agreement and the release and termination of the security interests in the Collateral, the Administrative Agent, on behalf of itself and the other Credit Parties, may require such indemnities as they shall reasonably deem necessary or appropriate to protect the Credit Parties against (x) loss on account of credits previously applied to the Obligations that may subsequently be reversed or revoked, (y) any obligations that may thereafter arise with respect to the Other Liabilities, and (z) any Obligations that may thereafter arise under SECTION 9.04 or SECTION 9.05 hereof.
SECTION 9.23 Press Releases and Related Matters.
Each Loan Party consents to the publication by the Administrative Agent of customary trade advertising material in tombstone format relating to the financing transactions contemplated by this Agreement using any Loan Partys name, and with the consent of the Lead Borrower, logo or trademark. The Administrative Agent shall provide a draft reasonably in advance of any advertising material to the Lead Borrower for review and comment prior to the publication thereof. The Administrative Agent and the Lenders reserve the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements.
SECTION 9.24 Additional Waivers.
(a) The Obligations are the joint and several obligation of each Loan Party. To the fullest extent permitted by Applicable Law, the obligations of each Loan Party hereunder shall not be affected by (i) the failure of any Credit Party to assert any claim or demand or to enforce or exercise any right or remedy against any other Loan Party under the provisions of this Agreement, any other Loan Document or under Applicable Law, (ii) any rescission, waiver, amendment or modification of, or any release of any Loan Party from, any of the terms or provisions of, this Agreement, any other Loan Document, or (iii) the failure to perfect any security interest in, or the release of, any of the Collateral or other security held by or on behalf of the Collateral Agent, any Secured Party or any other Credit Party.
(b) To the fullest extent permitted by Applicable Law, the obligations of each Loan Party to pay the Obligations in full hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the payment in full in cash of the Obligations after the termination of all Commitments to any Loan Party under any Loan Document), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any of the Obligations or otherwise. Without limiting the generality of the foregoing, to the fullest extent permitted by Applicable Law, the obligations of each Loan Party hereunder shall not be discharged or impaired or otherwise affected by the failure of
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the Administrative Agent, any Secured Party or any other Credit Party to assert any claim or demand or to enforce any remedy under this Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, any default, failure or delay, willful or otherwise, in the performance of any of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Loan Party or that would otherwise operate as a discharge of any Loan Party as a matter of law or equity (other than the payment in full in cash of all the Obligations after termination of all Commitments to any Loan Party under any Loan Document).
(c) To the fullest extent permitted by Applicable Law, each Loan Party waives any defense based on or arising out of any defense of any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any other Loan Party, other than the payment in full in cash of all the Obligations after the termination of all Commitments to any Loan Party under any Loan Document. To the fullest extent permitted by Applicable Law, the Collateral Agent, each Secured Party and the other Credit Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with any other Loan Party, or exercise any other right or remedy available to them against any other Loan Party, without affecting or impairing in any way the liability of any Loan Party hereunder except to the extent that all the Obligations have been indefeasibly paid in full in cash and performed in full after the termination of Commitments to any Loan Party under any Loan Document. Pursuant to, and to the fullest extent permitted by, Applicable Law, each Loan Party waives any defense arising out of any such election even though such election operates, pursuant to Applicable Law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Loan Party against any other Loan Party, as the case may be, or any security. To the fullest extent permitted by Applicable Law, each Loan Party waives any and all suretyship defenses.
(d) Except as otherwise specifically provided herein, each Loan Party is obligated to repay the Obligations as joint and several obligors under this Agreement. Upon payment by any Loan Party of any Obligations, all rights of such Loan Party against any other Loan Party arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior payment in full in cash of all the Obligations (other than contingent indemnity obligations for then unasserted claims) and the termination of all Commitments to any Loan Party under any Loan Document. If any amount shall erroneously be paid to any Loan Party on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of any Loan Party, such amount shall be held in trust for the benefit of the Credit Parties and shall forthwith be paid to the Administrative Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of this Agreement and the other Loan Documents. Subject to the foregoing, to the extent that any Loan Party shall, under this Agreement as a joint and several obligor, repay any of the Obligations constituting Revolving Credit Loans made to another Loan Party hereunder (an Accommodation Payment), then the Loan Party making such Accommodation Payment shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Loan Parties in an amount equal to a fraction of such Accommodation Payment, the numerator of which fraction is such other Loan Partys Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Loan Parties; provided that such rights of contribution and
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indemnification shall be subordinated to the prior payment in full, in cash, of all of the Obligations. As of any date of determination, the Allocable Amount of each Loan Party shall be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Loan Party hereunder without (a) rendering such Loan Party insolvent within the meaning of Section 101 (31) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act (UFTA) or Section 2 of the Uniform Fraudulent Conveyance Act (UFCA), (b) leaving such Loan Party with unreasonably small capital or assets, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving such Loan Party unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA.
(e) Each Loan Party understands and acknowledges that if the Collateral Agent or any other Secured Party forecloses judicially or nonjudicially against any real property security for the Obligations, that foreclosure could impair or destroy any ability that such Loan Party may have to seek reimbursement, contribution, or indemnification from the other Loan Parties or others based on any right such Loan Party may have of subrogation, reimbursement, contribution, or indemnification for any amounts paid by such Loan Party hereunder or under the Guaranty. Each Loan Party further understands and acknowledges that in the absence of this paragraph, such potential impairment or destruction of such Loan Partys rights, if any, may entitle such Loan Party to assert a defense to its obligations based on Section 580d of the California Code of Civil Procedure as interpreted in Union Bank v. Gradsky, 265 Cal. App. 2d 40 (1968). By executing the Loan Documents, each Loan Party freely, irrevocably, and unconditionally: (i) waives and relinquishes that defense and agrees that such Loan Party will be fully liable under the Loan Documents even though the Collateral Agent or any other Secured Party may foreclose, either by judicial foreclosure or by exercise of power of sale, any deed of trust securing the Obligations; (ii) agrees that such Loan Party will not assert that defense in any action or proceeding which the Administrative Agent, the Collateral Agent or any other Secured Party may commence to enforce the Loan Documents; (iii) acknowledges and agrees that the rights and defenses waived by such Loan Party herein include any right or defense that such Loan Party may have or be entitled to assert based upon or arising out of any one or more of §§ 580a, 580b, 580d, or 726 of the California Code of Civil Procedure or § 2848 of the California Civil Code; and (iv) acknowledges and agrees that the Secured Parties are relying on this waiver in creating the Obligations, and that this waiver is a material part of the consideration which the Secured Parties are receiving for creating the Obligations.
(f) Each Loan Party hereby agrees to keep each other Loan Party fully apprised at all times as to the status of its business, affairs, finances, and financial condition, and its ability to perform its Obligations under the Loan Documents, and in particular as to any adverse developments with respect thereto. Each Loan Party hereby agrees to undertake to keep itself apprised at all times as to the status of the business, affairs, finances, and financial condition of each other Loan Party, and of the ability of each other Loan Party to perform its Obligations under the Loan Documents, and in particular as to any adverse developments with respect to any thereof. Each Loan Party hereby agrees, in light of the foregoing mutual covenants to inform each other, and to keep themselves and each other informed as to such matters, that the Credit Parties shall have no duty to inform any Loan Party of any information pertaining to the business, affairs, finances, or financial condition of any other Loan Party, or pertaining to the ability of any other Loan Party to perform its Obligations under the Loan Documents, even if such information is adverse, and even if such information might influence the decision of one or more of the Loan Parties to continue to be jointly and severally liable for, or to
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provide Collateral for, the Obligations of one or more of the other Loan Parties. To the fullest extent permitted by applicable law, each Loan Party hereby expressly waives any duty of the Credit Parties to inform any Loan Party of any such information.
(g) Each Loan Party waives any right or defense it may have at law or equity, including California Code of Civil Procedure §580a, to a fair market value hearing or action to determine a deficiency judgment after a foreclosure.
SECTION 9.25 Intercreditor Agreement.
Each of the Loan Parties, the Agents, the Lenders and the other Credit Parties acknowledges that it has received a copy of the Intercreditor Agreement and that the exercise of certain of the Agents rights and remedies hereunder may be subject to, and restricted by, the provisions of the Intercreditor Agreement. Except as specified herein, nothing contained in the Intercreditor Agreement shall be deemed to modify any of the provisions of this Agreement and the other Loan Documents, which, as among the Loan Parties, the Agents, the Lenders and the other Credit Parties shall remain in full force and effect.
SECTION 9.26 Assumption by Company.
The Company, by its signature below, hereby confirms that, as a result of its merger with Giraffe Acquisition Corporation, it hereby assumes all of the rights and obligations of Giraffe Acquisition Corporation under this Agreement and the other Loan Documents (in furtherance of, and not in lieu of, any assumption or deemed assumption as a matter of law) and hereby joins this Agreement as the Lead Borrower hereunder and joins the other Loan Documents.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
GIRAFFE ACQUISITION CORPORATION (which on the Closing Date shall be merged with and into The Gymboree Corporation, with The Gymboree Corporation surviving such merger as the Lead Borrower), | ||
By: | /s/ Jordan Hitch | |
Name: | Jordan Hitch | |
Title: | Secretary & Vice President | |
The undersigned hereby confirms that, as a result of its merger with Giraffe Acquisition Corporation, it hereby assumes all of the rights and obligations of Giraffe Acquisition Corporation under this Agreement (in furtherance of, and not in lieu of, any assumption or deemed assumption as a matter of law) and hereby agrees to be joined to this Agreement as the Lead Borrower hereunder. | ||
THE GYMBOREE CORPORATION, as Lead Borrower and as Borrower | ||
By: | /s/ Matthew K. McCauley | |
Name: | Matthew K. McCauley | |
Title: | Chief Executive Officer |
Signature Page to Credit Agreement
GYM-CARD, LLC, as a Borrower | ||
By: | /s/ Matthew K. McCauley | |
Name: | Matthew K. McCauley | |
Title: | Chief Executive Officer & President | |
GYM-MARK, INC., as a Borrower | ||
By: | /s/ Matthew K. McCauley | |
Name: | Matthew K. McCauley | |
Title: | Chief Executive Officer | |
GYMBOREE MANUFACTURING, INC., as a Borrower | ||
By: | /s/ Matthew K. McCauley | |
Name: | Matthew K. McCauley | |
Title: | Chief Executive Officer | |
GYMBOREE OPERATIONS, INC., as a Borrower | ||
By: | /s/ Matthew K. McCauley | |
Name: | Matthew K. McCauley | |
Title: | Chief Executive Officer | |
GYMBOREE PLAY PROGRAMS, INC., as a Borrower | ||
By: | /s/ Matthew K. McCauley | |
Name: | Matthew K. McCauley | |
Title: | Chief Executive Officer | |
GYMBOREE RETAIL STORES, INC., as a Borrower | ||
By: | /s/ Matthew K. McCauley | |
Name: | Matthew K. McCauley | |
Title: | Chief Executive Officer |
Signature Page to Credit Agreement
S.C.C. WHOLESALE, INC., as a Borrower | ||
By: | /s/ Matthew K. McCauley | |
Name: | Matthew K. McCauley | |
Title: | Chief Executive Officer & President |
Signature Page to Credit Agreement
FACILITY GUARANTORS:
GIRAFFE INTERMEDIATE B, INC. as a Facility Guarantor | ||
By: | /s/ Jordan Hitch | |
Name: | Jordan Hitch | |
Title: | Secretary & Vice President |
Signature Page to Credit Agreement
AGENTS: | ||
BANK OF AMERICA, N.A., as Administrative Agent, as Collateral Agent, and as Issuing Bank | ||
By: | /s/ Richard D. Hill, Jr. | |
Name: | Richard D. Hill, Jr. | |
Title: | Managing Director | |
Address: 100 Federal Street, 9th Floor Boston, Massachusetts 02110 Attn: Rick Hill Telephone: 617-434-4080 Telecopy: 617-434-4131 |
Signature Page to Credit Agreement
LENDERS: | ||
BANK OF AMERICA, N.A., as Swingline Lender, and as a Lender | ||
By: | /s/ Richard D. Hill, Jr. | |
Name: | Richard D. Hill, Jr. | |
Title: | Managing Director | |
Address: 100 Federal Street, 9th Floor Boston, Massachusetts 02110 Attn: Rick Hill Telephone: 617-434-4080 Telecopy: 617-434-4131 | ||
Capital One Leverage Finance Corp., as a Lender | ||
By: | /s/ Michael S. Burns | |
Name: | Michael S. Burns | |
Title: | Senior Vice President | |
CIT BANK, as a Lender | ||
By: | /s/ Benjamin Haslam | |
Name: | Benjamin Haslam | |
Title: | Authorized Signatory | |
SunTrust Bank, as a Lender | ||
By: | /s/ Jamie Hurley | |
Name: | Jamie Hurley | |
Title: | Vice President | |
TD BANK, N.A., as a Lender | ||
By: | /s/ William H. Moul, Jr. | |
Name: | William H. Moul, Jr. | |
Title: | Vice President |
Signature Page to Credit Agreement
U.S. BANK NATIONAL ASSOCIATION, as a Lender | ||
By: | /s/ Jeffrey S. Gruender | |
Name: | Jeffrey S. Gruender | |
Title: | Vice President Asset Based Finance |
Signature Page to Credit Agreement
Exhibit 10.11
MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT (this Agreement) is entered into as of October 23, 2010, by and among (i) Giraffe Holding, Inc., a Delaware corporation (Parent), (ii) Giraffe Acquisition Corporation, a Delaware corporation, (Acquisition Sub) and (iii) Bain Capital Partners, LLC (Bain or the Manager). As used herein, Company means, prior to the Merger, Acquisition Sub and its subsidiaries (if any) and, after the Merger, Gymboree and its subsidiaries.
RECITALS
WHEREAS, Parent owns all of the outstanding stock of Acquisition Sub, and Parent and Acquisition Sub have entered into an Agreement and Plan of Merger, dated as of October 11, 2010 (the Merger Agreement), among (i) Parent, (ii) Acquisition Sub and (iii) The Gymboree Corporation, a Delaware corporation (Gymboree), pursuant to which Acquisition Sub will merge with and into Gymboree (the Merger) on the terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS, in connection with the Merger and related transactions (including the Merger Agreement), the Manager provided advice, analysis and assistance, including without limitation with respect to due diligence investigations and the structuring and negotiation of debt facilities and other matters (the Financial Advisory Services); and
WHEREAS, the Company desires to retain the Manager to provide management, consulting and financial and other advisory services (Services) to the Company, and the Manager is willing to provide such services on the terms set forth below.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Services. The Manager hereby agrees that it will provide the following Services to Parent and/or the Company:
(a) advice in connection with the negotiation and consummation of agreements, contracts, documents and instruments necessary to provide Parent and/or the Company with financing on terms and conditions satisfactory to Parent and/or the Company, as applicable;
(b) financial, managerial and operational advice in connection with day-to-day operations, including, without limitation, advice with respect to the development and implementation of strategies for improving the operating, marketing and financial performance of the Company;
(c) advice in connection with financing, acquisition, disposition, merger, business combination and change of control transactions involving Parent and/or the Company (however structured); and
(d) such other services (which may include financial and strategic planning and analysis, consulting services, human resources and executive recruitment services and other services) as the Manager, on the one hand, and Parent and the Company, on the other hand, may from time to time agree to in writing.
The Manager will devote, in its discretion, such time and efforts to the performance of services contemplated hereby as the Manager deems reasonably necessary or appropriate; provided, however, that no minimum number of hours is required to be devoted by the Manager on a weekly, monthly, annual or other basis. Parent and the Company each acknowledge that the Managers services are not exclusive to Parent or the Company and that the Manager will render similar services to other Persons. The Manager, Parent and the Company understand that Parent and/or the Company may, at times, engage one or more investment bankers or financial advisers to provide services in addition to, but not in lieu of, Services provided by the Manager under this Agreement. In providing services to Parent and/or the Company, the Manager will act as an independent contractor and it is expressly understood and agreed that this Agreement is not intended to create, and does not create, any partnership, agency, joint venture or similar relationship and that no party hereto has the right or ability to contract for or on behalf of any other party hereto or to effect any transaction for the account of any other party hereto.
2. Payment of Fees.
(a) The Company will pay to the Manager (or such affiliates of the Manager as the Manager may designate), in consideration of the Manager providing the Financial Advisory Services, an aggregate transaction fee (the Transaction Fee) in the amount of $17,000,000, such fee being payable on the earlier of (i) the effective date of the Merger (the Closing Date) and (ii) the date the Merger Agreement is terminated.
(b) During the Term (as such term is defined in Section 3 hereof), the Company will pay to the Manager (or such affiliates of the Manager as the Manager may designate), an aggregate annual periodic fee (the Periodic Fee) of $3,000,000 in exchange for the ongoing Services provided by the Manager under this Agreement, such fee being payable by the Company quarterly in advance on or before the start of each calendar quarter; provided, however, that the Company will pay the Periodic Fee for the period from the date hereof through December 31, 2010 on the Closing Date. The Periodic Fee will be prorated for any partial period of less than three months. The Manager may elect in its sole discretion to defer the receipt of all or a portion of the Periodic Fee; provided, that any such election to defer shall be made in accordance with and subject to the applicable requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder.
(c) During the Term, the Manager will advise the Company in connection with financing, acquisition, disposition and change of control transactions involving the Company or any of its direct or indirect subsidiaries (however structured), and the
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Company will pay to the Manager (or such affiliates of the Manager as the Manager may designate) an aggregate fee (each a Subsequent Fee) in connection with each such transaction equal to one percent (1%) of the gross transaction value of such transaction.
(d) In the case of an Initial Public Offering or a Change of Control (as defined below), the Company shall pay to the Manager (or such affiliates of the Manager as the Manager may designate), in addition to the fees payable above, a lump sum amount equal to the net present value (using a discount rate equal to the then prevailing yield on U.S. Treasury Securities of like maturity) of the Periodic Fees that would have been payable to the Manager with respect to the period from the date of such Initial Public Offering or Change of Control until the end of the Term then in effect (without giving any effect to an early termination of the Term as a result of such Change of Control or Initial Public Offering). Such fee to be due and payable at the closing of such transaction and in the case of financing transactions, whether or not any such financing is actually committed or drawn upon. For purposes of this Agreement, (i) Change of Control shall mean (a) any change in the ownership of the capital stock of Parent or the Company if, immediately after giving effect thereto, any Person (or group of Persons acting in concert) other than the Manager and its affiliates will have the direct or indirect power to elect a majority of the members of the board of directors of Parent or the Company or (b) any change in the ownership of the capital stock of Parent or the Company if, immediately after giving effect thereto, the Manager and its affiliates shall, directly or indirectly, beneficially own less than 50% of the capital stock of Parent or the Company; and (ii) Initial Public Offering shall mean the initial public offering and sale of common stock of Parent or the Company for cash pursuant to an effective registration statement under the Securities Act of 1933, as in effect from time to time, registered on Form S-1 (or any successor form under the Securities Act of 1933, as in effect from time to time).
Each payment made pursuant to this Section 2 will be paid by wire transfer of immediately available federal funds to the account specified on Schedule 1 hereto, or to such other account(s) as the Manager may specify to the Company in writing prior to such payment.
3. Term. This Agreement will continue in full force and effect until December 31, 2020; provided that this Agreement shall be automatically extended on such date and each December 31 thereafter for an additional year unless the Company or the Manager provides written notice of its desire not to automatically extend the term of this Agreement to the other parties hereto at least 90 days prior to such December 31; and provided further, however, that (a) the Manager may cause this Agreement to terminate at any time and (b) this Agreement will terminate automatically upon an Initial Public Offering or a Change of Control unless the Company and the Manager determine otherwise (the period on and after the date hereof through the termination hereof being referred to herein as the Term); and provided further, however, that each of (x) Sections 4, 5 and 8 hereof (whether in respect of or relating to services rendered during or after the Term) will all survive any termination of this Agreement to the maximum extent permitted under applicable law and (y) any and all accrued and unpaid obligations of the Company owed under Section 2 hereof will be paid promptly upon any termination of this Agreement. At the end of the Term, all obligations of the Manager under this Agreement will terminate and any subsequent services rendered by the Manager to the Company will be separately compensated.
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4. Expenses; Indemnification.
(a) Expenses. The Company will pay on demand all Reimbursable Expenses. As used herein, Reimbursable Expenses means all (i) expenses incurred or accrued prior to the Closing Date by the Manager or its affiliates in connection with this Agreement, the Merger Agreement, the Merger or any related transactions, consisting of their respective out-of-pocket expenses for travel and other incidentals in connection with such transactions (including, without limitation, all air travel (by first class on a commercial airline or by charter, as determined by the Manager) and other travel related expenses) and the out-of-pocket expenses and the fees and charges of (A) Ropes & Gray LLP, counsel, (B) PricewaterhouseCoopers LLP, accounting firm and (C) any other consultants or advisors, appraisal or valuation firms, information or exchange agents, or other entities retained by the Manager in connection with such transactions, (ii) reasonable out-of-pocket expenses incurred from and after the Closing Date relating to their Affiliated Funds (as defined below) investment in, the operations of, or the services provided by the Manager to, the Company or any of its affiliates from time to time (including, without limitation, all air travel (by first class on a commercial airline or by charter, as determined by the Manager) and other reasonable travel related expenses), (iii) reasonable out-of-pocket legal expenses incurred by the Manager or its affiliates from and after the date hereof in connection with the enforcement of rights or taking of actions under this Agreement, under Acquisition Subs certificate of incorporation and bylaws, or under any subscription agreements, stockholders agreements, registration rights agreements, voting agreements or similar agreements entered into with the Company in connection with investments in the Company (subject to any applicable limitations on expense reimbursement rights expressly set forth in such agreements) and (iv) expenses incurred from and after the date hereof by the Manager and its affiliates, which the Manager, in its sole discretion, deems properly allocable to the Company under this Agreement.
(b) Indemnity and Liability. The Company hereby indemnifies and agrees to exonerate and hold the Manager, each Affiliated Fund of the Manager, and each of their respective former, current or future, direct or indirect, directors, officers, employees, agents, advisors and affiliates, each former, current or future, direct or indirect holder of any equity interests or securities of the Manager or any Affiliated Fund of the Manager (whether such holder is a limited or general partner, member, stockholder or otherwise), each former, current or future assignee of the Manager or any Affiliated Fund of the Manager and each former, current or future director, officer, employee, agent, advisor, general or limited partner, manager, management company, member, stockholder, affiliate, controlling person, representative and assignee of any of the foregoing (each such person or entity, a Related Person) (collectively, the Indemnitees) free and harmless from and against any and all actions, causes of action, suits, claims, liabilities, damages and costs and expenses in connection therewith (including reasonable attorneys fees and expenses) incurred by the Indemnitees or any of them before or after the date of this Agreement (collectively, the Indemnified Liabilities), as a result of, arising out of, or in any way relating to (i) this Agreement, the Merger Agreement, the Merger, any transaction to which the Company or any of its affiliates is a party, or any other
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circumstances with respect to the Company or any of its affiliates or (ii) operations of, or services provided by the Manager to, the Company or any of its affiliates from time to time (including but not limited to any indemnification obligations assumed or incurred by any Indemnitee to or on behalf of the Company, or any of its accountants or other representatives, agents or affiliates) except for any such Indemnified Liabilities arising from such Indemnitees willful misconduct. If and to the extent that the foregoing undertaking may be unavailable or unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law. For purposes of this Section 4(b), willful misconduct will be deemed to have occurred only if so found in a final non-appealable judgment of a court of competent jurisdiction to such effect, in which case to the extent any of the foregoing limitations is so determined to apply to any Indemnitee as to any previously advanced indemnity payments made by the Company, then such payments shall be promptly repaid by such Indemnitee to the Company. The rights of any Indemnitee to indemnification hereunder will be in addition to any other rights any such Person may have under any other agreement or instrument referenced above or any other agreement or instrument to which such Indemnitee is or becomes a party or is or otherwise becomes a beneficiary or under law or regulation. Notwithstanding the foregoing or any other provisions hereof, the rights of the Indemnitees (other than the Manager) hereunder may only be exercised on their behalf by the Manager. In this Agreement, (i) Person means any individual or corporation, association, partnership, limited liability company, joint venture, joint stock or other company, business trust, trust, organization, or other entity of any kind and (ii) the term Affiliated Funds means, with respect to any specified investment fund, any other investment fund that directly or indirectly controls, is controlled by or is under common control with such specified fund or that has the same general partner or primary investment advisor as such specified fund (or a general partner or primary investment advisor that controls, is controlled by or is under common control with the general partner or primary investment advisor of such specified fund).
(c) Indemnification Priority. The Company hereby acknowledges that the rights to indemnification, advancement of expenses and/or insurance provided pursuant to this Section 4 may also be provided to certain Indemnitees by Bain Capital Fund X, L.P. and certain of its affiliates and Affiliated Funds (other than the Company) (collectively, the Affiliate Indemnitors) and by insurers providing insurance coverage to the Affiliated Indemnitors. The Company hereby agrees that, as between itself and the Affiliate Indemnitors and their insurers (i) the Company is the indemnitor of first resort with respect to all such indemnifiable claims against such Indemnitees, whether arising under this Agreement or otherwise (i.e., its obligations to such Indemnitees are primary and any obligation of the Affiliate Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by such Indemnitees are secondary), (ii) the Company shall be required to advance the full amount of expenses incurred by such Indemnitees and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement (or any other agreement between the Company and such Indemnitee), without regard to any rights such Indemnitee may have
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against the Affiliate Indemnitors or any of their insurers and (iii) the Company irrevocably waives, relinquishes and releases the Affiliate Indemnitors from any and all claims against the Affiliate Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company agrees to indemnify the Affiliate Indemnitors directly for any amounts that the Affiliate Indemnitors pay as indemnification or advancement on behalf of any such Indemnitee and for which such Indemnitee may be entitled to indemnification from the Company in connection with serving as a director or officer (or equivalent titles) of the Company. The Company further agrees that no advancement or payment by the Affiliate Indemnitors on behalf of any such Indemnitee with respect to any claim for which such Indemnitee has sought indemnification from the Company shall affect the foregoing and the Affiliate Indemnitors shall be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Indemnitee against the Company, and the Company shall cooperate with the Indemnitee in pursuing such rights.
5. Disclaimer and Limitation of Liability; Opportunities.
(a) Disclaimer; Standard of Care. The Manager does not make any representations or warranties, express or implied, in respect of the Services to be provided by the Manager hereunder. In no event will the Manager or any of the Indemnitees be liable to Parent, the Company or any of their respective affiliates for any act, alleged act, omission or alleged omission that does not constitute willful misconduct of the Manager as determined by a final, non-appealable determination of a court of competent jurisdiction.
(b) Freedom to Pursue Opportunities. In recognition that the Manager and its respective Indemnitees currently have, and will in the future have or will consider acquiring, investments in numerous companies with respect to which the Manager or its Indemnitees may serve as an advisor, a director or in some other capacity, and in recognition that the Manager and its respective Indemnitees have a myriad of duties to various investors and partners, and in anticipation that Parent and/or the Company, on the one hand, and the Manager (or one or more affiliates, associated investment funds or portfolio companies, or clients of the Manager), on the other hand, may engage in the same or similar activities or lines of business and have an interest in the same areas of corporate opportunities, and in recognition of the benefits to be derived by Parent and the Company hereunder and in recognition of the difficulties that may confront any advisor who desires and endeavors fully to satisfy such advisors duties in determining the full scope of such duties in any particular situation, the provisions of this Section 5(b) are set forth to regulate, define and guide the conduct of certain affairs of Parent and the Company as they may involve the Manager. Except as the Manager may otherwise agree in writing after the date hereof:
(i) The Manager and its Indemnitees will have the right: (A) to directly or indirectly engage in any business (including, without limitation, any business activities or lines of business that are the same as or similar to those pursued by, or competitive with, Parent, the Company or any of their respective subsidiaries) or invest, own or deal in securities of any other Person so engaged in
6
any business, (B) to directly or indirectly do business with any client or customer of Parent, the Company or any of their respective subsidiaries or, (C) to take any other action that the Manager believes in good faith is necessary to or appropriate to fulfill its obligations as described in the first sentence of this Section 5(b) and (D) not to present potential transactions, matters or business opportunities to Parent, the Company or any of their respective subsidiaries, and to pursue, directly or indirectly, any such opportunity for itself, and to direct any such opportunity to another Person.
(ii) The Manager and its respective Indemnitees will have no duty (contractual or otherwise) to communicate or present any corporate opportunities to Parent, the Company or any of their respective affiliates or to refrain from any actions specified in Section 5(b)(i) hereof, and Parent and the Company, on their own behalf and on behalf of their respective affiliates, each hereby renounces and waives any right to require the Manager or any of its Indemnitees to act in a manner inconsistent with the provisions of this Section 5(b).
(iii) The Manager and its Indemnitees will not be liable to Parent, the Company or any of their respective affiliates for breach of any duty (contractual or otherwise) by reason of any activities or omissions of the types referred to in this Section 5(b) or of any such Persons participation therein.
(c) Limitation of Liability. In no event will the Manager or any of its Indemnitees be liable to Parent, the Company or any of their respective affiliates for any indirect, special, punitive, incidental, exemplory or consequential damages, including, without limitation, lost profits or savings, whether or not such damages are foreseeable, or for any third party claims (whether based in contract, tort or otherwise), relating to the Services to be provided by the Manager hereunder. Additionally, in no event shall the aggregate liability of the Manager and all of its Indemnitees with respect to this Agreement or any Services provided hereunder exceed the fees received by the Manager pursuant to Section 2 of this Agreement.
6. Assignment, etc. Except as provided below, no party hereto has the right to assign this Agreement without the prior written consent of each of the other parties. Notwithstanding the foregoing, (a) the Manager may assign all or part of its rights and obligations hereunder to any affiliate of the Manager that provides services similar to those called for by this Agreement, in which event the Manager will be released of all of its rights and obligations hereunder and (b) the provisions hereof for the benefit of Indemnitees (other than the Manager itself) or Affiliate Indemnitors shall also inure to the benefit of such other Indemnitees, Affiliate Indemnitors and their respective successors and assigns.
7. Amendments and Waivers. No amendment or waiver of any term, provision or condition of this Agreement will be effective, unless in writing and executed by the Manager and Acquisition Sub (or their respective successors); provided, that the Manager may individually agree to waive or reduce any fee to which it is entitled pursuant to this Agreement, and, unless otherwise directed by the Manager, such waived portion shall revert to the Company. No waiver on any one occasion will extend to or effect or be construed as a waiver of any right or remedy
7
on any future occasion. No course of dealing of any Person nor any delay or omission in exercising any right or remedy will constitute an amendment of this Agreement or a waiver of any right or remedy of any party hereto.
8. Governing Law; Jurisdiction.
(a) Choice of Law. This Agreement and any controversy arising out of or relating to this Agreement shall be governed by and construed in accordance with the General Corporation Law of the State of Delaware as to matters within the scope thereof, and as to all other matters shall be governed by and construed in accordance with the internal laws of the State of New York.
(b) Consent to Jurisdiction. Each of the parties hereto agrees that all actions, suits or proceedings arising out of, based upon or relating to this Agreement or the subject matter hereof will be brought and maintained exclusively in the federal and state courts of the State of New York, City of New York, County of New York. Each of the parties hereto by execution hereof (i) hereby irrevocably submits to the jurisdiction of the federal and state courts in the State of New York, City of New York, County of New York for the purpose of any action, suit or proceeding arising out of or based upon this Agreement or the subject matter hereof and (ii) hereby waives to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such action, suit or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that it is immune from extraterritorial injunctive relief or other injunctive relief, that its property is exempt or immune from attachment or execution, that any such action, suit or proceeding may not be brought or maintained in one of the above-named courts, that any such action, suit or proceeding brought or maintained in one of the above-named courts should be dismissed on grounds of forum non conveniens, should be transferred to any court other than one of the above-named courts, should be stayed by virtue of the pendency of any other action, suit or proceeding in any court other than one of the above-named courts, or that this Agreement or the subject matter hereof may not be enforced in or by any of the above-named courts. Notwithstanding the foregoing, to the extent that any party hereto is or becomes a party in any litigation in connection with which it may assert indemnification rights set forth in this Agreement, the court in which such litigation is being heard will be deemed to be included in clause (i) above. Each of the parties hereto hereby consents to service of process in any such suit, action or proceeding in any manner permitted by the laws of the State of New York, agrees that service of process by registered or certified mail, return receipt requested, at the address specified in or pursuant to Section 10 hereof is reasonably calculated to give actual notice and waives and agrees not to assert by way of motion, as a defense or otherwise, in any such action, suit or proceeding any claim that service of process made in accordance with Section 10 hereof does not constitute good and sufficient service of process. The provisions of this Section 8 will not restrict the ability of any party to enforce in any court any judgment obtained in a court included in clause (i) above.
(c) Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND
8
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT, OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, CAUSE OF ACTION, ACTION, SUIT OR PROCEEDING ARISING OUT OF, BASED UPON OR RELATING TO THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. EACH OF THE PARTIES HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY EACH OTHER PARTY THAT THE PROVISIONS OF THIS SECTION 8(C) CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH SUCH PARTY IS RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY. ANY OF THE PARTIES HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH OF THE PARTIES HERETO TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
9. Entire Agreement, Etc. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes any prior communication or agreement with respect thereto. Parent and each of its subsidiaries party shall be jointly and severally liable for all obligations of the Company or any other of its subsidiaries hereunder.
10. Notice. All notices, demands, and communications required or permitted under this Agreement will be in writing and will be effective if served upon such other party and such other partys copied persons as specified below to the address set forth for it below (or to such other address as such party will have specified by notice to each other party) if (i) delivered personally, (ii) sent and received by facsimile or (iii) sent by certified or registered mail or by Federal Express, DHL, UPS or any other comparably reputable overnight courier service, postage prepaid, to the appropriate address as follows:
If to the Company (after the Closing Date), to it at:
c/o The Gymboree Corporation
500 Howard Street
San Francisco, CA 94105
Attention: General Counsel
Facsimile: (415) 278-7562
with copies to:
Bain Capital Partners, LLC
111 Huntington Avenue
Boston, MA 02199
Facsimile: (617) 516-2010
Attention: General Counsel
Ropes & Gray LLP
The Prudential Tower
800 Boylston Street
Boston, Massachusetts 02119
Facsimile: (617) 951-7050
9
Attention: R. Newcomb Stillwell
C. Todd Boes
If to the Company (prior to and on the Closing Date), Holdco or Bain, to it, care of:
Bain Capital Partners, LLC
111 Huntington Avenue
Boston, MA 02199
Facsimile: (617) 516-2010
Attention: General Counsel
with copies to:
Ropes & Gray LLP
The Prudential Tower
800 Boylston Street
Boston, Massachusetts 02119
Facsimile: (617) 951-7050
Attention:
R. Newcomb Stillwell
C. Todd Boes
Unless otherwise specified herein, such notices or other communications will be deemed effective, (a) on the date received, if personally delivered or sent by facsimile during normal business hours, (b) on the business day after being received if sent by facsimile other than during normal business hours, (c) one business day after being sent by Federal Express, DHL or UPS or other comparably reputable delivery service and (d) five business days after being sent by registered or certified mail. Each of the parties hereto shall be entitled to specify a different address by giving notice as aforesaid to each of the other parties hereto.
11. Severability. If in any judicial or arbitral proceedings a court or arbitrator refuses to enforce any provision of this Agreement, then such unenforceable provision will be deemed eliminated from this Agreement for the purpose of such proceedings to the extent necessary to permit the remaining provisions to be enforced, and the parties hereto shall negotiate in good faith to seek to enter into substitute provisions incorporating, as nearly as possible, the purpose, intent and effect of such unenforceable provision. To the full extent, however, that the provisions of any applicable law may be waived, they are hereby waived to the end that this Agreement be deemed to be a valid and binding agreement enforceable in accordance with its terms, and in the event that any provision hereof is found to be invalid or unenforceable, such provision will be construed by limiting it so as to be valid and enforceable to the maximum extent consistent with and possible under applicable law.
12. Miscellaneous
(a) Counterparts. This Agreement may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, each of which
10
when so executed will be deemed to be an original and all of which together will constitute one and the same agreement.
(b) Interpretation. The headings contained in this Agreement are for convenience of reference only and will not in any way affect the meaning or interpretation hereof. As used herein the word including shall be deemed to mean including without limitation. This Agreement reflects the mutual intent of the parties and no rule of construction against the drafting party shall apply.
(c) No Third Party Beneficiaries. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors and permitted assigns, and it is not the intention of the parties to confer, and, except for Indemnitees and Affiliate Indemnitors, each as defined in Section 4 hereof (but subject to the rights of the Manager to exercise the rights of the same), no provision hereof shall confer third party beneficiary rights upon any other Person.
[The remainder of this page is intentionally left blank. Signatures immediately follow.]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf as an instrument under seal as of the date first above written by its officer or representative thereunto duly authorized.
ACQUISITION SUB: | GIRAFFE ACQUISITION CORPORATION | |||||||
By: | /s/ Jordan Hitch | |||||||
Name: | Jordan Hitch | |||||||
Title: | Authorized Signatory | |||||||
PARENT: | GIRAFFE HOLDING, INC. | |||||||
By: | /s/ Jordan Hitch | |||||||
Name: | Jordan Hitch | |||||||
Title: | Authorized Signatory | |||||||
MANAGER: | BAIN CAPITAL PARTNERS, LLC | |||||||
By: | BAIN CAPITAL INVESTORS, LLC, it Managing Member | |||||||
By: | /s/ Jordan Hitch | |||||||
Name: | Jordan Hitch | |||||||
Title: | Authorized Signatory |
Exhibit 10.12
FORM OF STOCKHOLDERS AGREEMENT
by and among
Giraffe Holding, Inc.,
Giraffe Intermediate A, Inc.,
Giraffe Intermediate B, Inc.,
The Gymboree Corporation
and
the Investors, Other Investors and Managers Named Herein
Entered into on November 23, 2010
TABLE OF CONTENTS
Page | ||||||||
1. |
EFFECTIVENESS; DEFINITIONS |
2 | ||||||
1.1. | Closing |
2 | ||||||
1.2. | Definitions |
2 | ||||||
2. |
VOTING AGREEMENT |
2 | ||||||
2.1. | Election of Directors |
2 | ||||||
2.2. | Significant Transactions |
2 | ||||||
2.3. | Consent to Amendment |
2 | ||||||
2.4. | Grant of Proxy |
2 | ||||||
2.5. | The Company |
3 | ||||||
2.6. | Period |
3 | ||||||
3. |
TRANSFER RESTRICTIONS |
3 | ||||||
3.1. | Permitted Transferees |
3 | ||||||
3.2. | Tag Alongs, Drag Alongs, Etc. |
4 | ||||||
3.3. | Transfers Pursuant to Section 5; Transfers to the Company |
4 | ||||||
3.5. | Impermissible Transfer |
5 | ||||||
3.6. | Period |
5 | ||||||
3.7. | Transfers of Options |
5 | ||||||
4. |
INVESTOR TRANSFER RIGHTS; TAG ALONG AND DRAG ALONG RIGHTS |
6 | ||||||
4.1. | Tag Along |
6 | ||||||
4.2. | Drag Along |
8 | ||||||
4.3. | Exercise |
9 | ||||||
4.4. | Miscellaneous |
9 | ||||||
4.5. | Period |
11 | ||||||
5. |
OPTIONS TO PURCHASE MANAGEMENT SHARES |
12 | ||||||
5.1. | Call Options |
12 | ||||||
5.2. | Closing |
14 | ||||||
5.3. | Form of Payment |
14 | ||||||
5.4. | Investor Call Option |
16 | ||||||
5.5. | Acknowledgment |
16 | ||||||
5.6. | Period |
16 | ||||||
6. | REMEDIES |
16 | ||||||
6.1. | Generally |
16 | ||||||
6.2. | Deposit |
16 | ||||||
7. |
LEGENDS |
17 | ||||||
7.1. | Restrictive Legend |
17 | ||||||
7.2. | 1933 Act Legends |
18 | ||||||
7.3. | Stop Transfer Instruction |
18 | ||||||
7.4. | Termination of 1933 Act Legend |
18 | ||||||
8. |
AMENDMENT, TERMINATION, ETC. |
18 | ||||||
8.1. | Oral Modifications |
18 | ||||||
8.2. | Written Modifications |
18 |
8.3. | Effect of Termination |
19 | ||||||
9. |
DEFINITIONS |
19 | ||||||
9.1. | Certain Matters of Construction |
19 | ||||||
9.2. | Definitions |
19 | ||||||
10. |
MISCELLANEOUS |
25 | ||||||
10.1. | Authority; Effect |
25 | ||||||
10.2. | Notices |
25 | ||||||
10.3. | Binding Effect, Etc. |
26 | ||||||
10.4. | Descriptive Headings |
26 | ||||||
10.5. | Counterparts |
26 | ||||||
10.6. | Severability |
26 | ||||||
11. |
GOVERNING LAW |
27 | ||||||
11.1. | Governing Law |
27 | ||||||
11.2. | Consent to Jurisdiction |
27 | ||||||
11.3. | WAIVER OF JURY TRIAL |
28 | ||||||
11.4. | Exercise of Rights and Remedies |
28 |
ii
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this Agreement) is made as of November 23, 2010, by and among:
(i) | Giraffe Holding, Inc. (the Company); |
(ii) | Giraffe Intermediate A, Inc. (Giraffe A); |
(iii) | Giraffe Intermediate B, Inc. (Giraffe B); |
(iv) | The Gymboree Corporation (Gymboree); |
(v) | each of Bain Capital Fund X, L.P., BCIP Associates IV (U.S.), L.P., BCIP Associates IV-B (U.S.), L.P., BCIP T Associates IV (U.S.), L.P., and BCIP T Associates IV-B (U.S.), L.P. (together with their Permitted Transferees, the Investors); |
(vi) | RGIP, LLC, FS Partners II, LLC and such other Persons who from time to time become party hereto by executing a counterpart signature page hereof and are designated by the Board as Other Investors (together with their Permitted Transferees, the Other Investors); and |
(vii) | such other Persons who from time to time become party hereto by executing a counterpart signature page hereof and are designated by the Board as Managers (together with their Permitted Transferees, the Managers and together with the Investors and the Other Investors, the Stockholders). |
Recitals
1. On or about the date hereof, the Company caused its indirect subsidiary Giraffe Acquisition Corporation (Merger Sub), a wholly owned subsidiary of Giraffe B, a wholly owned subsidiary of Giraffe A, a wholly owned subsidiary of the Company, to merger with and into Gymboree with Gymboree being the surviving corporation, pursuant to an Agreement and Plan of Merger, dated October 11, 2010, by and among Gymboree, the Company and Merger Sub (the Merger Agreement).
2. The parties hereto believe that it is in the best interests of the Company and the Stockholders to set forth their agreements on certain matters.
Agreement
Therefore, the parties hereto hereby agree as follows:
1. EFFECTIVENESS; DEFINITIONS.
1.1. Closing. This Agreement will become effective upon consummation of the closing under the Merger Agreement (the Closing).
1.2. Definitions. Certain terms are used in this Agreement as specifically defined herein. These definitions are set forth or referred to in Section 9 hereof.
2. VOTING AGREEMENT.
2.1. Election of Directors. Each holder of Shares hereby agrees to cast all votes to which such holder is entitled in respect of the Shares, whether at any annual or special meeting, by written consent or otherwise, (a) to fix the number of members of the board of directors of the Company (the Board) at such number as may be specified from time to time by the Majority Investors and (b) to elect as members of the Board such individuals as shall have been nominated from time to time by the Majority Investors.
2.2. Significant Transactions. Each holder of Shares agrees to cast all votes to which such holder is entitled in respect of the Shares, whether at any annual or special meeting, by written consent or otherwise, in the same proportion as Investor Shares are voted by the Investors to approve any sale, recapitalization, merger, consolidation, reorganization or any other transaction or series of transactions involving the Company or its direct or indirect subsidiaries (or all or any portion of their respective assets) in connection with, or in furtherance of, the exercise by the Majority Investors of their rights under Section 4.2.
2.3. Consent to Amendment. Each holder of Shares agrees to cast all votes to which such holder is entitled in respect of the Shares, whether at any annual or special meeting, by written consent or otherwise, in the same proportion as Investor Shares are voted by the Majority Investors to increase the number of authorized shares of Common Stock to the extent necessary to permit the Company to comply with the provisions of its Certificate of Incorporation or any agreement to which the Company is a party.
2.4. Grant of Proxy. Each holder of Shares other than the Investors hereby grants to the Investors an irrevocable proxy coupled with an interest to vote his, her or its Shares in accordance with his, her or its agreements contained in this Section 2, which proxy will be valid and remain in effect until the provisions of this Section 2 expire pursuant to Section 2.6.
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2.5. The Company. The Company agrees not to give effect to any action by any holder of Shares or any other Person which is in contravention of this Section 2.
2.6. Period. The foregoing provisions of this Section 2 will expire on the earliest of (a) the closing of a Change of Control, (b) the closing a Qualified Public Offering and (c) the last date permitted by law.
3. TRANSFER RESTRICTIONS. No holder of Shares will Transfer any of such Shares to any other Person except as provided in this Section 3.
3.1. Permitted Transferees.
3.1.1 Affiliates. Any holder of Shares may Transfer any or all of such Shares to an Affiliate of such holder or to a Charitable Organization.
3.1.2 Estate Planning. Any holder of Shares who is a natural Person may Transfer any or all of such Shares (i) by gift to, or for the benefit of, any Member of the Immediate Family of such holder, (ii) to a trust for the benefit of such holder or any Member of the Immediate Family of such holder or (iii) to any other trust in respect of which such holder serves as trustee; provided, however, in the case of clause (iii), that the trust instrument governing such trust will provide that such holder, as trustee, will retain sole and exclusive control over the voting and disposition of such Shares until the termination of this Agreement.
3.1.3 Upon Death. Subject to the provisions of Section 5.1 hereof upon the death of any holder of Shares who is a natural Person, such Shares may be distributed by the will or other instrument taking effect at death of such holder or by applicable laws of descent and distribution to such holders estate, executors, administrators and personal representatives, and then to such holders heirs, legatees or distributees, whether or not such recipients are Members of the Immediate Family of such holder or a Charitable Organization.
3.1.4 Investors, the Company and Certain Public Offerings. Any holder of Shares may Transfer any or all of such Shares to (a) any Investor, (b) with the Boards approval, the Company or any subsidiary of the Company or (c) in accordance with the terms of the Registration Rights Agreement.
3.1.5 Additional Permitted Transfers by the Investors. Any holder of Investor Shares may Transfer any or all of such Shares (a) to an Investor or an Affiliated Fund or (b) to its partners or members or to Affiliates of any of the foregoing.
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3.1.6 Additional Permitted Transfers by the Other Investors. Any holder of Other Investor Shares may Transfer any or all of such Shares to its partners or members in connection with the termination of such holders legal existence. Any such transfer may be made no earlier than six months prior to the termination of the holders existence.
No Transfer permitted under the terms of this Section 3.1 will be effective unless the transferee of such Shares (each, a Permitted Transferee) has delivered to the Company a written acknowledgment and agreement in form and substance reasonably satisfactory to the Company that such Shares to be received by such Permitted Transferee will remain Investor Shares, Other Investor Shares or Management Shares, as the case may be, and will be subject to all of the provisions of this Agreement and that such Permitted Transferee will be bound by, and will be a party to, this Agreement as the holder of Investor Shares, Other Investor Shares or Management Shares, as the case may be, or as may otherwise be determined by the Board, hereunder; provided, however, that Shares Transferred to any director, officer or employee of, or consultant or adviser to, the Company or any of its subsidiaries by a holder of Investor Shares will thereafter become Management Shares hereunder; and provided further that no Transfer by any holder of Shares to a Permitted Transferee will relieve such holder of any of its obligations hereunder.
3.2. Tag Alongs, Drag Alongs, Etc. In addition to Transfers permitted under Section 3.1:
(a) any holder of Investor Shares may Transfer such Shares if (i) such holder has complied with the tag along provisions contained in Section 4.1 hereof or (ii) the Majority Investors have exercised their drag along rights set forth in Section 4.2 hereof; and
(b) any holder of Shares may Transfer any or all of such Shares in accordance with the provisions, terms and conditions of Sections 4.1 and 4.2 hereof solely in their capacity as Participating Sellers thereunder.
Any Shares Transferred after compliance with the terms of Sections 4.1 or 4.2 hereof will conclusively be deemed thereafter not to be Shares under this Agreement and not to be subject to any of the provisions hereof or entitled to the benefit of any of the provisions hereof.
3.3. Transfers Pursuant to Section 5; Transfers to the Company. Management Shares may be transferred pursuant to the terms of Section 5. Any Shares Transferred to the Company pursuant to this Agreement will conclusively be deemed thereafter not to be Shares under this Agreement and not to be subject to any of the provisions hereof or entitled to the benefit of any of the provisions hereof. Any Shares Transferred to the Investors pursuant to this Agreement will be conclusively deemed thereafter to be Investor Shares under this Agreement and will be subject to, and entitled to the benefit of, the provisions hereof.
- 4 -
3.4. Impermissible Transfer. Any attempted Transfer of Shares not permitted under the terms of this Section 3 will be null and void, and the Company will not in any way give effect to any such impermissible Transfer. Notwithstanding any other provision of this Section 3 or otherwise and except as provided in Section 4:
3.4.1 In no event will any Manager be entitled to Transfer his or her Shares (i) to any Person (whether or not to an Affiliate) that in the reasonable judgment of the Majority Investors, exercised in good faith, is a competitor of, or other Person who is adverse to the interests of, the Company or Gymboree or (ii) to any Person who (directly or indirectly) (a) holds an ownership interest in such competitor equal to five percent or more, (b) has invested $5,000,000 or more in such competitor or (c) has designated, or has the right to designate, a member of the board of directors of such competitor, in each case without the approval of the Majority Investors, except, in or following a Qualified Public Offering, in any bona fide underwritten public offering or in any Rule 144 Sale; and
3.4.2 No Manager will be entitled to Transfer Shares at any time if such Transfer would: (i) violate the Securities Act, or any state (or other jurisdiction) securities or blue sky laws applicable to the Company or the Shares; (ii) cause the Company to be required to register Common Stock under Section 12(g) of the Exchange Act; (iii) cause the Company to become subject to the registration requirements of the U.S. Investment Company Act of 1940, as amended from time to time; or (iv) be a non-exempt prohibited transaction under ERISA or the Code or cause all or any portion of the assets of the Company to constitute plan assets under ERISA or Section 4975 of the Code.
3.5. Period. The foregoing provisions of this Section 3 will expire upon the earlier of the closing of (a) a Change of Control and (b) the effectiveness of the Companys registration statement in connection with a Qualified Public Offering.
3.6. Transfers of Options. Any Transfer of Options by a Manager or Permitted Transferee that has become a party hereto will be governed by and subject to the terms and conditions of the applicable equity incentive plan to the extent permitted by the terms thereof.
3.7. Stockholder Lock-Up. In connection with each underwritten Public Offering each Stockholder hereby agrees to be bound by and, if requested, to execute and deliver a lock-up agreement with the underwriter(s) of such Public Offering (the Principal Lock-Up Agreement) restricting such Stockholders right to (i) Transfer any Shares or (ii) enter into any swap or other arrangement that transfers to another any of the economic consequences of ownership of Shares, in each case to the extent that such restrictions are agreed to (A) in the case of an Initial Public Offering that is not a demand registration initiated by an Investor, by the Board, (B) in the case of a demand registration initiated by an Investor, by the Investors
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holding a majority of the Shares proposed to be offered and (C) otherwise, by the holders of a majority of the Shares participating in the Public Offering; provided, however, that no Stockholder will be required by this Section 3.7 to be bound by a lock-up agreement covering a period of greater than 90 days (180 days in the case of the Initial Public Offering) following the effectiveness of the related registration statement plus such additional period of up to 17 days as may be required by the underwriters to satisfy FINRA regulations and permit the managing underwriters analysts to publish research updates; provided, further, that no Stockholder will be required by this Section 3.7 to be bound by a lock-up agreement unless the Stockholders that hold a majority of the Shares held by all Stockholders execute such a lock-up agreement with the underwriter(s) of the applicable Public Offering. Notwithstanding the foregoing, such lock-up agreement will not apply to (i) transactions relating to shares of Common Stock or other securities acquired in (A) open market transactions or block purchases after the completion of the Initial Public Offering (or other Public Offering, as applicable) or (B) a Public Offering, (ii) Transfers to Permitted Transferees of such Stockholder in accordance with the terms of this Agreement (including the obligations of such Permitted Transferee to execute and deliver a Principal Lock-Up Agreement), and (iii) conversions of shares of Common Stock into other classes of Common Stock without change of holder.
4. INVESTOR TRANSFER RIGHTS; TAG ALONG AND DRAG ALONG RIGHTS.
4.1. Tag Along. If one or more holders of Investor Shares (each such holder, a Prospective Selling Investor) proposes to Transfer to a Prospective Buyer (other than an Affiliate of the Investors) in a transaction subject to Section 3.2(a)(i) hereof, an amount of Investor Shares equal to an aggregate of 20% or more of the Investor Shares then currently outstanding and in connection therewith the Majority Investors have not elected to exercise their drag along rights under Section 4.2:
4.1.1 Notice. The Prospective Selling Investors will deliver a written notice (the Tag Along Notice) to each other holder of Shares (each, a Tag Along Holder) at least ten Business Days prior to such proposed Transfer. The Tag Along Notice will include:
(a) The principal terms of the proposed Sale insofar as it relates to such Shares, including (i) the number and class of the Shares to be purchased from the Prospective Selling Investors, (ii) with respect to each class of Shares to be purchased from the Prospective Selling Investors, the fraction(s) expressed as a percentage, determined by dividing the number of Shares of such class to be purchased from the Prospective Selling Investors by the total number of Investor Shares of such class purchased by the Investors (the Tag Along Sale Percentage), (iii) the maximum and minimum per Share purchase price and the form of consideration to be paid by the Prospective Purchaser and (iv) the name and address of the Prospective Buyer; and
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(b) An invitation to each Tag Along Holder to make an offer to include in the proposed Sale to the applicable Prospective Buyer an additional number of Shares, of the applicable class of Shares proposed to be transferred, held by such Tag Along Holder (in any event not to exceed in the case of a Tag Along Holder and all of his, her or its Permitted Transferees the Tag Along Sale Percentage of the total number of Shares of the applicable class of Shares held by such Tag Along Holder excluding for purposes of such calculation all Shares underlying any outstanding Options, Warrants or Convertible Securities), on the same terms and conditions (subject to Section 4.3.4 hereof in the case of Options, Warrants and Convertible Securities), with respect to each Share Sold, as the Prospective Selling Investors shall Sell each of their Shares.
4.1.2 Exercise. Within ten Business Days after the date of the Tag Along Notice, each Tag Along Holder desiring to make an offer to include issued and outstanding Shares in the proposed Sale (each a Participating Seller and, together with the Prospective Selling Investors, collectively, the Tag Along Sellers) will furnish a written notice (the Tag Along Offer) to the Prospective Selling Investors offering to include an additional number of Shares of the applicable class of Shares (not in any event to exceed the Tag Along Sale Percentage of the total number of Shares of the applicable class held by such Participating Seller) that such Participating Seller desires to have included in the proposed Sale. Each Tag Along Holder who does not accept the Prospective Selling Investors invitation to make an offer to include Shares in the proposed Sale will be deemed to have waived all of his, her or its rights with respect to such Sale, and the Tag Along Sellers will thereafter be free to Sell to the Prospective Buyer, at a per Share price no greater than the maximum per Share price set forth in the Tag Along Notice and on other principal terms which are not materially more favorable to the Tag Along Sellers than those set forth in the Tag Along Notice, without any further obligation to such non-accepting Tag Along Holder.
4.1.3 Irrevocable Offer. The offer of each Participating Seller contained in his, her or its Tag Along Offer will be irrevocable, and, to the extent such offer is accepted, such Participating Seller will be bound and obligated to Sell in the proposed Sale on the same terms and conditions, with respect to each Share Sold (subject to Section 4.3.4 hereof in the case of Options, Warrants and Convertible Securities), as the Prospective Selling Investors, up to such number of Shares as such Participating Seller will have specified in his, her or its Tag Along Offer; provided, however, that if the principal terms of the proposed Sale change with the result that the per Share price will be less than the minimum per Share price set forth in the Tag Along Notice or the other principal terms will be materially less favorable to the Tag Along Sellers than those set forth in the Tag Along Notice, each Participating Seller will be permitted to withdraw the offer contained in his, her or its Tag Along Offer and will be released from his, her or its obligations thereunder.
4.1.4 Reduction of Shares Sold. The Prospective Selling Investors shall attempt to obtain the inclusion in the proposed Sale of the entire number of Shares that each of the Tag Along Sellers requested to have included in the Sale (as evidenced in the case of the Prospective Selling Investors by the Tag Along Notice and in the case of each
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Participating Seller by such Participating Sellers Tag Along Offer). In the event the Prospective Selling Investors will be unable to obtain the inclusion of such entire number of Shares in the proposed Sale, the number of Shares of each class to be sold in the proposed Sale will be allocated among the Tag Along Sellers in proportion, as nearly as practicable, to the respective number of Shares of such class held by each Tag Along Seller, excluding for purposes of such calculation all Shares underlying any outstanding Options or Warrants.
4.1.5 Additional Compliance. If prior to consummation of the Sale, the terms of the proposed Sale change with the result that the per Share price to be paid in such proposed Sale will be greater than the maximum per Share price set forth in the Tag Along Notice or the other principal terms of such proposed Sale will be materially more favorable to the Tag Along Sellers than those set forth in the Tag Along Notice, the Tag Along Notice will be null and void, and it will be necessary for a separate Tag Along Notice to be furnished, and the terms and provisions of this Section 4.1 separately complied with, in order to consummate such proposed Sale pursuant to this Section 4.1; provided, however, that in the case of such a separate Tag Along Notice, the applicable period to which reference is made in Sections 4.1.1 and 4.1.2 hereof will be five Business Days. If the Prospective Selling Investors have not completed the proposed Sale by the end of the 180th day following the date of the Tag Along Notice, each Participating Seller will be released from his, her or its obligations under his, her or its Tag Along Offer, the Tag Along Notice will be null and void, and it will be necessary for a separate Tag Along Notice to be furnished, and the terms and provisions of this Section 4.1 separately complied with, in order to consummate such proposed Sale pursuant to this Section 4.1, unless the failure to complete such proposed Sale resulted from any failure by any Participating Seller to comply with the terms of this Section 4.1.
4.1.6 Classes of Shares. For the avoidance of doubt, the right of any Tag Along Holder to include Shares in any Sale in accordance with this Section 4.1 will be limited to a right to include Shares in such Sale which are of the same class as the Shares to be included in such Sale by the Prospective Selling Investors, and all determinations under this Section 4.1 will be made on the basis of the holdings of Shares of the class of Shares to be included in such Sale by the Prospective Selling Investor (including the Tag Along Sale Percentage).
4.2. Drag Along. If one or more holders of Investor Shares (each such holder, a Prospective Selling Investor) proposes to Sell to a Prospective Buyer (other than an Affiliate of the Investors) an amount of Investor Shares equal to an aggregate of 20% or more of the Investor Shares then currently outstanding, each holder of Shares of a class hereby agrees, if requested by the Majority Investors, to Sell a percentage of each class of Shares held by such holder of Shares that is equal to the percentage of Investor Shares owned by the Prospective Selling Investor that are proposed to be Sold by the Prospective Selling Investor to the Prospective Buyer (the Drag Along Sale Percentage), directly or indirectly, in the manner and on the terms set forth in this Section 4.2.
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4.2.1 Exercise. If the Majority Investors elect to exercise their rights under this Section 4.2, the Prospective Selling Investors will furnish a written notice (the Drag Along Notice) to each other holder of Shares. The Drag Along Notice will set forth the principal terms of the proposed Sale insofar as it relates to such Shares including (i) the number and class of Shares to be acquired from the Prospective Selling Investors, (ii) the Drag Along Sale Percentage applicable to such class, (iii) the per Share consideration (which, for the avoidance of doubt, may be expressed as a formula or otherwise) applicable to such class to be received in the proposed Sale of Shares of a class and (iv) the name and address of the Prospective Buyer. If the Prospective Selling Investors consummate the proposed Sale to which reference is made in the Drag Along Notice, each other holder of Shares (each a Participating Seller, and, together with the Prospective Selling Investors, collectively, the Drag Along Sellers) will be bound and obligated to Sell the Drag Along Sale Percentage of his, her or its Shares of such class in the proposed Sale on the same terms and conditions, with respect to each Share Sold (subject to Section 4.3.4 hereof in the case of Options, Warrants and Convertible Securities), as the Prospective Selling Investors will Sell each Investor Share of such class in the Sale (subject to Section 4.3.4 hereof in the case of Options, Warrants and Convertible Securities).
4.2.2 Waiver of Appraisal Rights. Each Drag Along Seller agrees not to demand or exercise appraisal rights under Section 262 of the DGCL with respect to a transaction subject to this Section 4.2 as to which such appraisal rights are available.
4.2.3 Classes of Shares. For the avoidance of doubt, the obligation of any holder of Shares to include Shares in any Sale in accordance with this Section 4.2 will be limited to an obligation to include Shares in such Sale which are of the same class as the Shares to be included in such Sale by the Prospective Selling Investors, and all determinations under this Section 4.2 will be made on the basis of the holdings of Shares of the class of Shares to be included in such Sale by the Prospective Selling Investor (including the Drag Along Sale Percentage).
4.3. Miscellaneous. The following provisions will apply to any proposed Sale to which Sections 4.1 or 4.2 apply:
4.3.1 Certain Legal Requirements. In the event the consideration to be paid in exchange for Shares in a proposed Sale pursuant to Section 4.1 or Section 4.2 hereof includes any securities, and the receipt thereof by a Participating Seller would require under applicable law (a) the registration or qualification of such securities or of any Person as a broker or dealer or agent with respect to such securities or (b) the provision to any Tag Along Seller or Drag Along Seller of any information regarding the Company, such securities or the issuer thereof, such Participating Seller will not have the right to Sell Shares in such proposed Sale. In such event, the Prospective Selling Investors will have the right, but not the obligation, to cause to be paid to such Participating Seller in lieu thereof, against surrender of the Shares (in accordance with Section 4.3.6 hereof)
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which would have otherwise been Sold by such Participating Seller to the Prospective Buyer in the proposed Sale, an amount in cash equal to the Fair Market Value of such Shares as of the date such securities would have been issued in exchange for such Shares.
4.3.2 Further Assurances. Each Participating Seller, whether in his, her or its capacity as a Participating Seller, stockholder, officer or director of the Company, or otherwise, will take or cause to be taken all such actions as may be necessary or reasonably desirable in order to expeditiously consummate each Sale pursuant to Section 4.1 or Section 4.2 hereof and any related transactions, including executing, acknowledging and delivering consents, assignments, waivers and other documents or instruments; furnishing information and copies of documents; filing applications, reports, returns, filings and other documents or instruments with governmental authorities; and otherwise cooperating with the Prospective Selling Investors and the Prospective Buyer; provided, however, that Participating Sellers will be obligated to become liable in respect of any representations, warranties, covenants, indemnities or otherwise to the Prospective Buyer solely to the extent provided in the immediately following sentence. Without limiting the generality of the foregoing, each Participating Seller agrees to execute and deliver such agreements as may be reasonably specified by the Prospective Selling Investors to which such Prospective Selling Investors will also be party on the same terms and conditions with respect to each Share sold, including agreements to (a) (i) make individual representations, warranties, covenants and other agreements, on a several basis and solely as to themselves, as to the unencumbered title to its Shares and the power, authority and legal right to Transfer such Shares and the absence of any Adverse Claim with respect to such Shares and (ii) be liable, on a several basis, without limitation as to such representations, warranties, covenants and other agreements, (b) be liable (whether by purchase price adjustment, indemnity payments or otherwise) in respect of representations, warranties, covenants and agreements in respect of the Company and its subsidiaries; provided, however, that the aggregate amount of liability described in this clause (b) in connection with any Sale of Shares will not exceed the lesser of (i) such Participating Sellers pro rata portion of any such liability, to be determined in accordance with such Participating Sellers portion of the total number of Shares included in such Sale or (ii) the proceeds allocated to such Participating Seller in connection with such Sale and (c) be liable in respect of claims for fraud, willful breach and intentional misconduct to the extent such claims are not limited against the Prospective Selling Investors.
4.3.3 Sale Process. The Prospective Selling Investors will, in their sole discretion, decide whether or not to pursue, consummate, postpone or abandon any proposed Sale and the terms and conditions thereof. No Investor or any Affiliate of any Investor will have any liability to any other holder of Shares arising from, relating to or in connection with the pursuit, consummation, postponement, abandonment or terms and conditions of any proposed Sale except to the extent such Investor will have failed to comply with the provisions of this Section 4.
4.3.4 Treatment of Options, Warrants and Convertible Securities. Each Participating Seller agrees that to the extent he, she or it desires to include vested and
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exercisable Options, Warrants or Convertible Securities in any Sale of Shares pursuant to Section 4 hereof, he, she or it shall be deemed to have exercised, converted or exchanged such vested and exercisable Options, Warrants or Convertible Security immediately prior to the closing of such Sale to the extent necessary to Sell Common Stock to the Prospective Buyer, except to the extent permitted under the terms of any such Option, Warrant or Convertible Security and agreed to by the Board and the Prospective Buyer. If any Participating Seller will Sell Options, Warrants or Convertible Securities in any Sale pursuant to Section 4 hereof, such Participating Seller will receive in exchange for such Options, Warrants or Convertible Securities consideration equal to the amount (if greater than zero) determined by multiplying (a) the purchase price per Share of Common Stock received by the holders of the Prospective Selling Investors in such Sale less the unpaid exercise or conversion price, if any, per Share of such Option, Warrant or Convertible Security by (b) the number of Shares of Common Stock issuable upon exercise, conversion or exchange of such Option, Warrant or Convertible Security (to the extent exercisable, convertible or exchangeable at the time of such Sale), subject to reduction for any tax or other amounts required to be withheld under applicable law.
4.3.5 Expenses. All reasonable costs and expenses incurred by the Prospective Selling Investors or the Company in connection with any proposed Sale pursuant to this Section 4 (whether or not consummated), including all attorneys fees and charges, all accounting fees and charges and all finders, brokerage or investment banking fees, charges or commissions, will be paid by the Company. The reasonable fees and charges of a single legal counsel representing any or all of the other Tag Along Sellers or Drag Along Sellers in connection with any proposed Sale pursuant to this Section 4 (whether or not consummated) will be paid by the Company. Any other costs and expenses incurred by or on behalf of any or all of the other Tag Along Seller(s) or Drag Along Seller(s) in connection with any proposed Sale pursuant to this Section 4 (whether or not consummated) will be borne by such Tag Along Seller(s) or Drag Along Seller(s).
4.3.6 Closing. The closing of a Sale to which Sections 4.1 or 4.2 hereof apply will take place at such time and place as the Prospective Selling Investors will specify by notice to each Participating Seller. At the closing of such Sale, each Participating Seller will deliver the certificates evidencing the Shares (or Options, Warrants or Convertible Securities to the extent permitted by this Section 4.3) to be Sold by such Participating Seller, duly endorsed, or with stock (or equivalent) powers duly endorsed, for transfer with signature guaranteed, free and clear of any Adverse Claim, with any stock (or equivalent) transfer tax stamps affixed, against delivery of the applicable consideration.
4.4. Period. The foregoing provisions of this Section 4 will expire upon the earlier of the closing of (a) a Change of Control and (b) the effectiveness of the Companys registration statement in connection with an Initial Public Offering.
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5. OPTIONS TO PURCHASE MANAGEMENT SHARES.
5.1. Call Options. Except as the Company may otherwise agree in writing with any Manager with respect to Shares held by such Manager (or any Person to whom any shares of Common Stock were originally issued at the request of such Manager) or originally issued to such Manager (or other Person at the request of such Manager) but held by one or more direct or indirect Permitted Transferees (collectively, the Management Call Group), upon any termination of the employment by the Company and its subsidiaries of any Manager (whether such termination is by the Company, by such Manager or otherwise), the Company will have the right to purchase for cash (or a note to the extent provided in Section 5.3 below) all or any portion of the Purchased Management Shares held by the Management Call Group on the following terms (the Management Call Option):
5.1.1 General. For all Purchased Management Shares, the following terms will apply:
(a) Termination other than for Cause. If a Managers employment is terminated for any reason other than for Cause (including as a result of death or disability), or if a Manager resigns his or her employment for any reason, the Company (or its designated assignee) will have the right, on one or more occasions, at any time up to and including the date that is ninety days following the later to occur of (x) the later of termination of such Managers employment and the last date on which any Option or Warrant is exercisable by any member of such Managers Management Call Group, and (y) the date that is six months plus one day following the most recent acquisition of Purchased Management Shares from the Company by any member of such Managers Management Call Group, to purchase from such Management Call Group, and upon the exercise of such call right each member of such Management Call Group will sell to the Company (or its designated assignee), all of the Purchased Management Shares held by such member of the Management Call Group as of the date as of which such call right is exercised at a price equal to the Fair Market Value of the Purchased Management Shares being sold, determined as of the date specified in such Management Call Notice (as defined below), which date will be no earlier than the date that is six months plus one day following the most recent acquisition from the Company by any member of such Managers Management Call Group of any such Purchased Management Shares that are to be purchased by the Company pursuant to such exercised call right and will be no later than the last date on which the Company is permitted to issue a Management Call Notice in respect of such Purchased Management Shares under this Section 5.1.1(a).
(b) Termination for Cause. If a Managers employment is terminated for Cause (or the Company reasonably determines that it could have terminated such Managers employment for Cause at the time such Manager resigned), the Company (or its designated assignee) will have the right, on one or more occasions, at any time up to and including the date that is ninety days following the later to occur of (x) the later
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of termination of such Managers employment and the last date on which any Option or Warrant is exercisable by any member of such Managers Management Call Group, and (y) the date that is six months plus one day following the most recent acquisition of Purchased Management Shares from the Company by any member of such Managers Management Call Group, to purchase from such Management Call Group, and upon the exercise of such call right each member of such Management Call Group will sell to the Company (or its designated assignee), all of the Purchased Management Shares held by such member of the Management Call Group as of the date as of which such call right is exercised at a price (the Bad Leaver Price) equal to the lesser of (i) the Fair Market Value of the Purchased Management Shares being sold, determined as of the date specified in such Management Call Notice, which date will be no earlier than the date that is six months plus one day following the most recent acquisition from the Company by any member of such Managers Management Call Group of any such Purchased Management Shares that are to be purchased by the Company pursuant to such exercised call right and will be no later than the last date on which the Company is permitted to issue a Management Call Notice in respect of such Purchased Management Shares under this Section 5.1.1(b), and (ii) the price paid, if any, by such Manager for such Purchased Management Shares; provided, that for purposes of the foregoing clause (ii), the price paid by a Manager for a share acquired upon exercise of an Option or Warrant will be deemed to be equal to the exercise price of such Option or Warrant.
(c) Violation of Non-Competition Obligations. If a Managers employment is terminated for any reason or if a Manager resigns his or her employment for any reason and, within twelve months of such termination or resignation, such Manager Competes, the Company (or its designated assignee) will have the right, on one or more occasions, at any time up to and including the date that is one hundred eighty (180) days following the later to occur of (x) the later of the first date on which the Company receives notice that such Manager Competed and the last date on which any Option or Warrant is exercisable by any member of such Managers Management Call Group, and (y) the date that is six months plus one day following the most recent acquisition of Shares from the Company by any member of such Managers Management Call Group, to purchase from such Management Call Group, and upon the exercise of such call right each member of such Management Call Group will sell to the Company (or its designated assignee), all of the Purchased Management Shares held by such member of the Management Call Group as of the date as of which such call right is exercised at a price equal to the Bad Leaver Price.
5.1.2 Notices, Etc. Any Management Call Option may be exercised by delivery of written notice thereof (the Management Call Notice) to all members of the applicable Management Call Group from whom the Company has elected to purchase Purchased Management Shares no later than the end of the applicable 90 or 180 day period specified in Section 5.1.1. The Management Call Notice will state that the Company has elected to exercise the Management Call Option, the number of Purchased
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Management Shares with respect to which the Management Call Option is being exercised and the price or the date for determining the price of such shares.
5.1.3 Vesting. The rights of the Company and the Investors to purchase Management Shares under this Section 5 are in addition to, and do not modify, any vesting or exercisability requirements or forfeiture conditions that may be included in the terms of any Management Shares.
5.2. Closing.
5.2.1 The closing of any purchase and sale of Management Shares pursuant to this Section 5 will take place as soon as reasonably practicable, and in any event not later than 30 days after delivery of the Management Call Notice or, in the case of Option Shares, if later, 30 days after the determination of the applicable purchase price in accordance with Section 5.1.1 hereof (provided, that such time will be extended as necessary to comply with requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or other applicable legal requirements) at the principal office of the Company, or at such other time and location as the parties to such purchase may mutually determine.
5.2.2 At the closing of any purchase and sale of Management Shares following the exercise of any Management Call Option, the holders of Shares to be sold shall deliver to the Company a certificate or certificates representing the Shares to be purchased by the Company, duly endorsed, or with stock (or equivalent) powers duly endorsed, for transfer with signature guaranteed, free and clear of any lien or encumbrance, with any necessary stock (or equivalent) transfer tax stamps affixed, and the Company will pay to such holder by certified or bank check or wire transfer of immediately available federal funds or note, as may be applicable, the purchase price of the Shares being purchased by the Company. The delivery of a certificate or certificates for Shares by any Person selling Shares pursuant to any Management Call Option will be deemed a representation and warranty by such Person that: (i) such Person has full right, title and interest in and to such Shares; (ii) such Person has all necessary power and authority and has taken all necessary action to sell such Shares as contemplated; (iii) such Shares are free and clear of any and all liens or encumbrances and (iv) there is no Adverse Claim with respect to such Shares.
5.3. Form of Payment.
5.3.1 If (i) any payment of cash is required upon the purchase of Management Shares by the Company upon the exercise of any Management Call Option or (ii) any payment on a promissory note issued under this Section 5.3.1 comes due, and, in either case, such payment (or any dividend to fund such payment) would (or with notice or the lapse of time or both would) constitute, result in or give rise to a breach or violation of the terms or provisions of, or result in a default, event of default or right or cause of
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action under, any guarantee, financing or security agreement, indenture or document entered into by the Company or any of its subsidiaries and in effect on such date in respect of indebtedness for borrowed money or debt security, would be prohibited under Section 160 (Section 160) of the General Corporation Law of the State of Delaware (the DGCL), or would otherwise violate the DGCL (or if the Company or any such subsidiary reincorporates in another jurisdiction, the applicable business corporation law of such jurisdiction), then, to the extent permitted by Section 160:
(a) in the case of a cash payment due at a closing of any purchase of Management Shares by the Company upon the exercise of any Management Call Option, the Company will issue a promissory note in the aggregate principal amount of such payment, the principal amount of which note will be due and payable on demand (subject to subsection 5.3.1(c) below) and interest will accrue thereon at a rate equal to the prime rate (as reported in the Wall Street Journal Eastern Edition);
(b) in the case of a cash payment in respect of a promissory note issued under this Section 5.3.1, notwithstanding any of the provisions of such note, including the stated maturity of such note and the stated date on which interest payments are due, such payment will not become due and payable until such time as such payment can be made without violating any such agreement; and
(c) notwithstanding the terms of any promissory note issued pursuant to this Section 5.3.1, the Company must pay off the promissory note at the earliest of (i) a Sale Transaction, (ii) the effectiveness of the Companys registration statement in connection with an Initial Public Offering (but only to the extent of the net proceeds received by the Company in such Initial Public Offering) and (iii) the date on which any cash dividend or distribution is made in respect of Shares. At any such time, the Company will promptly notify the holder of such promissory note and make a payment on each such promissory note. If more than one such promissory note is outstanding at the time of payment, payment will be made to the holders of all such promissory notes on a pro rata basis.
5.3.2 In the event that the Company has exercised its call right pursuant to Section 5.1.1(a) with respect to Management Shares held by (i) a Manager who (A) Competes within twelve months of such Managers termination of employment or resignation as described in Section 5.1.1(c) or (B) is reasonably determined by the Company to have been eligible for termination for Cause, in either case following the Companys exercise of such call right, and/or (ii) one or more members of such Managers Management Call Group that held Management Shares, such Manager and/or such members of such Managers Management Call Group shall be obligated to deliver to the Company, within five (5) days following notice from the Company that such amount is due, an amount equal to the product of (x) the number of Management Shares purchased in connection with the exercise of the call right, multiplied by (y) the excess, if any, of the price paid for such Management Shares over the Bad Leaver Price for such Management Shares.
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5.4. Investor Call Option. If the Company shall elect not to purchase (pursuant to Section 5.1 hereof) any or all Management Shares held by a Manager or one or more members of such Managers Management Call Group, the Company shall notify the Investors and the Investors may purchase any or all of the remaining Management Shares held by such Persons for the purchase price identified in Section 5.1 hereof; provided, that nothing in this Section 5.3 shall operate to extend the time within which the Management Call Notice may be delivered pursuant to Section 5.1.2 hereof. The right to purchase such Shares will be allocated pro rata among the Investors (unless the Investors agree otherwise).
5.5. Acknowledgment. Each holder of Management Shares acknowledges and agrees that neither the Company, nor any Person directly or indirectly affiliated with the Company (in each case whether as a director, officer, manager, employee, agent or otherwise), will have any duty or obligation to affirmatively disclose to him, her or it, and he, she or it will not have any right to be advised of, any material information regarding the Company or otherwise at any time prior to, upon, or in connection with any termination of his, her or its employment by the Company and its subsidiaries upon the exercise of any Management Call Option or any purchase of the Shares in accordance with the terms hereof.
5.6. Period. The foregoing provisions of this Section 5 will expire with respect to any Management Share upon the earlier of the closing of (a) a Change of Control and (b) the effectiveness of the Companys registration statement in connection with a Qualified Public Offering.
6. REMEDIES.
6.1. Generally. The Company and each holder of Shares will have all remedies available at law, in equity or otherwise in the event of any breach or violation of this Agreement or any default hereunder by the Company or any holder of Shares. The parties acknowledge and agree that in the event of any breach of this Agreement, in addition to any other remedies that may be available, each of the parties hereto will be entitled to specific performance of the obligations of the other parties hereto and, in addition, to such other equitable remedies (including preliminary or temporary relief) as may be appropriate in the circumstances.
6.2. Deposit. Without limiting the generality of Section 6.1 hereof, if any holder of Shares fails to deliver to the purchaser thereof the certificate or certificates evidencing Shares to be Sold pursuant to Section 4 or 5 hereof, such purchaser may, at its option, in addition to all other remedies it may have, deposit the purchase price (including any promissory note constituting all or any portion thereof) for such Shares with any national bank or trust company having combined capital, surplus and undivided profits in excess of One Hundred Million Dollars ($100,000,000) (the Escrow Agent) and the Company will cancel on its books the certificate or certificates representing such Shares and thereupon all of such holders rights in
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and to such Shares will terminate. Thereafter, upon delivery to such purchaser by such holder of the certificate or certificates evidencing such Shares (duly endorsed, or with stock powers duly endorsed, for transfer, with signature guaranteed, free and clear of any liens or encumbrances, and with any transfer tax stamps affixed), such purchaser shall instruct the Escrow Agent to deliver the purchase price (without any interest from the date of the closing to the date of such delivery, any such interest to accrue to such purchaser) to such holder.
7. LEGENDS.
7.1. Restrictive Legend. Each certificate representing Shares will have the following legend endorsed conspicuously thereupon:
THE VOTING OF THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE, AND THE SALE, ENCUMBRANCE OR OTHER DISPOSITION THEREOF, ARE SUBJECT TO THE PROVISIONS OF A STOCKHOLDERS AGREEMENT TO WHICH THE ISSUER AND CERTAIN OF ITS STOCKHOLDERS ARE PARTY, A COPY OF WHICH MAY BE INSPECTED AT THE PRINCIPAL OFFICE OF THE ISSUER OR OBTAINED FROM THE ISSUER WITHOUT CHARGE.
Each certificate representing Investor Shares will also have the following legend endorsed conspicuously thereupon:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED TO, OR ISSUED WITH RESPECT TO SHARES ORIGINALLY ISSUED TO, THE FOLLOWING INVESTOR: .
Each certificate representing Other Investor Shares will also have the following legend endorsed conspicuously thereupon:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED TO, OR ISSUED WITH RESPECT TO SHARES ORIGINALLY ISSUED TO, THE FOLLOWING OTHER INVESTOR: .
Each certificate representing Management Shares will also have the following legend endorsed conspicuously thereupon:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED TO, OR ISSUED WITH RESPECT TO SHARES ORIGINALLY ISSUED TO OR AT THE REQUEST OF, THE FOLLOWING MANAGER: .
Any Person who acquires Shares which are not subject to any of the terms of this Agreement will have the right to have such legend (or the applicable portion thereof) removed from certificates representing such Shares.
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7.2. 1933 Act Legends. Each certificate representing Shares will have the following legend endorsed conspicuously thereupon:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A PRIVATE PLACEMENT, WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), AND MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE ACT COVERING THE TRANSFER OR AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER, THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
7.3. Stop Transfer Instruction. The Company will instruct any transfer agent not to register the Transfer of any Shares until the conditions specified in the foregoing legends are satisfied.
7.4. Termination of 1933 Act Legend. The requirement imposed by Section 7.2 hereof will cease and terminate as to any particular Shares (a) when, in the opinion of Ropes & Gray LLP, or other counsel reasonably acceptable to the Company, such legend is no longer required in order to assure compliance by the Company with the Securities Act or (b) when such Shares have been effectively registered under the Securities Act or transferred pursuant to Rule 144. Wherever (x) such requirement will cease and terminate as to any Shares or (y) such Shares will be transferable under Rule 144 without volume limitation or other restrictions on transfer (including without application of paragraphs (c), (e), (f) and (h) of Rule 144), the holder thereof will be entitled to receive from the Company, without expense, new certificates not bearing the legend set forth in Section 7.2 hereof.
8. AMENDMENT, TERMINATION, ETC.
8.1. Oral Modifications. This Agreement may not be orally amended, modified, extended or terminated, nor will any oral waiver of any of its terms be effective.
8.2. Written Modifications. This Agreement may be amended, modified, extended or terminated, and the provisions hereof may be waived, only by an agreement in writing signed by the Majority Investors; provided, however, that (a) the consent of the Majority Other Investors will be required for any amendment, modification, extension, termination or waiver that has a disproportionate and adverse effect on the rights of the holders of Other Investor Shares as such under this Agreement and (b) the consent of the Majority Managers will be required for any amendment, modification, extension, termination or waiver that has a disproportionate and adverse effect on the rights of the holders of Management Shares as such under this Agreement. Each such amendment, modification,
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extension, termination and waiver will be binding upon each party hereto and each holder of Shares subject hereto. In addition, each party hereto and each holder of Shares subject hereto may waive any right hereunder by an instrument in writing signed by such party or holder.
8.3. Effect of Termination. No termination under this Agreement will relieve any Person of liability for breach prior to termination.
9. DEFINITIONS. For purposes of this Agreement:
9.1. Certain Matters of Construction. In addition to the definitions referred to or set forth below in this Section 9:
(a) The words hereof, herein, hereunder and words of similar import will refer to this Agreement as a whole and not to any particular Section or provision of this Agreement, and reference to a particular Section of this Agreement will include all subsections thereof;
(b) The word including will be construed as including without limitation;
(c) Definitions will be equally applicable to both nouns and verbs and the singular and plural forms of the terms defined; and
(d) The masculine, feminine and neuter genders will each include the other.
9.2. Definitions. The following terms will have the following meanings:
Adverse Claim will have the meaning set forth in Section 8-302 of the applicable Uniform Commercial Code.
Affiliate will mean (a) with respect to any specified Person that is not a natural Person, any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person (for the purposes of this definition, control (including, with correlative meanings, the terms controlling, controlled by and under common control with) as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise) and (b) with respect to any natural Person, any Member of the Immediate Family of such natural Person.
Affiliated Fund will mean each corporation, trust, limited liability company, general or limited partnership or other entity under common control with any Investor or that receives investment advice from the investment adviser to any Investor or an investment adviser Affiliated with such investment adviser.
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Agreement will have the meaning set forth in the Preamble.
Bad Leaver Price shall have the meaning set forth in Section 5.1.1(b).
Board will have the meaning set forth in Section 2.1 hereof.
Business Day shall mean any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in the City of New York.
Cause with respect to any holder of Management Shares, means (i) a material breach by such Manager of the Managers duties and responsibilities, or (ii) the commission by the Manager of a felony involving moral turpitude, or (iii) the commission by the Manager of theft, fraud, embezzlement, material breach of trust or any material act of dishonesty involving the Company or its subsidiaries, or (iv) a significant violation by the Manager of the code of conduct of the Company or its subsidiaries or of any statutory or common law duty of loyalty to the Company or its subsidiaries. Notwithstanding the foregoing, if a Manager is party to an employment or severance agreement with the Company or any subsidiary of the Company that contains a definition of cause, such definition will apply (in the case of such Manager) in lieu of the definition set forth in the preceding sentence.
Change of Control will mean (a) any change in the ownership of the capital stock of the Company if, immediately after giving effect thereto, any Person (or group of Persons acting in concert) other than the Investors and their Affiliates will have the direct or indirect power to elect a majority of the members of the Board or (b) any change in the ownership of the capital stock of the Company if, immediately after giving effect thereto, the Investors and their Affiliates will own less than 25% of the Equivalent Shares.
Charitable Organization will mean a charitable organization as described by Section 501(c)(3) of the Code.
Closing will have the meaning set forth in Section 1.1 hereof.
Class A Stock will mean the Class A Common Stock, par value $.001 per share of the Company.
Class L Stock will mean the Class L Common Stock, par value $.001 per share, of the Company.
Code will mean the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time, and any successor statute of similar import, in each case as in effect from time to time. References to sections of the Code also refer to any successor sections.
Common Stock will mean the common stock, par value $0.01 per share, of the Company including the Class A Stock and the Class L Stock.
Company will have the meaning set forth in the Preamble.
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Compete will mean, with respect to a Manager, the breach by such Manager of any non-competition, non-solicitation or similar restrictive covenant made by such Manager in favor of the Company or any subsidiary of the Company, and Competes and Competed will each have correlative meaning.
Convertible Securities will mean any evidence of indebtedness, shares of stock (other than Common Stock) or other securities (other than Options and Warrants) which are directly or indirectly convertible into or exchangeable or exercisable for shares of Common Stock.
Cost will mean, for any security, the price paid to the issuer for such security.
DGCL will have the meaning set forth in Section 5.3.1 hereof.
Drag Along Notice will have the meaning set forth in Section 4.2.1 hereof.
Drag Along Sale Percentage will have the meaning set forth in Section 4.2 hereof.
Drag Along Sellers will have the meaning set forth in Section 4.2.1 hereof.
Equivalent Shares will mean, at any date of determination, (a) as to any outstanding shares of Common Stock, such number of shares of Common Stock and (b) as to any outstanding Options, Warrants or Convertible Securities which constitute Shares, the maximum number of shares of Common Stock for which or into which such Options, Warrants or Convertible Securities may at the time be exercised, converted or exchanged (or which will become exercisable, convertible or exchangeable on or prior to, or by reason of, the transaction or circumstance in connection with which the number of Equivalent Shares is to be determined).
ERISA will mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, in each case as in effect from time to time.
Escrow Agent will have the meaning set forth in Section 6.2 hereof.
Exchange Act will mean the Securities Exchange Act of 1934, as in effect from time to time.
Fair Market Value will mean, as of any date, as to any share of Common Stock, the Boards good faith determination of the fair value of such shares as of the applicable reference date and, as to any Option or Warrant, such fair value reduced by any applicable exercise price.
FINRA shall mean the Financial Industry Regulatory Authority.
Giraffe A will have the meaning set forth in the Preamble.
Giraffe B will have the meaning set forth in the Preamble.
Gymboree will have the meaning set forth in the Preamble.
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Initial Public Offering means the initial Public Offering registered on Form S-1 (or any successor form under the Securities Act).
Investor Shares will mean (a) all shares of Common Stock originally issued to, or issued with respect to shares originally issued to, or held by, an Investor, whenever issued, including all shares of Common Stock issued upon the exercise, conversion or exchange of any Options, Warrants or Convertible Securities and (b) all Options, Warrants and (except for purposes of Section 4.1 hereof) Convertible Securities originally granted or issued to an Investor (treating such Options, Warrants and Convertible Securities as a number of shares equal to the number of Equivalent Shares represented by such Options, Warrants and Convertible Securities for all purposes of this Agreement except as otherwise specifically set forth herein).
Investors will have the meaning set forth in the Preamble.
Majority Investors will mean, as of any date, the holders of a majority of the Investor Shares outstanding on such date.
Majority Managers will mean, as of any date, the holders of a majority of the Management Shares outstanding on such date.
Majority Other Investors will mean, as of any date, the holders of a majority of the Other Investor Shares outstanding on such date.
Management Call Group will have the meaning set forth in Section 5.1 hereof.
Management Call Notice will have the meaning set forth in Section 5.1.2 hereof.
Management Call Option will have the meaning set forth in Section 5.1 hereof.
Management Shares will mean (a) all shares of Common Stock originally issued to, or issued with respect to shares originally issued to, or held by, a Manager (or a Person to whom such shares of Common Stock were issued at the request of a Manager), whenever issued, including all shares of Common Stock issued upon the exercise, conversion or exchange of any Options, Warrants or Convertible Securities and (b) all Options, Warrants and (except for purposes of Section 4.1 hereof) Convertible Securities originally granted or issued to a Manager (treating such Options, Warrants and Convertible Securities as a number of shares equal to the number of Equivalent Shares represented by such Options, Warrants and Convertible Securities for all purposes of this Agreement except as otherwise specifically set forth herein).
Managers will have the meaning set forth in the Preamble.
Member of the Immediate Family will mean, with respect to any individual, each parent, spouse or child or other descendant of such individual, each trust created solely for the benefit of one or more of the aforementioned Persons and their spouses and each custodian or guardian of any property of one or more of the aforementioned Persons in his, her or its capacity as such custodian or guardian.
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Merger will mean the merger of Merger Sub with and into Gymboree as provided in the Merger Agreement.
Merger Agreement will have the meaning set forth in the Recitals.
Merger Sub will have the meaning set forth in the Recitals.
Option Shares will mean, with respect to a Manager or direct or indirect Permitted Transferee of a Manager, all or any portion of the Management Shares which were issued upon exercise of an Option held by such holder (or Permitted Transferee, if applicable).
Options will mean any options to subscribe for, purchase or otherwise directly acquire Common Stock.
Other Investor Shares will mean (a) all shares of Common Stock originally issued to, or issued with respect to shares originally issued to, or held by, an Other Investor, whenever issued, including all shares of Common Stock issued upon the exercise, conversion or exchange of any Options, Warrants or Convertible Securities and (b) all Options, Warrants and (except for purposes of Section 4.1 hereof) Convertible Securities originally granted or issued to an Other Investor (treating such Options, Warrants and Convertible Securities as a number of shares equal to the number of Equivalent Shares represented by such Options, Warrants and Convertible Securities for all purposes of this Agreement except as otherwise specifically set forth herein).
Other Investors will have the meaning set forth in the Preamble.
Participating Seller will have the meaning set forth in Sections 4.1.2 and 4.2.1 hereof.
Permitted Transferee will have the meaning set forth in Section 3.1.
Person will mean any individual, partnership, corporation, company, association, trust, joint venture, limited liability company, unincorporated organization, entity or division, or any government, governmental department or agency or political subdivision thereof.
Principal Lock-Up Agreement will have the meaning set forth in Section 3.5 hereof.
Prospective Buyer will mean any Person proposing to purchase Shares from a Prospective Selling Investor.
Prospective Selling Investor will have the meaning set forth in Sections 4.1 and 4.2 hereof.
Public Offering will mean a public offering and sale of Common Stock for cash pursuant to an effective registration statement under the Securities Act.
Purchased Management Shares will mean, with respect to a Manager (or a Person to whom any shares of Common Stock were originally issued at the request of such Manager) or direct or indirect Permitted Transferee of a Manager (or any such Person whom any shares of
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Common Stock were originally issued at the request of such Manager), all of the Management Shares which are not Options or Warrants held by such holder (or Permitted Transferee, if applicable).
Qualified Public Offering will mean a Public Offering, other than any Public Offering or sale pursuant to a registration statement on Form S-8 or comparable form, in which the aggregate price to the public of all such Common Stock sold in such offering will exceed $125,000,000.
Registration Rights Agreement will mean that certain Registration and Participation Rights Agreement to be dated as of the date hereof, among the Company and certain other parties thereto, as may be amended from time to time.
Regulation D will mean Regulation D under the Securities Act.
Rule 144 will mean Rule 144 under the Securities Act (or any successor Rule).
Rule 145 Transaction will mean a registration on Form S-4 pursuant to Rule 145 of the Securities Act (or any successor Form or provision, as applicable).
Sale will mean a Transfer for value.
Securities Act will mean the Securities Act of 1933, as in effect from time to time.
Section 160 shall have the meaning set forth in Section 5.3.1 hereof.
Shares will mean all Investor Shares, Other Investor Shares and Management Shares.
Stockholders will have the meaning set forth in the Preamble.
Tag Along Holder will have the meaning set forth in Section 4.1.1 hereof.
Tag Along Notice will have the meaning set forth in Section 4.1.1 hereof.
Tag Along Offer will have the meaning set forth in Section 4.1.1 hereof.
Tag Along Sale Percentage will have the meaning set forth in Section 4.1.1 hereof.
Tag Along Sellers will have the meaning set forth in Section 4.1.2 hereof.
Transfer will mean any sale, pledge, assignment, encumbrance or other transfer or disposition of any Shares to any other Person, whether directly, indirectly, voluntarily, involuntarily, by operation of law, pursuant to judicial process or otherwise.
Warrants will mean any warrants to subscribe for, purchase or otherwise directly acquire Common Stock.
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10. MISCELLANEOUS.
10.1. Authority; Effect. Each party hereto represents and warrants to and agrees with each other party that the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized on behalf of such party and do not violate any agreement or other instrument applicable to such party or by which its assets are bound. This Agreement does not, and will not be construed to, give rise to the creation of a partnership among any of the parties hereto, or to constitute any of such parties members of a joint venture or other association. Each of the Company, Giraffe A, Giraffe B and Gymboree will be jointly and severally liable for any payment obligation of the Company, Giraffe A, Giraffe B and Gymboree pursuant to this Agreement.
10.2. Notices. Any notices, requests, demands, claims and other communications required or permitted to be delivered, given or otherwise provided under this Agreement shall be in writing and shall be (a) delivered or given personally, (b) sent by facsimile, or (c) sent by overnight courier, in each case, to the address (or facsimile number) listed below:
If to the Company: | ||||
Giraffe Holding, Inc. | ||||
500 Howard Street | ||||
San Francisco, California 94105 | ||||
Attention: | Chief Executive Officer | |||
Facsimile: | (707) 678-1315 | |||
with a copy to: | ||||
c/o Bain Capital Partners, LLC | ||||
111 Huntington Avenue | ||||
Boston, Massachusetts 02199 | ||||
Attention: | Joshua Bekenstein and Jordan Hitch | |||
Facsimile: | (617) 516-2010 | |||
If to an Investor: | ||||
c/o Bain Capital Partners, LLC | ||||
111 Huntington Avenue | ||||
Boston, Massachusetts 02199 | ||||
Attention: | Joshua Bekenstein and Jordan Hitch | |||
Facsimile: | (617) 516-2010 | |||
with a copy to: |
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Ropes & Gray LLP The Prudential Towner 800 Boylston Street Boston, Massachusetts 02199 | ||||
Attention: | R. Newcomb Stillwell and C. Todd Boes | |||
Facsimile: | (617) 951-7050 |
If to an Other Investor or a Manager, to the most recent address of such Other Investor or such Manager shown on the records of the Company.
Notice to the holder of record of any shares of capital stock will be deemed to be notice to the holder of such shares for all purposes hereof.
Unless otherwise specified herein, such notices or other communications will be deemed effective (a) on the date received, if personally delivered, (b) on the date received if delivered by facsimile on a Business Day, or if delivered on other than a Business Day, on the first Business Day thereafter and (c) 1 Business Day after being sent by overnight courier. Each of the parties hereto will be entitled to specify a different address by giving notice as aforesaid to each of the other parties hereto.
10.3. Binding Effect, Etc. Except for restrictions on Transfers of Shares set forth in other agreements, plans or other documents, this Agreement constitutes the entire agreement of the parties with respect to its subject matter, supersedes all prior or contemporaneous oral or written agreements or discussions with respect to such subject matter, and will be binding upon and inure to the benefit of the parties hereto and their respective heirs, representatives, successors and permitted assigns. Except as otherwise expressly provided herein, no Investor, Manager or other party hereto may assign any of its respective rights or delegate any of its respective obligations under this Agreement without the prior written consent of the other parties hereto, and any attempted assignment or delegation in violation of the foregoing will be null and void.
10.4. Descriptive Headings. The descriptive headings of this Agreement are for convenience of reference only, are not to be considered a part hereof and will not be construed to define or limit any of the terms or provisions hereof.
10.5. Counterparts. This Agreement may be executed in multiple counterparts, each of which will be deemed an original, but all of which taken together will constitute one instrument.
10.6. Severability. In the event that any provision hereof would, under applicable law, be invalid or unenforceable in any respect, such provision will be construed by modifying or limiting it so as to be valid and enforceable to the maximum extent compatible with, and
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possible under, applicable law. The provisions hereof are severable, and in the event any provision hereof should be held invalid or unenforceable in any respect, it will not invalidate, render unenforceable or otherwise affect any other provision hereof.
11. GOVERNING LAW.
11.1. Governing Law. This Agreement and any controversy arising out of or relating to this Agreement will be governed by and construed in accordance with the DGCL as to matters within the scope thereof, and as to all other matters will be governed by and construed in accordance with the internal laws of the State of New York.
11.2. Consent to Jurisdiction. Each of the parties agrees that all actions, suits or proceedings arising out of, based upon or relating to this Agreement or the subject matter hereof will be brought and maintained exclusively in the federal and state courts of the State of New York, City of New York, County of New York. Each of the parties hereto by execution hereof (i) hereby irrevocably submits to the jurisdiction of the federal and state courts in the State of New York, City of New York, County of New York for the purpose of any action, suit or proceeding arising out of or based upon this Agreement or the subject matter hereof and (ii) hereby waives to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such action, suit or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that it is immune from extraterritorial injunctive relief or other injunctive relief, that its property is exempt or immune from attachment or execution, that any such action, suit or proceeding may not be brought or maintained in one of the above-named courts, that any such action, suit or proceeding brought or maintained in one of the above-named courts should be dismissed on grounds of forum non conveniens, should be transferred to any court other than one of the above-named courts, should be stayed by virtue of the pendency of any other action, suit or proceeding in any court other than one of the above-named courts, or that this Agreement or the subject matter hereof may not be enforced in or by any of the above-named courts. Notwithstanding the foregoing, to the extent that any party hereto is or becomes a party in any litigation in connection with which it may assert indemnification rights set forth in this Agreement, the court in which such litigation is being heard will be deemed to be included in clause (i) above. Each of the parties hereto hereby consents to service of process in any such suit, action or proceeding in any manner permitted by the laws of the State of New York, agrees that service of process by registered or certified mail, return receipt requested, at the address specified in or pursuant to Section 10.2 hereof is reasonably calculated to give actual notice and waives and agrees not to assert by way of motion, as a defense or otherwise, in any such action, suit or proceeding any claim that service of process made in accordance with Section 10.2 hereof does not constitute good and sufficient service of process. The provisions of this Section 11.2 will not restrict the ability of any party to enforce in any court any judgment obtained in a court included in clause (i) above.
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11.3. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES HERETO THAT THIS SECTION 11.3 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY ARE RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 11.3 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
11.4. Exercise of Rights and Remedies. No delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement will impair any such right, power or remedy, nor will it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor will any such delay, omission nor waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver.
[Signature pages follow]
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Exhibit 10.13
FORM OF REGISTRATION AND PARTICIPATION RIGHTS AGREEMENT
by and among
Giraffe Holding, Inc.,
Giraffe Intermediate A, Inc.,
Giraffe Intermediate B, Inc.,
The Gymboree Corporation
and
Certain Stockholders of Giraffe Holding, Inc.
Dated as of November 23, 2010
TABLE OF CONTENTS
Page | ||||
ARTICLE I EFFECTIVENESS; DEFINITIONS |
2 | |||
1.1. Effectiveness |
2 | |||
1.2. Definitions |
2 | |||
ARTICLE II PARTICIPATION RIGHTS |
2 | |||
2.1. General |
2 | |||
2.2. Right of Participation |
2 | |||
2.3. Post-Issuance Notice |
5 | |||
2.4. Excluded Transactions |
5 | |||
2.5. Certain Provisions Applicable to Options, Warrants and Convertible Securities |
5 | |||
2.6. Acquired Shares |
6 | |||
2.7. Period |
6 | |||
ARTICLE III REGISTRATION RIGHTS |
6 | |||
3.1. Demand Registration Rights |
6 | |||
3.2. Piggyback Registration Rights |
9 | |||
3.3. Certain Other Provisions |
11 | |||
3.4. Indemnification and Contribution |
16 | |||
ARTICLE IV REMEDIES |
19 | |||
4.1. Generally |
19 | |||
ARTICLE V PERMITTED TRANSFEREES |
20 | |||
ARTICLE VI AMENDMENT, TERMINATION, ETC. |
20 | |||
6.1. Oral Modifications |
20 | |||
6.2. Written Modifications |
20 | |||
6.3. Effect of Termination |
20 | |||
ARTICLE VII DEFINITIONS |
20 | |||
7.1. Certain Matters of Construction |
21 | |||
7.2. Definitions |
21 | |||
ARTICLE VIII MISCELLANEOUS |
26 | |||
8.1. Authority: Effect |
26 |
i
8.2. Notices |
26 | |||
8.3. Merger; Binding Effect, Etc |
27 | |||
8.4. Descriptive Headings |
27 | |||
8.5. Counterparts |
27 | |||
8.6. Severability |
27 | |||
8.7. No Recourse |
28 | |||
ARTICLE IX GOVERNING LAW |
28 | |||
9.1. Governing Law |
28 | |||
9.2. Consent to Jurisdiction |
28 | |||
9.3. WAIVER OF JURY TRIAL |
29 | |||
9.4. Exercise of Rights and Remedies |
29 |
ii
REGISTRATION AND PARTICIPATION RIGHTS AGREEMENT
This Registration and Participation Rights Agreement (this Agreement) is made as of November 23, 2010, by and among:
(i) | Giraffe Holding, Inc. (the Company); |
(ii) | Giraffe Intermediate A, Inc. (Giraffe A); |
(iii) | Giraffe Intermediate B, Inc. (Giraffe B); |
(iv) | The Gymboree Corporation (Gymboree); |
(v) | each of Bain Capital Fund X, L.P., BCIP Associates IV (U.S.), L.P., BCIP Associates IV-B (U.S.), L.P., BCIP T Associates IV (U.S.), L.P., and BCIP T Associates IV-B (U.S.), L.P. (the Bain Funds), and any other Person executing this Agreement and listed as an Investor on the signature pages hereto and such other Persons who from time to time become party hereto by executing a counterpart signature page hereof and are designated by the Board as Investors (collectively with their Permitted Transferees, the Investors); |
(vi) | RGIP, LLC, FS Partners II, LLC and such other Persons executing this Agreement and listed as an Other Investor on the signature pages hereto and such other Persons, if any, that from time to time become party hereto as Other Investors (collectively with their Permitted Transferees, the Other Investors); and |
(iii) | such other Persons who from time to time be executing this Agreement and listed as a Manager on the signature pages hereto and such other Persons, if any, that from time to time become party hereto as Managers (collectively with their Permitted Transferees, the Managers). |
RECITALS
1. On or about the date hereof, the Company caused its indirect subsidiary Giraffe Acquisition Corporation (Merger Sub), a wholly owned subsidiary of Giraffe B, a wholly owned subsidiary of Giraffe A, a wholly owned subsidiary of the Company, to merger with and into Gymboree with Gymboree being the surviving corporation, pursuant to an Agreement and Plan of Merger, dated October 11, 2010, by and among Gymboree, the Company and Merger Sub (the Merger Agreement).
2. In connection with the foregoing, the Company and the stockholders of the Company are entering into a Stockholders Agreement dated on or about the date hereof (the Stockholders Agreement).
1
4. The parties believe that it is in the best interests of the Company and the other parties hereto to set forth their agreements regarding registration and participation rights and certain other matters.
AGREEMENT
Therefore, the parties hereto hereby agree as follows:
ARTICLE I
EFFECTIVENESS; DEFINITIONS.
1.1. Effectiveness. This Agreement will become effective upon consummation of the closing under the Merger Agreement (the Closing).
1.2. Definitions. Certain terms are used in this Agreement as specifically defined herein. These definitions are set forth or referred to in Section ARTICLE VII hereof.
ARTICLE II
PARTICIPATION RIGHTS.
2.1. General. Neither the Company nor any of its subsidiaries shall issue or sell any shares of any of its capital stock or any securities convertible into or exchangeable for any shares of its capital stock, issue or grant any options or warrants for the purchase of, or enter into any agreements providing for the issuance (contingent or otherwise) of, any of its capital stock or any stock or securities convertible into or exchangeable for any shares of its capital stock, in each case, to any Investor or any Affiliated Fund (each an Issuance of Subject Securities), except in compliance with the provisions of Sections 2.2 or 2.3 hereof.
2.2. Right of Participation.
2.2.1 Offer. Not fewer than ten Business Days prior to the consummation of an Issuance, the Company will furnish a notice (the Participation Notice) to each holder of record of Participation Shares (the Participation Offerees). The Participation Notice will include:
(a) The principal terms of the proposed Issuance, including (i) the amount and kind of Subject Securities to be included in the Issuance, (ii) the number of Equivalent Shares represented by such Subject Securities (if applicable), (iii) the percentage of the total number of Equivalent Shares outstanding as of immediately prior to giving effect to such Issuance that the number of Equivalent Shares held by such Participation Offeree constitutes (the Participation Portion), (iv) the maximum and minimum price (including if applicable, the maximum and minimum Price Per Equivalent Share) per unit of the Subject Securities and (v) the name and address of the Investor or Affiliated Fund to whom the Subject Securities will be issued (the Prospective Subscriber); and
2
(b) An offer by the Company to issue, at the option of each Participation Offeree, to such Participation Offeree such portion of the Subject Securities to be included in the Issuance as may be requested by such Participation Offeree (not to exceed the Participation Offerees Participation Portion of the total amount of Subject Securities to be included in the Issuance), on the same economic terms and conditions, with respect to each unit of Subject Securities issued to the Participation Offerees, as each of the Prospective Subscribers will receive with respect to issued units of Subject Securities.
2.2.2 Exercise.
(a) General. Each Participation Offeree desiring to accept the offer contained in the Participation Notice will send a written commitment to the Company within ten Business Days after the date of the Participation Notice specifying the dollar amount of Subject Securities (in any event not to exceed the Participation Portion of the total amount of Subject Securities to be included in the Issuance) that such Participation Offeree desires to purchase (each a Participating Buyer). Each Participation Offeree who has not so accepted such offer will be deemed to have waived all of his, her or its rights with respect to the Issuance, and the Company will thereafter be free to issue Subject Securities in the Issuance to the Prospective Subscriber and any Participating Buyers, at a price no less than the minimum price set forth in the Participation Notice and on other principal terms not substantially more favorable to the Prospective Subscriber than those set forth in the Participation Notice, without any further obligation to such non-accepting Participation Offerees. If, prior to consummation, the terms of such proposed Issuance change with the result that the price will be less than the minimum price set forth in the Participation Notice or the other principal terms will be substantially more favorable to the Prospective Subscriber than those set forth in the Participation Notice, it will be necessary for the Company to furnish a separate Participation Notice, and the terms and provisions of this Section 2.2 separately complied with, in order to consummate such Issuance pursuant to this Section 2.2.
(b) Irrevocable Acceptance. The acceptance of each Participating Buyer will be irrevocable except as hereinafter provided, and each such Participating Buyer will be bound and obligated to acquire in the Issuance on the same economic terms and conditions, with respect to each unit of Subject Securities issued, as the Prospective Subscriber, such amount of Subject Securities as such Participating Buyer shall have specified in such Participating Buyers written commitment.
(c) Time Limitation. If, at the end of the 180th day following the date of the Participation Notice, the Company has not completed the Issuance, each Participating Buyer will be released from his, her or its obligations under the written commitment, the Participation Notice will be null and void, and it will be necessary for the Company to furnish a separate Participation Notice, and the
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terms and provisions of this Section 2.2 separately complied with, in order to consummate such Issuance pursuant to this Section 2.2.
2.2.3 Other Securities. The Company may condition the participation of the Participation Offerees in an Issuance upon the purchase by such Participation Offerees of any securities (including debt securities) other than Subject Securities (Other Securities) in the event that the participation of the Prospective Subscriber in such Issuance is so conditioned. In such case, each Participating Buyer will acquire in the Issuance, together with the Subject Securities to be acquired by it, Other Securities in the same proportion to the Subject Securities to be acquired by it as the proportion of Other Securities to Subject Securities being acquired by the Prospective Subscriber in the Issuance, on the same terms and conditions as the Prospective Subscriber, as to each unit of Subject Securities and Other Securities issued to the Participating Buyers.
2.2.4 Certain Legal Requirements. In the event that the participation in the Issuance by a holder of Shares as a Participating Buyer would require under applicable law (i) the registration or qualification of such securities or of any Person as a broker or dealer or agent with respect to such securities or (ii) the provision to any participant in the Sale of any information regarding the Company, its subsidiaries or any of their respective securities, such holder of Shares will not have the right to participate in the Issuance. Without limiting the generality of the foregoing, it is understood and agreed that the Company will not be under any obligation to effect a registration of such securities under the Securities Act or similar state statutes.
2.2.5 Further Assurances. Each Participation Offeree and each Stockholder to whom the Shares held by such Participation Offeree were originally issued, will, whether in his, her or its capacity as a Participating Buyer, Stockholder, officer or director of the Company, or otherwise, take or cause to be taken all such reasonable actions as may be necessary or desirable in order to expeditiously consummate each Issuance pursuant to this Section 2.2 and any related transactions, including executing, acknowledging and delivering consents, assignments, waivers and other documents or instruments; filing applications, reports, returns, filings and other documents or instruments with governmental authorities; and otherwise cooperating with the Company and the Prospective Subscriber. Without limiting the generality of the foregoing, each such Participating Buyer and Stockholder agrees to execute and deliver such subscription and other agreements specified by the Company to which the Prospective Subscriber will be party.
2.2.6 Expenses. All reasonable costs and expenses incurred by the holders of Investor Shares or the Company in connection with any proposed Issuance of Subject Securities (whether or not consummated), including all attorneys fees and charges, all accounting fees and expenses and all finders, brokerage or investment banking fees, charges or commissions, will be paid by the Company or its subsidiaries. The reasonable fees and charges of a single legal counsel representing any or all of the other holders of Shares in connection with such proposed Issuance of Subject Securities (whether or not consummated) will be paid by the Company or its subsidiaries. Any other costs and expenses incurred by or on behalf of any other holder of Shares in connection with such
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proposed Issuance of Subject Securities (whether or not consummated) will be borne by such holder.
2.2.7 Closing. The closing of an Issuance pursuant to Section 2.2 hereof will take place at such time and place as the Company will specify by notice to each Participating Buyer. At the Closing of any Issuance under this Section 2.2.7, each Participating Buyer will receive the notes, certificates or other instruments evidencing the Subject Securities (and, if applicable, Other Securities) to be issued to such Participating Buyer, registered in the name of such Participating Buyer or his, her or its designated nominee, free and clear of any liens or encumbrances, with any transfer tax stamps affixed, against delivery by such Participating Buyer of the applicable consideration.
2.3. Post-Issuance Notice. Notwithstanding the notice requirements of Sections 2.2.1 and 2.2.2 hereof, the Company may proceed with any Issuance prior to having complied with the provisions of Section 2.2; provided that the Company will:
2.3.1 provide to each holder of Shares who would have been a Participation Offeree in connection with such Issuance (i) prompt notice of such Issuance and (ii) a notice containing the information that would have been required to be included in a Participation Notice pursuant to Section 2.2.1 in which the actual price per unit of Subject Securities (and, if applicable, actual Price Per Equivalent Share) shall be set forth; and
2.3.2 offer to issue to such holder of Shares such number of securities of the type issued in the Issuance as may be requested by such holder of Shares (not to exceed the Participation Portion that such holder of Shares would have been entitled to pursuant to Section 2.2 hereof multiplied by the sum of (a) the number of Subject Securities included in the Issuance and (b) the aggregate number of shares issued pursuant to this Section 2.3 with respect to such Issuance) on the same economic terms and conditions with respect to such securities as the subscribers in the Issuance received; and
2.3.3 keep such offer open for a period of ten Business Days, during which period, each such holder may accept such offer by sending a written acceptance to the Issuer committing to purchase an amount of such securities in any event not to exceed the Participation Portion that such holder would have been entitled to pursuant to Section 2.2 hereof multiplied by the sum of (a) the number of Subject Securities included in such issuance and (b) the aggregate number of shares issued pursuant to this Section 2.3 with respect to such Issuance.
2.4. Excluded Transactions. Notwithstanding the preceding provisions of this Section 2, the preceding provisions of this Section 2 will not apply to the Issuance of Shares to the Investors in connection with the Closing of the transactions contemplated by the Merger Agreement.
2.5. Certain Provisions Applicable to Options, Warrants and Convertible Securities. In the event that the Issuance of Subject Securities will result in any increase in the number of shares of Common Stock issuable upon exercise, conversion or exchange of any Options, Warrants or Convertible Securities, the number of shares (or Equivalent Shares, if applicable) of
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Subject Securities (and Other Securities, if applicable) which the holders of such Options, Warrants or Convertible Securities, as the case may be, will be entitled to purchase pursuant to Section 2.2 hereof, if any, will be reduced, share for share, by the amount of any such increase.
2.6. Acquired Shares. Any Subject Securities constituting Common Stock acquired by any holder of Shares pursuant to this Section 2 will be deemed for all purposes hereof and under the Stockholders Agreement to be Participation Shares hereunder of like kind with the Shares then held by the acquiring holder.
2.7. Period. The foregoing provisions of this Section 2 will expire upon the earlier of the closing of (a) a Change of Control and (b) the effectiveness of the Companys registration statement in connection with the Initial Public Offering.
ARTICLE III
REGISTRATION RIGHTS.
The Company will perform and comply, and cause each of its subsidiaries to perform and comply, with such of the following provisions as are applicable to it. Each Holder will perform and comply with such of the following provisions as are applicable to such Holder.
3.1. Demand Registration Rights.
3.1.1 IPO Demand Registration Rights.
(a) At any time following the Closing, if the Company has not yet completed the Initial Public Offering, any Bain Fund, by notice to the Company specifying the intended method or methods of disposition, may request (each such requesting Bain Fund, an IPO Initiating Holders) that the Company effect the registration under the Securities Act for the Initial Public Offering of all or a specified part of the Registrable Securities held by such IPO Initiating Holder.
(b) The Company will use its best efforts to (i) effect the registration under the Securities Act (including by means of a shelf registration pursuant to Rule 415 under the Securities Act if so requested by a majority of the IPO Initiating Holders and if the Company is then eligible to use such registration) of the Registrable Securities that the Company has been requested to register by an IPO Initiating Holder pursuant to this Section 3.1.1 together with all other Registrable Securities that the Company has been requested to register pursuant to Section 3.2 by other Holders, all to the extent required to permit the disposition of the Registrable Securities that the Company has been so requested to register, and (ii) if requested by an IPO Initiating Holder, obtain acceleration of the effective date of the registration statement relating to such registration.
3.1.2 Post-IPO Demand Registration Rights. At any such time as any Bain Fund which, together with its Affiliates and Affiliated Funds, beneficially holds, in the aggregate, more than five percent (5%) of the outstanding Shares (the Initiating Holders), by notice to the Company specifying the intended method or methods of
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disposition, may request that the Company effect the registration under the Securities Act for a Public Offering of all or a specified part of the Registrable Securities held by such Initiating Holders; provided, however, that the value of Registrable Securities that the Initiating Holders propose to sell in such Public Offering is at least Twenty-Five Million Dollars ($25,000,000) or such lower amount as agreed by the Board. The Company will then use its best efforts to (i) effect the registration under the Securities Act (including by means of a shelf registration pursuant to Rule 415 under the Securities Act if so requested by a majority of the Initiating Holders and if the Company is then eligible to use such registration) of the Registrable Securities that the Company has been requested to register by such Initiating Holders together with all other Registrable Securities that the Company has been requested to register pursuant to Section 3.2 by other Holders, all to the extent required to permit the disposition of the Registrable Securities that the Company has been so requested to register, and (ii) if requested by an Initiating Holder, obtain acceleration of the effective date of the registration statement relating to such registration; provided, however, that the Company will not be obligated to take any action to effect any such registration pursuant to this Section 3.1.2:
(a) during the effectiveness of any Principal Lock-Up Agreement entered into in connection with any registration statement pertaining to an underwritten public offering of securities of the Company for its own account (other than a Rule 145 Transaction, or a registration relating solely to employee benefit plans); or
(b) if a registration statement requested under this Section 3.1.2 became effective within the preceding 90 days (unless otherwise consented to by the Board).
3.1.3 Shelf Takedowns. At any time during which the Company has effective a shelf registration pursuant to Rule 415 under the Securities Act with respect to such Holders Shares, any Bain Fund (the Shelf Takedown Holders), by notice to the Company specifying the intended method or methods of disposition, may request that the Company effect an underwritten offering of the Shelf Takedown Holders Shares that are subject to such registration statement (an Underwritten Shelf Takedown) of all or a specified part of the Registrable Securities held by such Shelf Takedown Holder; provided, however, that the value of Registrable Securities that the Shelf Takedown Holder together with Shares owned by its Affiliated Funds proposes to sell in an Underwritten Shelf Takedown is at least Twenty-Five Million Dollars ($25,000,000) or such lower amount as agreed by the Board. The Company will not be obligated to take any action to effect any such Underwritten Shelf Takedown pursuant to this Section 3.1.3 if an Underwritten Shelf Takedown requested under this Section 3.1.3 was consummated within the preceding 90 days (unless otherwise consented to by the Board).
3.1.4 Form. Except as otherwise provided above or required by law, so long as the Company is eligible and qualified to register Registrable Securities on Form S-3 (or any successor or similar short-form registration statement), each registration requested pursuant to Section 3.1.2 will be effected by the filing of a registration statement on Form S-3 (or any other form which includes substantially the same information as would be
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required to be included in a registration statement on such form as currently constituted); provided that if any registration requested pursuant to this Section 3.1 is proposed to be effected on Form S-3 (or any successor or similar short-form registration statement) and is in connection with an underwritten offering, and if the managing underwriter will advise the Company in writing that, in its opinion, it is of material importance to the success of such proposed offering to file a registration statement on Form S-1 (or any successor or similar registration statement) or to include in such registration statement information not required to be included pursuant to Form S-3 (or any successor or similar short-form registration statement), then the Company will file a registration statement on Form S-1 or supplement Form S-3 (or any successor or similar short-form registration statement) as reasonably requested by such managing underwriter.
3.1.5 Payment of Expenses. The Company will pay all Registration Expenses in connection with registrations of Registrable Securities pursuant to this Section 3.1, including all reasonable expenses (other than fees and disbursements of counsel that do not constitute Registration Expenses) that any Holder incurs in connection with each registration of Registrable Securities requested pursuant to this Section 3.1.
3.1.6 Additional Procedures. In the case of a registration pursuant to Section 3.1 hereof, whenever an IPO Initiating Holder or an Initiating Holder is entitled to request and so requests that such registration will be effected pursuant to an underwritten offering, the Company will include such information in any written notice to Holders required by Section 3.2. In such event, the right of any Holder to have securities owned by such Holder included in such registration will be conditioned upon the inclusion of such Holders Registrable Securities in the underwriting (unless otherwise mutually agreed upon by the IPO Initiating Holder or Initiating Holder and such Holder). If requested by the IPO Initiating Holder, Initiating Holder or Shelf Takedown Holder the Company together with the Holders proposing to distribute their securities through the underwriting will enter into an underwriting agreement with the underwriters for such offering containing such representations and warranties by the Company and such Holders and such other terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions, including customary indemnity and contribution provisions (subject, in each case, to the limitations on such liabilities set forth in this Agreement).
3.1.7 Suspension of Registration. If the filing, initial effectiveness or continued use of a registration statement, including a shelf registration statement pursuant to Rule 415 under the Securities Act, in respect of a registration pursuant to this Section 3.1 at any time would require the Company to make a public disclosure of material non-public information, which disclosure in the good faith judgment of the Board (after consultation with external legal counsel) (i) would be required to be made in any registration statement so that such registration statement would not be materially misleading, (ii) would not be required to be made at such time but for the filing, effectiveness or continued use of such registration statement and (iii) would have a material adverse effect on the Company or its business or on the Companys ability to effect a material proposed acquisition, disposition, financing, reorganization, recapitalization or similar transaction, then the Company may, upon giving prompt written notice of such action to the Holders
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participating in such registration, delay the filing or initial effectiveness of, or suspend use of, such registration statement; provided, that the Company will not be permitted to do so (i) for a period exceeding 30 days on any one occasion or (ii) for an aggregate period exceeding 60 days in any 12 month period. In the event the Company exercises its rights under the preceding sentence, such Holders agree to suspend, promptly upon their receipt of the notice referred to above, their use of any prospectus relating to such registration in connection with any sale or offer to sell Registrable Securities. The Company will promptly notify such Holders of the expiration of any period during which it exercised its rights under this Section 3.1.7. The Company agrees that, in the event it exercises its rights under this Section 3.1.7, it will, within 30 days following such Holders receipt of the notice of suspension, update the suspended registration statement as may be necessary to permit the Holders to resume use thereof in connection with the offer and sale of their Registrable Securities in accordance with applicable law.
3.2. Piggyback Registration Rights.
3.2.1 Piggyback Registration.
(a) General. Each time the Company proposes to register any shares of Common Stock under the Securities Act on a form which would permit registration of Registrable Securities for sale to the public, for its own account and/or for the account of any other Person (pursuant to Section 3.1 or otherwise) for sale in a Public Offering, the Company will give notice to all Holders of its intention to do so. Any Holder may, by written response delivered to the Company within twenty days after the date of delivery of such notice, request that all or a specified part of such Holders Registrable Securities be included in such registration. A Holder may request in any such response that varying numbers of such Holders Registrable Securities be included in the registration based on varying prices at which such Registrable Securities are to be sold in the registered offering. The Company thereupon will use its best efforts to cause to be included in such registration under the Securities Act all Registrable Securities that the Company has been so requested to register by such Holders, to the extent required to permit the disposition (in accordance with the methods to be used by the Company or, pursuant to Section 3.1, other Holders in such Public Offering) of the Registrable Securities to be so registered; provided that (i) if, at any time after giving written notice of its intention to register any securities, the Company will determine for any reason not to proceed with the proposed registration of the securities to be sold by it, the Company may, at its election, give written notice of such determination to each Holder and, thereupon, will be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), and (ii) if such registration involves an underwritten offering, all Holders requesting to be included in the Companys registration must sell their Registrable Securities to the underwriters selected by the Company on the same terms and conditions as apply to the Company (with such differences as may be customary or appropriate in combined primary and secondary offerings and, in any event, without providing for indemnification or contribution
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obligations in excess of what is required by Section 3.4) or, in the case of a registration initiated pursuant to Section 3.1.1 or 3.1.2, the Bain Funds. No registration of Registrable Securities effected under this Section 3.2 will relieve the Company of any of its obligations to effect registrations of Registrable Securities pursuant to Section 3.1 hereof.
(b) Excluded Transactions. The Company will not be obligated to effect any registration of Registrable Securities under this Section 3.2 or give any notice to any Holder of the Companys intent to register Registrable Securities, in each case incidental to the registration of any of its securities in connection with:
(i) Any Public Offering relating to employee benefit plans or dividend reinvestment plans;
(ii) Any Public Offering relating to the acquisition or merger after the date hereof by the Company or any of its subsidiaries of or with any other businesses except to the extent such Public Offering is for the sale of securities for cash; or
(iii) The Initial Public Offering, unless such offering shall have been initiated pursuant to Section 3.1.1 or the Board determines otherwise, provided, that even if such offering is the Initial Public Offering and has been initiated pursuant to Section 3.1.1, the Company will not be obligated to effect any registration of Registrable Securities or give any notice to Holders under this Section 3.2 if the lead underwriters determine that inclusion of such Registrable Securities would materially adversely affect the marketability or pricing of the offering.
3.2.2 Payment of Expenses. The Company will pay all Registration Expenses in connection with registrations of Registrable Securities pursuant to this Section 3.2.
3.2.3 Additional Procedures. Holders participating in any Public Offering pursuant to this Section 3.2 will take all such actions and execute all such documents and instruments that are reasonably requested by the Company to effect the sale of their Registrable Securities in such Public Offering, including being parties to the underwriting agreement entered into by the Company and any other selling shareholders in connection therewith and being liable in respect of the representations and warranties and the other agreements (including customary selling stockholder representations, warranties, indemnifications and lock-up agreements) for the benefit of the underwriters contained therein; provided, however, that (i) with respect to individual representations, warranties, indemnities and agreements of sellers of Registrable Securities in such Public Offering, the aggregate amount of such liability will not exceed such holders net proceeds from such offering and (ii) to the extent selling stockholders give further representations, warranties and indemnities, then with respect to all other representations, warranties and indemnities of sellers of Registrable Securities in such Public Offering, the aggregate amount of such liability will not exceed the lesser of (x) such holders pro rata portion of any such liability, in accordance with such holders portion of the total number of
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Registrable Securities included in the offering, and (y) such holders net proceeds from such offering.
3.3. Certain Other Provisions.
3.3.1 Underwriters Cutback. In connection with any registration of shares, the underwriter may determine that marketing factors (including an adverse effect on the per share offering price) require a limitation of the number of shares to be underwritten. Notwithstanding any contrary provision of this Section 3 and subject to the terms of this Section 3.3.1, the underwriter may limit the number of shares which would otherwise be included in such registration by excluding any or all Registrable Securities from such registration, it being understood that, if the registration in question involves a registration for sale of securities for the Companys own account, then the number of shares which the Company seeks to have registered in such registration will not be subject to exclusion, in whole or in part, under this Section 3.3.1. Upon receipt of notice from the underwriter of the need to reduce the number of shares to be included in the registration, the Company will advise all holders of the Companys securities that would otherwise be registered and underwritten pursuant hereto, and the number of shares of such securities, including Registrable Securities, that may be included in the registration will be allocated in the following manner, unless the underwriter will determine that marketing factors require a different allocation: shares, other than Registrable Securities, requested to be included in such registration by other stockholders will be excluded unless the Company, with the consent of the parties required to approve any amendment or waiver of this Agreement pursuant to Section 6.2 hereof, has granted registration rights which are to be treated on an equal basis with Registrable Securities for the purpose of the exercise of the underwriter cutback (such shares afforded such equal treatment being Parity Shares); and, if a limitation on the number of shares is still required, the number of Registrable Securities, Parity Shares and other shares of Common Stock that may be included in such registration will be allocated among the holders thereof in proportion, as nearly as practicable, as follows:
(a) there will be first allocated to each such holder requesting that its Registrable Securities or Parity Shares be registered in such registration a number of such shares to be included in such registration equal to the lesser of (i) the number of such shares requested to be registered by such holder, and (ii) a number of such shares equal to such holders Pro Rata Portion;
(b) the balance, if any, not allocated pursuant to clause (a) above will be allocated to those holders requesting that their Registrable Securities or Parity Shares be registered in such registration that requested to register a number of such shares in excess of such holders Pro Rata Portion pro rata to each such holder based upon the number of Registrable Securities and Parity Shares held by such holder, or in such other manner as the holders requesting that their Registrable Securities or Parity Shares be registered in such registration may otherwise agree; and
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(c) the balance, if any, not allocated pursuant to clause (b) above will be allocated to shares, other than Registrable Securities and Parity Shares, requested to be included in such registration by other stockholders.
For purposes of any underwriter cutback, all Registrable Securities held by any Holder will also include any Registrable Securities held by the partners, retired partners, shareholders or Affiliates of such Holder, or the estates and family members of any such Holder or such partners and retired partners, any trusts for the benefit of any of the foregoing Persons and, at the election of such Holder or such partners, retired partners, trusts or Affiliates, any Charitable Organization to which any of the foregoing shall have contributed Common Stock prior to the execution of the underwriting agreement in connection with such underwritten offering, and such Holder and other Persons will be deemed to be a single selling Holder, and any pro rata reduction with respect to such selling Holder will be based upon the aggregate amount of Common Stock owned by all entities and individuals included with such selling Holder, as defined in this sentence. No securities excluded from the underwriting by reason of the underwriters marketing limitation will be included in such registration. Upon delivery of a written request pursuant to Section 3.1.1, 3.1.2 or 3.2.1(a) that Registrable Securities be sold in an underwritten offering, the Holder thereof may not thereafter elect to withdraw therefrom without the written consent of the Bain Funds. Notwithstanding the foregoing, if the managing underwriter of any underwritten offering will advise the Holders participating in the offering that the Registrable Securities covered by the registration statement cannot be sold in such offering within a price range acceptable to the IPO Initiating Holder, Initiating Holder or Shelf Takedown Holder, then the IPO Initiating Holder, Initiating Holder or Shelf Takedown Holder will have the right to withdraw from such underwritten offering and, upon any such withdrawal, the Bain Funds may elect to terminate any such offering at any time.
3.3.2 Registration Procedures. If, and in each case when, the Company is required to effect a registration of any Registrable Securities as provided in this Section 3, the Company will promptly:
(a) prepare and, in any event within 45 days (30 days in the case of a Form S-3 registration) after the end of the period under Section 3.2.1(a) within which a piggyback request for registration may be given to the Company, file with the Commission a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective within 90 days of the initial filing;
(b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period not in excess of 270 days (or such shorter period which will terminate when all Registrable Securities covered by such registration statement have been sold) and to comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement; provided that before filing a registration statement or prospectus, or any
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amendments or supplements thereto in accordance with Sections 3.1 or 3.2, the Company will furnish to counsel selected pursuant to Section 3.3.3 hereof copies of all documents proposed to be filed, which documents will be subject to the review of such counsel;
(c) furnish to each seller of such Registrable Securities such number of copies of such registration statement and of each amendment and supplement thereto (in each case including all exhibits filed therewith), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and summary prospectus), in conformity with the requirements of the Securities Act, and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities by such seller;
(d) use its best efforts to register or qualify such Registrable Securities covered by such registration in such jurisdictions as each seller will reasonably request, and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller, except that the Company will not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction where, but for the requirements of this clause (d), it would not be obligated to be so qualified or to consent to general service of process in any such jurisdiction;
(e) notify each seller of any such Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the Companys becoming aware that the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such seller, prepare and furnish to such seller a reasonable number of copies of an amended or supplemental prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;
(f) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable (but not more than 18 months) after the effective date of the registration statement, an earnings statement which will satisfy the provisions of Section 11(a) of the Securities Act;
(g) (i) if such Registrable Securities are Common Stock (including Common Stock issuable upon conversion, exchange or exercise of another security), use its best efforts to list such Registrable Securities on any securities
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exchange on which the Common Stock is then listed if such Registrable Securities are not already so listed; and (ii) use its best efforts to provide a transfer agent and registrar for such Registrable Securities covered by such registration statement not later than the effective date of such registration statement;
(h) enter into such customary agreements (including an underwriting agreement in customary form), which may include indemnification provisions in favor of underwriters and other Persons in addition to the provisions of Section 3.4 hereof, and take such other actions as the Bain Funds or the underwriters, if any, reasonably requested in order to expedite or facilitate the disposition of such Registrable Securities;
(i) obtain a cold comfort letter or letters from the Companys independent public accountants in customary form and covering matters of the type customarily covered by cold comfort letters as the Bain Funds shall reasonably request;
(j) make available for inspection by any seller of such Registrable Securities covered by such registration statement, by any managing underwriter or underwriters participating in any disposition to be effected pursuant to such registration statement and by any attorney, accountant or other agent retained by any such seller or any such managing underwriter(s), all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Companys officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement (subject to each party referred to in this clause (j) entering into customary confidentiality agreements in a form reasonably acceptable to the Company);
(k) notify counsel (selected pursuant to Section 3.3.3 hereof) for the Holders of Registrable Securities included in such registration statement and the managing underwriter or agent, immediately, and confirm the notice in writing (i) when the registration statement, or any post-effective amendment to the registration statement, will have become effective, or any supplement to the prospectus or any amendment to the prospectus will have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request of the Commission to amend the registration statement or amend or supplement the prospectus or for additional information, and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the registration statement or of any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the registration statement for offering or sale in any jurisdiction, or of the institution or threatening of any proceedings for any of such purposes;
(l) use its best efforts to prevent the issuance of any stop order suspending the effectiveness of the registration statement or of any order preventing or
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suspending the use of any preliminary prospectus and, if any such order is issued, to obtain the withdrawal of any such order as soon as practicable;
(m) if requested by the managing underwriter or agent or any Holder of Registrable Securities covered by the registration statement, incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or agent or such Holder reasonably requests to be included therein, including, with respect to the number of Registrable Securities being sold by such Holder to such underwriter or agent, the purchase price being paid therefor by such underwriter or agent and with respect to any other terms of the underwritten offering of the Registrable Securities to be sold in such offering; and make all required filings of such prospectus supplement or post-effective amendment as soon as practicable after being notified of the matters incorporated in such prospectus supplement or post-effective amendment;
(n) cooperate with the Holders of Registrable Securities covered by the registration statement and the managing underwriter or agent, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing securities to be sold under the registration statement, and enable such securities to be in such denominations and registered in such names as the managing underwriter or agent, if any, or such Holders may request;
(o) obtain for delivery to the Holders of Registrable Securities being registered and to the underwriter or agent an opinion or opinions from counsel for the Company in customary form and in form, substance and scope reasonably satisfactory to the Bain Funds, underwriters or agents and their counsel;
(p) cooperate with each seller of Registrable Securities and each underwriter or agent participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the FINRA; and
(q) use its best efforts to make available the executive officers of the Company to participate with the Holders of Registrable Securities and any underwriters in any road shows that may be reasonably requested by the Holders in connection with distribution of the Registrable Securities.
3.3.3 Selection of Underwriters and Counsel. The underwriters and legal counsel to be retained by the Company in connection with any Public Offering will be selected by the Board; provided that, in the case of an offering following a request therefor under Section 3.1.1 or 3.1.2, such underwriters and counsel will be reasonably acceptable to the Bain Funds. In connection with any registration of Registrable Securities pursuant to Sections 3.1 and 3.2 hereof, the Bain Funds may select one counsel to represent all Holders of Registrable Securities covered by such registration; provided, however, that in the event that the counsel selected as provided above is also acting as counsel to the Company in connection with such registration, the remaining Holders will be entitled to
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select one additional counsel to represent, at the Companys expense, all such remaining Holders.
3.3.4 Company Lock-Up. If any registration pursuant to Section 3.1 of this Agreement shall be in connection with an underwritten Public Offering, the Company agrees not to effect any public sale or distribution of any Common Stock of the Company (or securities convertible into or exchangeable or exercisable for Common Stock) (in each case, other than as part of such underwritten public offering and other than pursuant to a registration on Form S-4 or S-8) for its own account, within 90 days (or such shorter period as the managing underwriters may require) after, the effective date of such registration (except as part of such registration).
3.3.5 Holder Lock-Up. Each Holder will comply with the provisions of Section 3.7 of the Stockholders Agreement applicable to a Stockholder as though such Section were set forth herein. No Stockholder will Transfer Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock pursuant to a waiver from a lock-up agreement described in Section 3.7 of the Stockholders Agreement unless the benefit of such waiver is extended in a pro rata manner to all Stockholders.
3.3.6 Other Agreements. The Company covenants and agrees that, so long as any Person holds any Registrable Securities in respect of which any registration rights provided for in Section 3.1 of this Agreement remain in effect, the Company will not, directly or indirectly, grant to any Person or agree to or otherwise become obligated in respect of rights of registration in the nature or substantially in the nature of those set forth in Section 3.1 or 3.2 of this Agreement without the consent of Stockholders holding a majority of the Registrable Securities (plus the consent of any Stockholder who would be disproportionately and adversely affected thereby compared to other Stockholders) other than registration rights set forth in Section 3.1 or 3.2 that are provided to Managers, Other Investors or Investors that join this Agreement from time to time.
3.4. Indemnification and Contribution.
3.4.1 Indemnities of the Company. In the event of any registration of any Registrable Securities or other debt or equity securities of the Company or any of its subsidiaries under the Securities Act pursuant to this Section 3 or otherwise, and in connection with any registration statement or any other disclosure document produced by or on behalf of the Company or any of its subsidiaries including reports required and other documents filed under the Exchange Act, and other documents pursuant to which any debt or equity securities of the Company or any of its subsidiaries are sold (whether or not for the account of the Company or its subsidiaries), the Company will, and hereby does, and will cause each of its subsidiaries, jointly and severally, to indemnify and hold harmless each holder of Registrable Securities, any Person who is or might be deemed to be a controlling Person of the Company or any of its subsidiaries within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, their respective direct and indirect partners, advisory board members, advisors, directors, officers, employees, trustees, members and shareholders, and each other Person, if any, who controls any such
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holder or any such controlling Person within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each such Person being referred to herein as a Covered Person), against any losses, claims, damages or liabilities (or actions or proceedings in respect thereof), joint or several, to which such Covered Person may be or become subject under the Securities Act, the Exchange Act, any other securities or other law of any jurisdiction, the common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained or incorporated by reference in any registration statement under the Securities Act, any preliminary prospectus or final prospectus included therein, or any related summary prospectus, or any amendment or supplement thereto, or any document incorporated by reference therein, or any other such disclosure document (including reports and other documents filed under the Exchange Act and any document incorporated by reference therein) or other document or report, (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any violation or alleged violation by the Company or any of its subsidiaries of any federal, state, foreign or common law rule or regulation applicable to the Company or any of its subsidiaries and relating to action or inaction in connection with any such registration, disclosure document or other document or report, and will reimburse such Covered Person for any legal or any other expenses incurred by it in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding; provided, however, that neither the Company nor any of its subsidiaries will be liable to any Covered Person in any such case to the extent that any such loss, claim, damage, liability, action or proceeding arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement, incorporated document or other such disclosure document or other document or report, in reliance upon and in conformity with written information furnished to the Company or to any of its subsidiaries through an instrument duly executed by such Covered Person specifically stating that it is for use in the preparation thereof. The indemnities of the Company and of its subsidiaries contained in this Section 3.4.1 will remain in full force and effect regardless of any investigation made by or on behalf of such Covered Person and will survive any transfer of securities or any termination of this Agreement.
3.4.2 Indemnities to the Company. Subject to Section 3.4.4, the Company and any of its subsidiaries may require, as a condition to including any securities in any registration statement filed pursuant to this Section 3, that the Company and any of its subsidiaries will have received an undertaking satisfactory to it from the prospective seller of such securities, severally and not jointly, to indemnify and hold harmless the Company and any of its subsidiaries, each director of the Company or any of its subsidiaries, each officer of the Company or any of its subsidiaries who will sign such registration statement and each other Person (other than such seller), if any, who controls the Company and any of its subsidiaries within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each other prospective seller of such securities with respect to any statement in or omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus included
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therein, or any amendment or supplement thereto, or any other disclosure document (including reports and other documents filed under the Exchange Act or any document incorporated therein) or other document or report, if such statement or omission was made in reliance upon and in conformity with written information furnished to the Company or any of its subsidiaries through an instrument executed by such seller specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement, incorporated document or other document or report. Such indemnity will remain in full force and effect regardless of any investigation made by or on behalf of the Company, any of its subsidiaries or any such director, officer or controlling Person and will survive any transfer of securities or any termination of this Agreement.
3.4.3 Contribution. If the indemnification provided for in Sections 3.4.1 or 3.4.2 hereof is unavailable to a party that would have been entitled to indemnification pursuant to the foregoing provisions of this Section 3.4 (an Indemnitee) in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each party that would have been an indemnifying party thereunder will, subject to Section 3.4.4 and in lieu of indemnifying such Indemnitee, contribute to the amount paid or payable by such Indemnitee as a result of such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative fault of such indemnifying party on the one hand and such Indemnitee on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions or proceedings in respect thereof). The relative fault will be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or such Indemnitee and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties agree that it would not be just or equitable if contribution pursuant to this Section 3.4.3 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the preceding sentence. The amount paid or payable by a contributing party as a result of the losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to above in this Section 3.4.3 will include any legal or other expenses reasonably incurred by such Indemnitee in connection with investigating or defending any such action or claim. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.
3.4.4 Limitation on Liability of Holders of Registrable Securities. The liability of each holder of Registrable Securities in respect of any indemnification or contribution obligation of such holder arising under this Section 3.4 will not in any event exceed an amount equal to the net proceeds to such holder (after deduction of all underwriters discounts and commissions) from the disposition of the Registrable Securities disposed of by such holder pursuant to such registration.
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3.4.5 Indemnification Procedures. Promptly after receipt by an Indemnitee of written notice of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Section 3.4, such Indemnitee will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action or proceeding; provided that the failure of the Indemnitee to give notice as provided herein will not relieve the indemnifying party of its obligations under this Section 3.4, except to the extent that the indemnifying party is materially prejudiced by such failure to give notice. In case any such action or proceeding is brought against an Indemnitee, the indemnifying party will be entitled to participate in and to assume the defense thereof (at its expense), jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such Indemnitee, and after notice from the indemnifying party to such Indemnitee of its election so to assume the defense thereof, the indemnifying party will not be liable to such Indemnitee for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation and will have no liability for any settlement made by the Indemnitee without the consent of the indemnifying party, such consent not to be unreasonably withheld. Notwithstanding the foregoing, if in such Indemnitees reasonable judgment a conflict of interest between such Indemnitee and the indemnifying parties may exist in respect of such action or proceeding or the indemnifying party does not assume the defense of any such action or proceeding within a reasonable time after notice of commencement, the Indemnitee will have the right to assume or continue its own defense and the indemnifying party will be liable for any reasonable expenses therefor, but in no event will bear the expenses for more than one firm of counsel for all Indemnitees in each jurisdiction who will be approved by the Bain Funds in the registration in respect of which such indemnification is sought. No indemnifying party will settle any action or proceeding or consent to the entry of any judgment without the prior written consent of the Indemnitee, unless such settlement or judgment (i) includes as an unconditional term thereof the giving by the claimant or plaintiff of a release to such Indemnitee from all liability in respect of such action or proceeding and (ii) does not involve the imposition of equitable remedies or the imposition of any obligations on such Indemnitee and does not otherwise adversely affect such Indemnitee, other than as a result of the imposition of financial obligations for which such Indemnitee will be indemnified hereunder.
ARTICLE IV
REMEDIES.
4.1. Generally. The parties will have all remedies available at law, in equity or otherwise in the event of any breach or violation of this Agreement or any default hereunder. The parties acknowledge and agree that in the event of any breach of this Agreement, in addition to any other remedies that may be available, each of the parties hereto will be entitled to specific performance of the obligations of the other parties hereto and, in addition, to such other equitable remedies (including preliminary or temporary relief) as may be appropriate in the circumstances.
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ARTICLE V
PERMITTED TRANSFEREES.
The rights of a Holder hereunder may be assigned (but only with all related obligations as set forth below) in connection with a Transfer of Shares effected in accordance with the terms of the Stockholders Agreement and this Agreement to a Permitted Transferee of such Holder. Without prejudice to any other or similar conditions imposed hereunder with respect to any such Transfer, no assignment permitted under the terms of this Section 5 will be effective unless the Permitted Transferee to which such assignment is being made, if not a Stockholder, has delivered to the Company a written acknowledgment and agreement in form and substance reasonably satisfactory to the Company that the Shares in respect of which such assignment is made will continue to be deemed Shares and will be subject to all of the provisions of this Agreement relating to Shares and that such Permitted Transferee will be bound by, and will be a party to, this Agreement. A Permitted Transferee to whom rights are transferred pursuant to this Section 5 may not again transfer such rights to any other Permitted Transferee, other than as provided in this Section 5.
ARTICLE VI
AMENDMENT, TERMINATION, ETC.
6.1. Oral Modifications. This Agreement may not be orally amended, modified, extended or terminated, nor will any oral waiver of any of its terms be effective.
6.2. Written Modifications. This Agreement may be amended, modified, extended or terminated, and the provisions hereof may be waived, only by an agreement in writing signed by the Company and the Stockholders that hold a majority of the Shares held by all Stockholders; provided, however, that any amendment, modification, extension, termination or waiver (an Amendment) will also require the consent of any Stockholder who would be disproportionately and adversely affected thereby. Each such Amendment will be binding upon each party hereto and each holder of Shares subject hereto. In addition, each party hereto and each holder of Shares subject hereto may waive any right hereunder by an instrument in writing signed by such party or holder.
6.3. Effect of Termination. No termination under this Agreement will relieve any Person of liability for breach prior to termination. In the event this Agreement is terminated, each Covered Person will retain the indemnification rights pursuant to Section 3.4 hereof with respect to any matter that (i) may be an indemnified liability thereunder and (ii) occurred prior to such termination.
ARTICLE VII
DEFINITIONS.
For purposes of this Agreement:
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7.1. Certain Matters of Construction. In addition to the definitions referred to or set forth below in this Section 7:
(i) The words hereof, herein, hereunder and words of similar import will refer to this Agreement as a whole and not to any particular Section or provision of this Agreement, and reference to a particular Section of this Agreement will include all subsections thereof;
(ii) The word including will be construed as including, without limitation;
(iii) Definitions will be equally applicable to both nouns and verbs and the singular and plural forms of the terms defined; and
(iv) The masculine, feminine and neuter genders will each include the other.
7.2. Definitions. The following terms will have the following meanings:
Affiliate will mean (a) with respect to any specified Person that is not a natural Person, any other Person that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person (for the purposes of this definition, control (including, with correlative meanings, the terms controlling, controlled by and under common control with) as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise) and (b) with respect to any natural Person, any Member of the Immediate Family of such natural Person.
Affiliated Fund means with respect to any Investor, each corporation, trust, limited liability company, general or limited partnership or other entity under common control with that Investor (including any such entity with the same general partner or principal investment advisor as that Investor or with a general partner or principal investment advisor that is an Affiliate of the general partner or principal investment advisor of that Investor).
Agreement will have the meaning set forth in the Preamble.
Amendment will have the meaning set forth in Section 6.2.
Bain Funds will have the meaning set forth in the Preamble.
Board will mean the board of directors of the Company.
Business Day will mean any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in the City of New York.
Change of Control will mean (a) any change in the ownership of the capital stock of the Company if, immediately after giving effect thereto, any Person (or group of Persons acting in
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concert) other than the Investors and their Affiliates will have the direct or indirect power to elect a majority of the members of the Board or (b) any change in the ownership of the capital stock of the Company if, immediately after giving effect thereto, the Investors and their Affiliates will own less than 25% of the Equivalent Shares.
Charitable Organization means a charitable organization as described by Section 501(c)(3) of the Internal Revenue Code of 1986, as in effect from time to time.
Class A Stock will mean the Class A Common Stock, par value $.001 per share of the Company.
Class L Stock will mean the Class L Common Stock, par value $.001 per share, of the Company.
Closing will have the meaning set forth in Section 1.1.
Commission will mean the Securities and Exchange Commission.
Common Stock will mean the common stock, par value $0.01 per share, of the Company, including the Class A Stock and the Class L Stock.
Company will have the meaning set forth in the Preamble.
Covered Person will have the meaning set forth in Section 3.4.1.
Convertible Securities will mean any evidence of indebtedness, shares of stock (other than Common Stock) or other securities (other than Options and Warrants) which are directly or indirectly convertible into or exchangeable or exercisable for shares of Common Stock.
Equivalent Shares will mean, at any date of determination, (a) as to any outstanding shares of Common Stock, such number of shares of Common Stock and (b) as to any outstanding Options, Warrants or Convertible Securities which constitute Shares, the maximum number of shares of Common Stock for which or into which such Options, Warrants or Convertible Securities may at the time be exercised, converted or exchanged (or which will become exercisable, convertible or exchangeable on or prior to, or by reason of, the transaction or circumstance in connection with which the number of Equivalent Shares is to be determined); provided, however, that with respect to any Manager only Vested Shares shall be counted in determining the Equivalent Shares held by such Manager.
Exchange Act will mean the Securities Exchange Act of 1934, as in effect from time to time.
FINRA will mean the Financial Industry Regulatory Authority.
Giraffe A will have the meaning set forth in the Preamble.
Giraffe B will have the meaning set forth in the Preamble.
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Gymboree will have the meaning set forth in the Preamble.
Holders will mean the holders of Registrable Securities under this Agreement.
Indemnitee will have the meaning set forth in Section 3.4.3.
Initial Public Offering will mean the initial Public Offering registered on Form S-1 (or any successor form under the Securities Act) after the date hereof.
Initiating Holders will have the meaning set forth in Section 3.1.2.
Investors will have the meaning set forth in the Preamble.
IPO Initiating Holders will have the meaning set forth in Section 3.1.1.
Issuance will have the meaning set forth in Section 2.1.
Management Shares will mean all Shares held by a Manager. Any Management Shares that are Transferred by the holder thereof to such holders Permitted Transferees will remain Management Shares in the hands of such Permitted Transferee.
Managers will have the meaning set forth in the Preamble.
Merger Agreement will have the meaning set forth in the Recitals.
Options will mean any options to subscribe for, purchase or otherwise directly acquire Common Stock, other than any such option held by the Company or any right to purchase shares pursuant to this Agreement.
Other Investors will have the meaning set forth in the Preamble.
Other Securities will have the meaning set forth in Section 2.2.3.
Participating Buyer will have the meaning set forth in Section 2.2.2.
Participation Notice will have the meaning set forth in Section 2.2.1.
Participation Offeree will have the meaning set forth in Section 2.2.1.
Participation Portion will have the meaning set forth in Section 2.2.1.
Parity Shares will have the meaning set forth in Section 3.3.1.
Participation Shares will mean all Shares held by an Investor, by an Other Investor and all Vested Shares held by a Manager.
Permitted Transferee will have the meaning set forth in the Stockholders Agreement.
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Person will mean any individual, partnership, corporation, company, association, trust, joint venture, limited liability company, unincorporated organization, entity or division, or any government, governmental department or agency or political subdivision thereof.
Price Per Equivalent Share will mean the Boards good faith determination of the price per Equivalent Share of any Convertible Securities or Options or Warrants which are the subject of an Issuance pursuant to Section 2 hereof.
Principal Lock-Up Agreement will have the meaning set forth in Section 3.7 of the Stockholders Agreement.
Pro Rata Portion will mean for purposes of Section 3.3, with respect to each holder of Registrable Securities or Parity Shares requesting that such shares be registered in such registration statement, a number of such shares equal to the aggregate number of shares of Common Stock to be registered in such registration (excluding any shares to be registered for the account of the Company) multiplied by a fraction, the numerator of which is the aggregate number of Registrable Securities and Parity Shares held by such holder, and the denominator of which is the aggregate number of Registrable Securities and Parity Shares held by all holders requesting that their Registrable Securities or Parity Shares be registered in such registration.
Prospective Subscriber will have the meaning set forth in Section 2.2.1.
Public Offering will mean a public offering and sale of Common Stock for cash pursuant to an effective registration statement under the Securities Act.
Purchase Election will have the meaning set forth in Section 3.1.1(c).
Registrable Securities will mean (a) all shares of Class A Stock, (b) all shares of Class A Stock issuable upon conversion of Shares of Class L Stock, (c) all shares of Class A Stock issuable upon exercise, conversion or exchange of any Option, Warrant or Convertible Security and (d) all shares of Class A Stock directly or indirectly issued or issuable with respect to the securities referred to in clauses (a), (b) or (c) above by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, in each case constituting Shares and, in the case of any Manager, Vested Shares. As to any particular Registrable Securities, such shares will cease to be Registrable Securities when (u) such shares will have been Transferred in a Sale to which Sections 4.1 or 4.2 of the Stockholders Agreement apply, (v) a registration statement with respect to the sale of such securities will have become effective under the Securities Act and such securities will have been disposed of in accordance with such registration statement, (w) such securities will have been Transferred pursuant to Rule 144, (x) subject to the provisions of Section 5 hereof, such securities will have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer will have been delivered by the Company and subsequent disposition of them will not require registration of them under the Securities Act, (y) such securities may be distributed without volume limitation or other restrictions on transfer under Rule 144 (including without application of paragraphs (c), (e) (f) and (h) of Rule 144) or (z) such securities will have ceased to be outstanding.
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Registration Expenses means any and all expenses incident to performance of or compliance with Section 3 of this Agreement (other than underwriting discounts and commissions paid to underwriters and transfer taxes, if any), including (a) all Commission and securities exchange or FINRA registration and filing fees, (b) all fees and expenses of complying with securities or blue sky laws (including reasonable fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities), (c) all printing, messenger and delivery expenses, (d) all fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange or FINRA pursuant to Section 3.3.2(g) and all rating agency fees, (e) the fees and charges of counsel for the Company and of its independent public accountants, including the expenses of any special audits and/or cold comfort letters required by or incident to such performance and compliance, (f) the reasonable fees and charges of one counsel for the Holders selected pursuant to the terms of Section 3 and one counsel for certain Holders selected pursuant to the second proviso of Section 3.3.3, if applicable, (g) any fees and disbursements customarily paid by the issuers of securities, (h) expenses incurred in connection with any road show (including the reasonable out-of-pocket expenses of the Holders) and (i) fees and expenses incurred in connection with the distribution or transfer of Registrable Securities to or by a Holder or its permitted transferees in connection with a Public Offering.
Rule 144 will mean Rule 144 under the Securities Act (or any successor Rule).
Rule 145 will mean Rule 145 under the Securities Act (or any successor Rule).
Rule 145 Transaction will mean a registration on Form S-4 (or any successor Form) pursuant to Rule 145.
Securities Act will mean the Securities Act of 1933, as in effect from time to time.
Shares will mean (a) all shares of Common Stock held by a Stockholder, whenever issued, including all shares of Common Stock issued upon the exercise, conversion or exchange of any Options, Warrants or Convertible Securities and (b) all Options, Warrants and Convertible Securities held by a Stockholder (treating such Options, Warrants and Convertible Securities as a number of Shares equal to the number of Equivalent Shares represented by such Options, Warrants and Convertible Securities for all purposes of this Agreement except as otherwise specifically set forth herein).
Shelf Takedown Holders will have the meaning set forth in Section 3.1.3.
Stockholders will mean the Investors and the Managers.
Stockholders Agreement will have the meaning set forth in the Recitals.
Subject Securities will have the meaning set forth in Section 2.1.
Transfer will mean any sale, pledge, assignment, encumbrance or other transfer or disposition of any Shares to any other Person, whether directly, indirectly, voluntarily, involuntarily, by operation of law, pursuant to judicial process or otherwise.
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Underwritten Shelf Takedown will have the meaning set forth in Section 3.1.3.
Vested Shares will mean, with respect to a Manager at any time, the Management Shares held by such Manager which are not subject to vesting requirements at such time.
Warrants will mean any warrants to subscribe for, purchase or otherwise directly acquire Common Stock.
ARTICLE VIII
MISCELLANEOUS.
8.1. Authority: Effect. Each party hereto represents and warrants to and agrees with each other party that the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized on behalf of such party and do not violate any agreement or other instrument applicable to such party or by which its assets are bound. This Agreement does not, and will not be construed to, give rise to the creation of a partnership among any of the parties hereto, or to constitute any of such parties members of a joint venture or other association. Each of the Company, Giraffe A, Giraffe B and Gymboree will be jointly and severally liable for any payment obligation of the Company, Giraffe A, Giraffe B and Gymboree pursuant to this Agreement.
8.2. Notices. Any notices, requests, demands, claims and other communications required or permitted to be delivered, given or otherwise provided under this Agreement shall be in writing and shall be (a) delivered or given personally, (b) sent by facsimile, or (c) sent by overnight courier, in each case, to the address (or facsimile number) listed below:
If to the Company:
Giraffe Holding, Inc.
500 Howard Street
San Francisco, California 94105
Attention: Chief Executive Officer
Facsimile: (707) 678-1315
with a copy to:
c/o Bain Capital Partners, LLC
111 Huntington Avenue
Boston, Massachusetts 02199
Attention: Joshua Bekenstein and Jordan Hitch
Facsimile: (617) 516-2010
If to a Bain Fund or an Investor:
c/o Bain Capital Partners, LLC
111 Huntington Avenue
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Boston, Massachusetts 02199
Attention: Joshua Bekenstein and Jordan Hitch
Facsimile: (617) 516-2010
with a copy to:
Ropes & Gray LLP
The Prudential Towner
800 Boylston Street
Boston, Massachusetts 02199
Attention: R. Newcomb Stillwell and C. Todd Boes
Facsimile: (617) 951-7050
If to an Other Investor or a Manager, to the most recent address of such Other Investor or Manager shown on the records of the Company.
Notice to the holder of record of any shares of capital stock will be deemed to be notice to the holder of such shares for all purposes hereof.
Unless otherwise specified herein, such notices or other communications will be deemed effective (a) on the date received, if personally delivered, (b) on the date received if delivered by facsimile on a Business Day, or if delivered on other than a Business Day, on the first Business Day thereafter and (c) 2 Business Days after being sent by overnight courier. Each of the parties hereto will be entitled to specify a different address by giving notice as aforesaid to each of the other parties hereto.
8.3. Merger; Binding Effect, Etc. This Agreement, together with the Stockholders Agreement, constitute the entire agreement of the parties with respect to their subject matter, supersede all prior or contemporaneous oral or written agreements or discussions with respect to such subject matter, and will be binding upon and inure to the benefit of the parties hereto and thereto and their respective heirs, representatives, successors and permitted assigns. Except as otherwise expressly provided herein, no Stockholder or other party hereto may assign any of its respective rights or delegate any of its respective obligations under this Agreement without the prior written consent of the other parties hereto, and any attempted assignment or delegation in violation of the foregoing will be null and void.
8.4. Descriptive Headings. The descriptive headings of this Agreement are for convenience of reference only, are not to be considered a part hereof and will not be construed to define or limit any of the terms or provisions hereof.
8.5. Counterparts. This Agreement may be executed in multiple counterparts, each of which will be deemed an original, but all of which taken together will constitute one instrument.
8.6. Severability. In the event that any provision hereof would, under applicable law, be invalid or unenforceable in any respect, such provision will be construed by modifying or limiting it so as to be valid and enforceable to the maximum extent compatible with, and possible under, applicable law. The provisions hereof are severable, and in the event any provision hereof
27
should be held invalid or unenforceable in any respect, it will not invalidate, render unenforceable or otherwise affect any other provision hereof.
8.7. No Recourse. Notwithstanding anything that may be expressed or implied in this Agreement, the Company and each Stockholder covenant, agree and acknowledge that no recourse under this Agreement or any documents or instruments delivered in connection with this Agreement will be had against any current or future director, officer, employee, general or limited partner, member or stockholder of any Stockholder or of any Affiliate or assignee thereof, as such, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever will attach to, be imposed on or otherwise be incurred by any current or future director, officer, employee, partner, member or stockholder of any Stockholder or of any Affiliate or assignee thereof, as such, for any obligation of any Stockholder under this Agreement or any documents or instruments delivered in connection with this Agreement for any claim based on, in respect of or by reason of such obligations or their creation.
ARTICLE IX
GOVERNING LAW.
9.1. Governing Law. This Agreement and any controversy arising out of or relating to this Agreement will be governed by and construed in accordance with the General Corporation Law of the State of Delaware as to matters within the scope thereof, and as to all other matters will be governed by and construed in accordance with the internal laws of the State of New York.
9.2. Consent to Jurisdiction. Each of the parties agrees that all actions, suits or proceedings arising out of, based upon or relating to this Agreement or the subject matter hereof will be brought and maintained exclusively in the federal and state courts of the State of New York, City of New York, County of New York. Each of the parties hereto by execution hereof (i) hereby irrevocably submits to the jurisdiction of the federal and state courts in the State of New York, City of New York, County of New York for the purpose of any action, suit or proceeding arising out of or based upon this Agreement or the subject matter hereof and (ii) hereby waives to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such action, suit or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that it is immune from extraterritorial injunctive relief or other injunctive relief, that its property is exempt or immune from attachment or execution, that any such action, suit or proceeding may not be brought or maintained in one of the above-named courts, that any such action, suit or proceeding brought or maintained in one of the above-named courts should be dismissed on grounds of forum non conveniens, should be transferred to any court other than one of the above-named courts, should be stayed by virtue of the pendency of any other action, suit or proceeding in any court other than one of the above-named courts, or that this Agreement or the subject matter hereof may not be enforced in or by any of the above-named courts. Notwithstanding the foregoing, to the extent that any party hereto is or becomes a party in any litigation in connection with which it may assert indemnification rights set forth in this Agreement, the court in which such litigation is
28
being heard will be deemed to be included in clause (i) above. Each of the parties hereto hereby consents to service of process in any such suit, action or proceeding in any manner permitted by the laws of the State of New York, agrees that service of process by registered or certified mail, return receipt requested, at the address specified in or pursuant to Section 8.2 hereof is reasonably calculated to give actual notice and waives and agrees not to assert by way of motion, as a defense or otherwise, in any such action, suit or proceeding any claim that service of process made in accordance with Section 8.2. hereof does not constitute good and sufficient service of process. The provisions of this Section 9.2. will not restrict the ability of any party to enforce in any court any judgment obtained in a court included in clause (i) above.
9.3. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES HERETO THAT THIS SECTION 9.3 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY ARE RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 9.3 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
9.4. Exercise of Rights and Remedies. No delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement will impair any such right, power or remedy, nor will it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor will any such delay, omission nor waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver.
[Signature pages follow]
29
Exhibit 12.1
Ratio of earnings to fixed charges
Predecessor | Successor | Pro-Forma | ||||||||||||||||||||||||||
Fiscal Year Ended | January 31, 2010 to November 22, 2010 |
November 23, 2010 to January 29, 2011 |
Year Ended January 29, 2011 |
|||||||||||||||||||||||||
February 3, 2007 |
February 2, 2008 |
January 31, 2009 |
January 30, 2010 |
|||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Rent expense |
||||||||||||||||||||||||||||
Total rent expense |
$ | 55,618 | $ | 59,533 | $ | 68,551 | $ | 75,278 | $ | 65,934 | $ | 15,863 | $ | 81,797 | ||||||||||||||
Fixed Charges |
||||||||||||||||||||||||||||
Interest expense |
232 | 179 | 208 | 243 | 248 | 17,387 | 91,375 | |||||||||||||||||||||
Estimate of the interest within operating leases |
18,354 | 19,646 | 22,622 | 24,842 | 21,758 | 5,235 | 26,993 | |||||||||||||||||||||
Fixed Charges |
18,586 | 19,825 | 22,830 | 25,085 | 22,006 | 22,622 | 118,368 | |||||||||||||||||||||
Earnings (loss) |
||||||||||||||||||||||||||||
Earnings (loss) before income taxes |
112,806 | 133,444 | 149,639 | 164,733 | 88,013 | (33,076 | ) | 62,317 | ||||||||||||||||||||
Plus: fixed charges |
18,586 | 19,825 | 22,830 | 25,085 | 22,006 | 22,622 | 118,368 | |||||||||||||||||||||
131,392 | 153,269 | 172,469 | 189,818 | 110,019 | (10,454 | ) | 180,685 | |||||||||||||||||||||
Other Financial Data |
||||||||||||||||||||||||||||
Ratio of earnings to fixed charges (a) |
7.1 x | 7.7 x | 7.6 x | 7.6 x | 5.0 x | | 1.5x |
(a) | With respect to the period from November 23, 2010 to January 29, 2011, our earnings were insufficient to cover our fixed charges by $10.5 million. |
Exhibit 21.1
Subsidiaries of The Gymboree Corporation
1. | Gymboree Manufacturing, Inc., a California corporation. |
2. | Gym-Mark, Inc., a California corporation. |
3. | Gymboree Retail Stores, Inc., a California corporation. |
4. | Gymboree Play Programs, Inc., a California corporation. |
5. | Gymboree Operations, Inc., a California corporation. |
6. | Gymboree, Inc., a Canadian and Delaware corporation. |
7. | Gymboree Island, LLC, a Puerto Rico limited liability company. |
8. | Gym-Card, LLC, a Virginia limited liability company. |
9. | S.C.C. Wholesale, Inc., a California corporation. |
10. | Gymboree Australia Pty. Ltd, an Australian proprietary limited company. |
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement on Form S-4 of our report dated April 28, 2011 (May 13, 2011 as to Note 19) relating to the consolidated financial statements of The Gymboree Corporation and subsidiaries (the Company) appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading Experts in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
May 13, 2011
Exhibit 25.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
¨ | CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) |
DEUTSCHE BANK TRUST COMPANY AMERICAS
(formerly BANKERS TRUST COMPANY)
(Exact name of trustee as specified in its charter)
NEW YORK | 13-4941247 | |
(Jurisdiction of Incorporation or organization if not a U.S. national bank) |
(I.R.S. Employer Identification no.) | |
60 WALL STREET NEW YORK, NEW YORK |
10005 | |
(Address of principal executive offices) | (Zip Code) |
Deutsche Bank Trust Company Americas
Attention: Lynne Malina
Legal Department
60 Wall Street, 37th Floor
New York, New York 10005
(212) 250 0677
(Name, address and telephone number of agent for service)
THE GYMBOREE CORPORATION
(Issuer)
(Exact name of obligor as specified in its charter)
Delaware | 94-2615258 | |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
Table of Additional Registrants
Gymboree Manufacturing, Inc. |
California | 94-3206464 | ||||
Gym-Mark, Inc. |
California | 94-3206459 | ||||
Gymboree Operations, Inc. |
California | 94-3206463 | ||||
Gymboree Play Programs, Inc. |
California | 94-3206460 | ||||
Gymboree Retail Stores, Inc. |
California | 94-3206461 | ||||
S.C.C. Wholesale, Inc. |
California | 27-3336588 | ||||
Gym-Card, LLC |
Virginia | 26-3845720 |
500 Howard Street
San Francisco, California 94105
(Address of principal executive offices)
9.125% Senior Notes due 2018
(Title of the Indenture securities)
Item 1. General Information.
Furnish the following information as to the trustee.
(a) | Name and address of each examining or supervising authority to which it is subject. |
Name |
Address | |
Federal Reserve Bank (2nd District) |
New York, NY | |
Federal Deposit Insurance Corporation |
Washington, D.C. | |
New York State Banking Department |
Albany, NY |
(b) | Whether it is authorized to exercise corporate trust powers. |
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the Trustee, describe each such affiliation.
NONE.
Item 3. -15. Not Applicable
Item 16. List of Exhibits.
Exhibit 1 - | Restated Organization Certificate of Bankers Trust Company dated August 6, 1998, Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated September 25, 1998, Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated December 16, 1998, and Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated February 27, 2002 - Incorporated herein by reference to Exhibit 1 filed with Form T-1 Statement, Registration No. 333-157637-01. | |
Exhibit 2 - | Certificate of Authority to commence business - Incorporated herein by reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 333-157637-01. | |
Exhibit 3 - | Authorization of the Trustee to exercise corporate trust powers - Incorporated herein by reference to Exhibit 3 filed with Form T-1 Statement, Registration No. 333-157637-01. | |
Exhibit 4 - | Existing By-Laws of Deutsche Bank Trust Company Americas, as amended on April 15, 2002 business - Incorporated herein by reference to Exhibit 4 filed with Form T-1 Statement, Registration No. 333-157637-01. | |
Exhibit 5 - | Not applicable. | |
Exhibit 6 - | Consent of Bankers Trust Company required by Section 321(b) of the Act. - business - Incorporated herein by reference to Exhibit 6 filed with Form T-1 Statement, Registration No. 333-157637-01. | |
Exhibit 7 - | The latest report of condition of Deutsche Bank Trust Company Americas dated as of December 31, 2010. Copy attached. | |
Exhibit 8 - | Not Applicable. | |
Exhibit 9 - | Not Applicable. |
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Deutsche Bank Trust Company Americas, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on this 10th day of May, 2011.
DEUTSCHE BANK TRUST COMPANY AMERICAS | ||||
By: | /s/ Carol Ng | |||
Name: Carol Ng | ||||
Title: Vice President |
DEUTSCHE BANK TRUST COMPANY AMERICAS
Legal Title of Bank
NEW YORK
City
NY 10005
State Zip Code
FFIEC 031 Page RC-1
14
FDIC Certificate Number: 00623 Printed on 2/4/2011 at 4:16 PM
Consolidated Report of Condition for Insured Commercial and State-Chartered Savings Banks for December 31, 2010
All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding as of the last business day of the quarter.
Schedule RCBalance Sheet
Dollar Amounts in Thousands RCFD Tril | Bil | Mil | Thou
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A): a. Noninterest-bearing balances and currency and coin (1) 0081 297,000 1.a
b. Interest-bearing balances (2) 0071 15,328,000 1.b
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 0 2.a
b. Available-for-sale securities (from Schedule RC-B, column D) 1773 1,835,000 2.b
3. Federal funds sold and securities purchased under agreements to resell: RCON
a. Federal funds sold in domestic offices B987 142,000 3.a
RCFD
b. Securities purchased under agreements to resell (3) B989 3,021,000 3.b
4. Loans and lease financing receivables (from Schedule RC-C):
a. Loans and leases held for sale 5369 0 4.a
b. Loans and leases, net of unearned income B528 13,457,000 4.b
c. LESS: Allowance for loan and lease losses 3123 137,000 4.c
d. Loans and leases, net of unearned income and allowance (item 4.b minus 4.c) B529 13,320,000 4.d
5. Trading assets (from Schedule RC-D) 3545 6,107,000 5
6. Premises and fixed assets (including capitalized leases) 2145 41,000 6
7. Other real estate owned (from Schedule RC-M) 2150 26,000 7
8. Investments in unconsolidated subsidiaries and associated companies 2130 0 8
9. Direct and indirect investments in real estate ventures 3656 0 9
10. Intangible assets:
a. Goodwill 3163 0 10.a
b. Other intangible assets (from Schedule RC-M) 0426 59,000 10.b
11. Other assets (from Schedule RC-F) 2160 5,328,000 11
12. Total assets (sum of items 1 through 11) 2170 45,504,000 12
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
(3) Includes all securities resale agreements in domestic and foreign offices, regardless of maturity.
26361230_1
201193.1
DEUTSCHE BANK TRUST COMPANY AMERICAS FFIEC 031
Legal Title of Bank Page RC-2
FDIC Certificate Number: 00623 15
Printed on 2/4/2011 at 4:16 PM
Schedule RCContinued
Dollar Amounts in Thousands Tril | Bil | Mil | Thou
LIABILITIES
13. Deposits: RCON
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) 2200 17,745,000 13.a
(1) Noninterest-bearing (1) 6631 9,165,000 13.a.1
(2) Interest-bearing 6636 8,580,000 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs RCFN
(from Schedule RC-E, part II) 2200 7,769,000 13.b
(1) Noninterest-bearing 6631 2,566,000 13.b.1
(2) Interest-bearing 6636 5,203,000 13.b.2
14. Federal funds purchased and securities sold under agreements to repurchase: RCON
a. Federal funds purchased in domestic offices (2) B993 7,656,000 14.a
RCFD
b. Securities sold under agreements to repurchase (3) B995 0 14.b
15. Trading liabilities (from Schedule RC-D) 3548 256,000 15
16. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases) (from Schedule RC-M) 3190 270,000 16
17. and 18. Not applicable
19. Subordinated notes and debentures (4) 3200 0 19
20. Other liabilities (from Schedule RC-G) 2930 2,191,000 20
21. Total liabilities (sum of items 13 through 20) 2948 35,887,000 21
22. Not applicable
EQUITY CAPITAL
Bank Equity Captal
23. Perpetual preferred stock and related surplus 3838 1,500,000 23
24. Common stock 3230 2,127,000 24
25. Surplus (excludes all surplus related to preferred stock) 3839 592,000 25
26. a. Retained earnings 3632 4,989,000 26.a
b. Accumulated other comprehensive income (5) B530 23,000 26.b
c. Other equity capital components (6) A130 0 26.c
27. a. Total bank equity capital (sum of items 23 through 26.c) 3210 9,231,000 27.a
b. Noncontrolling (minority) interests in consolidated subsidiaries 3000 386,000 27.b
28. Total equity capital (sum of items 27.a and 27.b) G105 9,617,000 28
29. Total liabilities and equity capital (sum of items 21 and 28) 3300 45,504,000 29
Memoranda
To be reported with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external auditors as of any date during 2009 RCFD 6724 Number N/A M.1
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank
2 = Independent audit of the banks parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately)
3 = Attestation on bank managements assertion on the effectiveness of the banks internal control over financial reporting by a certified public accounting firm.
4 = Directors examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority)
5 = Directors examination of the bank performed by other external auditors (may be required by state chartering authority)
6 = Review of the banks financial statements by external auditors
7 = Compilation of the banks financial statements by external auditors
8 = Other audit procedures (excluding tax preparation work)
9 = No external audit work
To be reported with the March Report of Condition.
2. Banks fiscal year-end date RCON 8678 MM / DD
N/A M.2
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
(2) Report overnight Federal Home Loan Bank advances in Schedule RC, item 16, Other borrowed money.
(3) Includes all securities repurchase agreements in domestic and foreign offices, regardless of maturity.
(4) Includes limited-life preferred stock and related surplus.
(5) Includes net unrealized holding gains (losses) on available-for-sale securities, accumulated net gains (losses) on cash flow hedges, cumulative foreign currency translation adjustments, and minimum pension liability adjustments.
(6) Includes treasury stock and unearned Employee Stock Ownership Plan shares.
201193.1
26361230_1
Exhibit 99.1
LETTER OF TRANSMITTAL
Offer to Exchange
All Outstanding 9.125% Senior Notes due 2018 ($400,000,000 principal amount
outstanding) for 9.125% Senior Notes due 2018 which have been registered under the
Securities Act of 1933
of
THE GYMBOREE CORPORATION
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME ON , 2011 (THE EXPIRATION DATE), UNLESS EXTENDED.
The Exchange Agent is:
DEUTSCHE BANK TRUST COMPANY AMERICAS
By Mail, Hand or Overnight Delivery:
DB Services Americas, Inc. |
By Facsimile:
1-615-866-3889
For Information or Confirmation by Telephone:
1-800-735-7777, Option 1 |
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE VALID DELIVERY TO THE EXCHANGE AGENT.
The undersigned acknowledges receipt of the Prospectus dated , 2011 (the Prospectus) of The Gymboree Corporation (the Issuer), and the subsidiary guarantors of the Issuer named therein (the Guarantors), and this Letter of Transmittal (the Letter of Transmittal), which together constitute the Issuers offer (the Exchange Offer) to exchange its 9.125% Senior Notes due 2018, which have been registered under the Securities Act of 1933, as amended (the Securities Act), for a like principal amount of the Issuers issued and outstanding unregistered 9.125% Senior Notes due 2018. In this Letter of Transmittal, the Issuers issued and outstanding unregistered 9.125% Senior Notes due 2018 are referred to as the Outstanding Notes, and the Issuers registered 9.125% Senior Notes due 2018 are referred to as the Exchange Notes. Payment of the Outstanding Notes has been, and payment of the Exchange Notes will be, guaranteed by the Guarantors pursuant to the terms of the indenture governing the Outstanding Notes and the Exchange Notes.
The terms of the Exchange Notes are substantially identical to those of the Outstanding Notes, except that the transfer restrictions and registration rights relating to the Outstanding Notes will not apply to the Exchange Notes, and the Exchange Notes will not provide for the payment of additional interest in the event of a registration default.
The Issuer is not making the Exchange Offer to holders of the Outstanding Notes in any jurisdiction in which the Exchange Offer or the acceptance of the Exchange Offer would not be in compliance with the securities or Blue Sky laws of such jurisdiction. The Issuer also will not accept surrenders for exchange from holders of the Outstanding Notes in any jurisdiction in which the Exchange Offer or the acceptance of the Exchange Offer would not be in compliance with the securities or Blue Sky laws of such jurisdiction.
Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
The undersigned has checked the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer.
PLEASE READ THE ENTIRE
LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
List below the Outstanding Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the certificate numbers and aggregate principal amounts should be listed on a separate signed schedule affixed hereto.
DESCRIPTION OF OUTSTANDING NOTES TENDERED HEREWITH | ||||||||||||
Name(s) and Address(es) of Registered Holder(s) (Please fill in) |
Certificate Number(s)* |
Aggregate Principal Amount Represented by Outstanding Notes** |
Principal Amount Tendered** |
|||||||||
Total: |
||||||||||||
* Need not be completed by book-entry holders. ** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount represented by such Outstanding Notes. See instruction 2. |
|
Holders of Outstanding Notes whose respective notes are not immediately available or who cannot deliver all other required documents to the Exchange Agent on or prior to the Expiration Date or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Outstanding Notes according to the guaranteed delivery procedures set forth in the Prospectus.
Unless the context otherwise requires, the term holder for purposes of this Letter of Transmittal means any person in whose name Outstanding Notes are registered or any other person who has obtained a properly completed bond power from the registered holder or any person whose Outstanding Notes are held of record by The Depository Trust Company (DTC).
-2-
¨ | CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: |
Name of Registered Holder(s):
Name of Eligible Guarantor Institution that Guaranteed Delivery:
Date of Execution of Notice of Guaranteed Delivery:
If Delivered by Book-Entry Transfer:
Name of Tendering Institution:
Account Number:
Transaction Code Number:
¨ | CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO PERSON OTHER THAN PERSON SIGNING THIS LETTER OF TRANSMITTAL: |
Name:
Address:
¨ | CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO ADDRESS DIFFERENT FROM THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL: |
Name:
Address:
¨ | CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED OUTSTANDING NOTES FOR YOUR OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. |
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Outstanding Notes that were acquired as a result of market-making activities or other trading activities, such person acknowledges that (i) it has not entered into any arrangement or understanding with the Issuer or any of the Issuers affiliates to distribute the Exchange Notes (within the meaning of Rule 405 under the Securities Act) and (ii) it will deliver a prospectus in connection with any resale of the Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an underwriter within the meaning of the Securities Act. A broker-dealer may not participate in the Exchange Offer with respect to Outstanding Notes acquired other than as a result of market-making activities or other trading activities. Any holder who is an affiliate of the Issuer or who has an arrangement or understanding with respect to the distribution of the Exchange Notes to be acquired pursuant to the Exchange Offer, or any broker-dealer who purchased Outstanding Notes from the Issuer to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act must comply with the registration and prospectus delivery requirements under the Securities Act.
-3-
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Issuer the principal amount of the Outstanding Notes indicated in the box entitled Description of Outstanding Notes Tendered Herewith above. Subject to, and effective upon, the acceptance for exchange of all or any portion of the Outstanding Notes tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Issuer all right, title and interest in and to such Outstanding Notes as are being tendered herewith. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent also acts as the agent of the Issuer, in connection with the Exchange Offer) to cause the Outstanding Notes to be assigned, transferred and exchanged.
The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Outstanding Notes and to acquire Exchange Notes issuable upon the exchange of such tendered Outstanding Notes, and that, when the same are accepted for exchange, the Issuer will acquire good and unencumbered title to the tendered Outstanding Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Issuer to be necessary or desirable to complete the exchange, assignment and transfer of the tendered Outstanding Notes or transfer ownership of such Outstanding Notes on the account books maintained by the book-entry transfer facility. The undersigned further agrees that acceptance of any and all validly tendered Outstanding Notes by the Issuer and the issuance of Exchange Notes in exchange therefor shall constitute performance in full by the Issuer of its obligations under the Registration Rights Agreement dated November 23, 2010, as supplemented by the Joinder Agreement as of even date therewith, by and among the Issuer, the Guarantors named therein and Morgan Stanley & Co. Incorporated and Credit Suisse Securities (USA) LLC, as the initial purchasers (the Registration Rights Agreement), and that the Issuer or the Guarantors shall have no further obligations or liabilities thereunder. The undersigned will comply with its obligations under the Registration Rights Agreement. The undersigned has read and agrees to all terms of the Exchange Offer.
The undersigned understands that tenders of the Outstanding Notes pursuant to any one of the procedures described in the Prospectus and in the instructions attached hereto will, upon the Issuers acceptance for exchange of such tendered Outstanding Notes, constitute a binding agreement between the undersigned and the Issuer upon the terms and subject to the conditions of the Exchange Offer. The undersigned recognizes that, under circumstances set forth in the Prospectus, the Issuer may not be required to accept for exchange any of the Outstanding Notes.
By tendering the Outstanding Notes and executing this Letter of Transmittal, the undersigned represents to the Issuer and the Guarantors that (i) the Exchange Notes acquired in the exchange will be obtained in the ordinary course of business of the undersigned, (ii) the undersigned is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such Exchange Notes in violation of the Securities Act, (iii) the undersigned is not an affiliate of the Issuer or any of the Guarantors within the meaning of Rule 405 under the Securities Act, and (iv) if the undersigned is a broker-dealer registered under the Securities Act, that it will receive Exchange Notes for its own account in exchange for the Outstanding Notes that were acquired as a result of market-making activities or other trading activities and that it will comply with the applicable provisions of the Securities Act (including the prospectus delivery requirements in connection with any resale of such Exchange Notes).
The undersigned understands that all resales of the Exchange Notes must be made in compliance with applicable state securities or Blue Sky laws. If a resale does not qualify for an exemption from these laws, the
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undersigned acknowledges that it may be necessary to register or qualify the Exchange Notes in a particular state or to make the resale through a licensed broker-dealer in order to comply with these laws. The undersigned further understands that the Issuer assumes no responsibility regarding compliance with state securities or Blue Sky laws in connection with resales.
Each holder acknowledges and agrees that any broker-dealer and any such holder using the Exchange Offer to participate in a distribution of the Exchange Notes acquired in the Exchange Offer (i) could not under Securities and Exchange Commission (SEC) policy rely on the position of the SEC enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the SECs letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters, and (ii) must comply with the registration and prospectus delivery or availability, if applicable, requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Exchange Notes obtained by such holder in exchange for Outstanding Notes acquired by such holder directly from the Issuer.
All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Tendered Outstanding Notes may be withdrawn at any time prior to the Expiration Date in accordance with the terms of this Letter of Transmittal. Except as stated in the Prospectus, this tender is irrevocable.
Certificates for all Exchange Notes delivered in exchange for tendered Outstanding Notes and any Outstanding Notes delivered herewith but not exchanged, and registered in the name of the undersigned, shall be delivered to the undersigned at the address shown below the signature of the undersigned.
The undersigned, by completing the box entitled Description of Outstanding Notes Tendered Herewith above and signing this letter, will be deemed to have tendered the Outstanding Notes as set forth in such box.
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TENDERING HOLDER(S) SIGN HERE
(Complete accompanying Form W-9)
Must be signed by registered holder(s) exactly as name(s) appear(s) on certificate(s) for Outstanding Notes hereby tendered or in whose name Outstanding Notes are registered on the books of DTC or one of its participants, or by any person(s) authorized to become the registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth the full title of such person. See Instruction 3.
(Signatures) of Holder(s))
Date
Name(s)
(Please print)
Capacity (full title)
Address
(Include Zip Code)
Daytime Area Code and Telephone No.
Taxpayer Identification No.
GUARANTEE OF SIGNATURE(S)
(If RequiredSee Instruction 3)
Authorized Signature
Dated
Name
Title
Name of Firm
Address of Firm
(Include Zip Code)
Area Code and Telephone No.
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SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if Exchange Notes and/or Outstanding Notes not tendered are to be issued in the name of someone other than the registered holder of the Outstanding Notes whose name(s) appear(s) above.
Issue: | ¨ Outstanding Notes not tendered to: | |
¨ Exchange Notes to: |
Name(s)
Address:
(Include Zip Code)
Daytime Area Code and Telephone No.
Tax Identification No.
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if Exchange Notes and/or Outstanding Notes not tendered are to be sent to someone other than the registered holder of the Outstanding Notes whose name(s) appear(s) above, or such registered holder(s) at an address other than that shown above.
Mail: | ¨ Outstanding Notes not tendered to: | |
¨ Exchange Notes to: |
Name(s)
Address:
(Include Zip Code)
Area Code and Telephone No.
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INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. | Delivery of this Letter of Transmittal and Certificates; Guaranteed Delivery Procedures. |
A holder of Outstanding Notes may tender the same by (i) properly completing and signing this Letter of Transmittal or a facsimile hereof (all references in the Prospectus to the Letter of Transmittal shall be deemed to include a facsimile thereof) and delivering the same, together with the certificate or certificates, if applicable, representing such Outstanding Notes being tendered and any required signature guarantees and any other documents required by this Letter of Transmittal, to the Exchange Agent at its address set forth above on or prior to the Expiration Date, or (ii) complying with the procedure for book-entry transfer described below, or (iii) complying with the guaranteed delivery procedures described below.
Holders of Outstanding Notes may tender such notes by book-entry transfer by crediting the Outstanding Notes to the Exchange Agents account at DTC in accordance with DTCs Automated Tender Offer Program (ATOP) and by complying with applicable ATOP procedures with respect to the Exchange Offer. DTC participants that are accepting the Exchange Offer should transmit their acceptance to DTC, which will edit and verify the acceptance and execute a book-entry delivery to the Exchange Agents account at DTC. DTC will then send a computer-generated message (an Agents Message) to the Exchange Agent for its acceptance in which the holder of the Outstanding Notes acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, this Letter of Transmittal or the DTC participant confirms on behalf of itself and the beneficial owners of such Outstanding Notes all provisions of this Letter of Transmittal (including any representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter of Transmittal to the Exchange Agent. Delivery of the Agents Message by DTC will satisfy the terms of the Exchange Offer as to execution and delivery of a Letter of Transmittal by the participant identified in the Agents Message. DTC participants may also accept the Exchange Offer by submitting a Notice of Guaranteed Delivery through ATOP.
The method of delivery of this Letter of Transmittal, the Outstanding Notes and any other required documents is at the election and risk of the holder, and except as otherwise provided below, the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If such delivery is by mail, it is suggested that registered mail with return receipt requested, properly insured, be used. In all cases sufficient time should be allowed to permit timely delivery. No Outstanding Notes or Letters of Transmittal should be sent to the Issuer.
Holders who wish to tender their Outstanding Notes and (i) whose Outstanding Notes are not immediately available or (ii) who cannot deliver their Outstanding Notes, this Letter of Transmittal and all other required documents to the Exchange Agent on or prior to the Expiration Date or (iii) who cannot comply with the book-entry transfer procedures on a timely basis, must tender their Outstanding Notes pursuant to the guaranteed delivery procedure set forth in The Exchange OfferGuaranteed Delivery Procedures in the Prospectus. Holders may tender their Outstanding Notes if: (i) the tender is made by or through an Eligible Guarantor Institution (as defined below); (ii) the Exchange Agent receives (by facsimile transmission, mail or hand delivery), on or prior to the Expiration Date, a properly completed and duly executed Notice of Guaranteed Delivery that (a) sets forth the name and address of the holder of Outstanding Notes, if applicable, the certificate number(s) of the Outstanding Notes to be tendered and the principal amount of Outstanding Notes tendered; (b) states that the tender is being made thereby; and (c) guarantees that, within three New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal, or a facsimile thereof, together with the Outstanding Notes or confirmation of a book-entry transfer into the Exchange Agents account at DTC of Outstanding Notes delivered electronically, and any other documents required by the Letter of Transmittal, will be deposited by the Eligible Guarantor Institution with the Exchange Agent; or (iii) the Exchange Agent receives a properly completed and executed Letter of Transmittal, or facsimile thereof and the certificate(s) representing all tendered Outstanding Notes in proper form or confirmation of a book-entry transfer into the Exchange Agents account at DTC of existing notes delivered electronically and all other documents required by this Letter of Transmittal within three New York Stock Exchange trading days after the Expiration Date.
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No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the Outstanding Notes for exchange.
2. | Partial Tenders; Withdrawals. |
If less than the entire principal amount of Outstanding Notes evidenced by a submitted certificate is tendered, the tendering holder must fill in the aggregate principal amount of Outstanding Notes tendered in the box entitled Description of Outstanding Notes Tendered Herewith. A newly issued certificate for any Outstanding Notes submitted but not tendered will be sent to such holder as soon as practicable after the applicable expiration date. All Outstanding Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise clearly indicated.
Except as otherwise provided in the Prospectus, if not yet accepted, a tender pursuant to the Exchange Offer may be withdrawn prior to the Expiration Date. To be effective with respect to the tender of Outstanding Notes, a written notice of withdrawal must: (i) be received by the Exchange Agent at the address for the Exchange Agent set forth above before the Issuer notifies the Exchange Agent that it has accepted the tender of Outstanding Notes pursuant to the Exchange Offer; (ii) specify the name of the person who tendered the Outstanding Notes to be withdrawn; (iii) identify the Outstanding Notes to be withdrawn (including the certificate number or numbers and principal amount of such Outstanding Notes or, in the case of Outstanding Notes transferred by book-entry transfer, the name and number of the account at DTC to be credited); (iv) include a statement that such holder is withdrawing its election to have such notes exchanged; (v) be signed by the holder in the same manner as the Outstanding signature on this Letter of Transmittal (including any required signature guarantees or be accompanied by documents of transfer sufficient to permit the Exchange Agent with respect to the Outstanding notes to register the transfer of such Outstanding notes into the name of the depositor withdrawing the tender); and (vi) specify the name in which any such Outstanding Notes are to be different, if different from that of the depositor. The Exchange Agent will return the properly withdrawn Outstanding Notes promptly following receipt of notice of withdrawal. All questions as to the validity, form and eligibility of notices of withdrawals, including time of receipt, will be determined by the Issuer, and such determination will be final and binding on all parties.
Any Outstanding Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Outstanding Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Outstanding Notes tendered by book-entry transfer into the Exchange Agents account at the book entry transfer facility pursuant to the book-entry transfer procedures described above, such Outstanding Notes will be credited to an account with such book-entry transfer facility specified by the holder) as soon as practicable after withdrawal, rejection of tender or termination of the applicable Exchange Offer. Properly withdrawn Outstanding Notes may be tendered by following one of the procedures described under the caption Exchange Offer Procedures in the Prospectus at any time prior to the Expiration Date.
3. | Signature on this Letter of Transmittal; Written Instruments and Endorsements; Guarantee of Signatures. |
If this Letter of Transmittal is signed by the registered holder(s) of the Outstanding Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. If any of the Outstanding Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Outstanding Notes registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of such notes.
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When this Letter of Transmittal is signed by the registered holder or holders (which term, for the purposes described herein, shall include the book-entry transfer facility whose name appears on a security listing as the owner of the Outstanding Notes) of Outstanding Notes listed and tendered hereby, no endorsements of certificates or separate written instruments of transfer or exchange are required.
If this Letter of Transmittal is signed by a person other than the registered holder or holders of the Outstanding Notes listed, such notes must be endorsed or accompanied by separate written instruments of transfer or exchange in form satisfactory to the Issuer and duly executed by the registered holder, in either case signed exactly as the name or names of the registered holder or holders appear(s) on such notes.
If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Issuer, proper evidence satisfactory to the Issuer of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments of transfer or exchange required by this Instruction 3 must be guaranteed by an Eligible Guarantor Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible Guarantor Institution, unless Outstanding Notes are tendered: (i) by a holder who has not completed the box entitled Special Issuance Instructions or Special Delivery Instructions on this Letter of Transmittal; or (ii) for the account of an Eligible Guarantor Institution. In the event that the signatures in this Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by an Eligible Guarantor Institution that is a member of a firm of a registered national securities exchange or of the Financial Industry Regulatory Authority, a commercial bank or trust company having an office or correspondent in the United States or another eligible guarantor institution within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (an Eligible Guarantor Institution). If Outstanding Notes are registered in the name of a person other than the signer of this Letter of Transmittal, such notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Issuer, in their sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Guarantor Institution.
4. | Special Issuance and Delivery Instructions. |
Tendering holders should indicate, as applicable, the name and address to which the Exchange Notes or certificates for Outstanding Notes not exchanged are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the tax identification number of the person named must also be indicated. Holders tendering Outstanding Notes by book-entry transfer may request that such notes not exchanged be credited to such account maintained at the book-entry transfer facility as such holder may designate.
5. | Transfer Taxes. |
The Issuer shall, except as otherwise disclosed in this Section 5, pay all transfer taxes, if any, applicable to the transfer and exchange of Outstanding Notes to it or its order pursuant to the Exchange Offer. If, however, certificates representing Exchange Notes on the one hand and/or Outstanding Notes for principal amounts not tendered or accepted for exchange on the other hand are to be delivered to, or are to be registered or issued in the name of, any other person other than the registered holder of the Outstanding Notes tendered, or if tendered Outstanding Notes are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the transfer and exchange of Outstanding Notes to the Issuer or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exception therefrom is not submitted herewith the amount of such transfer taxes will be billed directly to such tendering holder.
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6. | Waiver of Conditions. |
The Issuer reserves the absolute right to waive, in whole or in part, any of the conditions to the Exchange Offer set forth in the Prospectus.
7. | Mutilated, Lost, Stolen or Destroyed Securities. |
Any holder whose Outstanding Notes have been mutilated, lost, stolen or destroyed, should contact the Exchange Agent at the address indicated below for further instructions.
8. | Backup Withholding |
Subject to the limitations described in the discussion in the Prospectus titled Certain U.S. Federal Income Tax Considerations, each U.S. holder of Outstanding Notes whose Outstanding Notes are accepted for exchange (or other payee) is generally required to provide a correct taxpayer identification number (TIN) (e.g., the holders Social Security or federal employer identification number) and certain other information on Internal Revenue Service (IRS) Form W-9, which is attached hereto, and to certify under penalties of perjury that the holder (or other payee) is not subject to backup withholding, or appropriately establish an exemption from backup withholding. Failure to provide the information on IRS Form W-9 in the manner described therein may subject the holder (or other payee) to a $50 penalty imposed by the IRS and federal backup withholding at the then applicable rate (currently 28% through 2012 and 31% thereafter) on any reportable payments to such holder.
Each non-U.S. holder of Outstanding Notes whose notes are accepted for exchange must submit a properly completed, appropriate IRS Form W-8, certifying, under penalties of perjury, to such holders foreign status. Failure to provide a properly completed, appropriate IRS Form W-8 may subject the holder (or other payee) to backup withholding at the then applicable rate (currently 28% through 2012 and 31% thereafter) on any reportable payments to such holder. An applicable IRS Form W-8 may be obtained from the Exchange Agent or at the IRS website at http://www.irs.gov.
Backup withholding is not an additional tax. Any amounts withheld from a payment under the backup withholding rules will be allowed as a credit against such holders U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is furnished to the IRS.
9. | Requests for Assistance or Additional Copies. |
Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number set forth above. In addition, all questions relating to the Exchange Offer, as well as requests for assistance or additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number indicated above.
IMPORTANT: This Letter of Transmittal or a facsimile or copy thereof (together with certificates of Outstanding Notes or confirmation of book-entry transfer and all other required documents) or a Notice of Guaranteed Delivery must be received by the Exchange Agent on or prior to the Expiration Date.
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Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
Offer to Exchange
All Outstanding 9.125% Senior Notes due 2018 ($400,000,000 principal amount outstanding) for 9.125% Senior Notes due 2018 which have been registered under the Securities Act of 1933
of
THE GYMBOREE CORPORATION
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 2011, UNLESS EXTENDED.
Registered holders of outstanding 9.125% Senior Notes due 2018 (the Outstanding Notes) who wish to tender their Outstanding Notes in exchange for a like principal amount of new 9.125% Senior Notes due 2018 (the Exchange Notes) and whose Outstanding Notes are not immediately available or who cannot deliver their Outstanding Notes and Letter of Transmittal (and any other documents required by the Letter of Transmittal) to Deutsche Bank Trust Company Americas, as exchange agent (the Exchange Agent), prior to 5:00 p.m., New York City time, on , 2011 (the Expiration Date) may use this Notice of Guaranteed Delivery or one substantially equivalent hereto. This Notice of Guaranteed Delivery may be delivered or transmitted by facsimile transmission, overnight courier, mail or hand delivery to the Exchange Agent as set forth below. In addition, in order to utilize the guaranteed delivery procedure to tender Outstanding Notes pursuant to the exchange offer, a completed, signed and dated Letter of Transmittal (or facsimile thereof) must also be received by the Exchange Agent prior to 5:00 p.m., New York City time on the Expiration Date. See The Exchange OfferGuaranteed Delivery Procedures in the Prospectus dated , 2011 (the Prospectus) of The Gymboree Corporation.
The Exchange Agent is:
DEUTSCHE BANK TRUST COMPANY AMERICAS
By Mail, Hand or Overnight Delivery:
DB Services Americas, Inc. |
By Facsimile:
1-615-866-3889
For Information or Confirmation by Telephone:
1-800-735-7777, Option 1 |
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE VALID DELIVERY TO THE EXCHANGE AGENT.
This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Guarantor Institution (as defined in the Letter of Transmittal), such signature guarantee must appear in the applicable space provided on the Letter of Transmittal for Guarantee of Signatures.
Ladies and Gentlemen:
Upon the terms and subject to the conditions set forth in the Prospectus and the accompanying Letter of Transmittal, the undersigned hereby tenders the principal amount of Outstanding Notes set forth below pursuant to the guaranteed delivery procedures described in The Exchange OfferGuaranteed Delivery Procedures section of the Prospectus.
DESCRIPTION OF OUTSTANDING NOTES TENDERED | ||||||||||||||
Name of Tendering Holder | Name and address of registered holder as it appears on the Outstanding Notes (Please Print) |
Certificate Number(s) of Outstanding Notes Tendered (or Account Number at Book-Entry Facility) |
Principal Amount of Outstanding Notes Tendered |
|||||||||||
SIGN HERE | ||||||||||||||
Name of Registered or Acting Holder: | ||||||||||||||
Signature(s): | ||||||||||||||
Name(s) (Please print): | ||||||||||||||
Address: | ||||||||||||||
Telephone Number: | ||||||||||||||
Date: | ||||||||||||||
If Outstanding Notes will be tendered by book-entry transfer, provide the following information: | ||||||||||||||
DTC Account Number: | ||||||||||||||
Date: | ||||||||||||||
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THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(Not to be used for signature guarantee)
The undersigned, a member of a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees to deliver to the Exchange Agent at its address set forth above, the certificates representing the Outstanding Notes (or a confirmation of book-entry transfer of such notes into the Exchange Agents account at the book-entry transfer facility), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, and any other documents required by the Letter of Transmittal within three New York Stock Exchange trading days after the Expiration Date.
Name of Firm: |
||||||||
(Authorized Signature) | ||||||||
Address: | Title: | |||||||
Name: | ||||||||
(Zip Code) | (Please type or print) | |||||||
Area Code and Telephone No.: | Date: | |||||||
NOTE: | DO NOT SEND OUTSTANDING NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. OUTSTANDING NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. |
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Exhibit 99.3
FORM OF LETTER TO REGISTERED HOLDERS AND DTC PARTICIPANTS
THE GYMBOREE CORPORATION
Offer to Exchange
, 2011
The Gymboree Corporation, or the Issuer, is offering, upon the terms and conditions set forth in the prospectus dated , 2011 (the Prospectus), and the enclosed letter of transmittal (the Letter of Transmittal), to exchange $400,000,000 aggregate principal amount of 9.125% Senior Notes due 2018, which have been registered under the Securities Act of 1933, as amended, for an equal principal amount of its outstanding 9.125% Senior Notes due 2018 (CUSIP Nos. 37611V AA2 and U37633 AA9; ISIN Nos. US37611VAA26 and USU37633AA99) which have not been so registered. The exchange offer is being made in order to satisfy certain obligations of the Issuer contained in the registration rights agreement dated as of November 23, 2010, as supplemented by the Joinder Agreement as of even date therewith, by and among the Issuer and the other signatories to the agreement.
We are requesting that you contact your clients for whom you hold notes and inform them of the exchange offer. For your information and for forwarding to your clients for whom you hold notes registered in your name or in the name of your nominee, or who hold notes registered in their own names, we are providing the following documents with respect to each note:
1. | the Prospectus; |
2. | the Letter of Transmittal; |
3. | a Form W-9; and |
4. | the notice of guaranteed delivery. |
Your prompt action is requested. The exchange offer will expire at 5:00 p.m., New York City time, on , 2011, unless we extend the offer beyond that date. You may withdraw notes that have been tendered pursuant to the exchange offer at any time before the exchange offer expires.
To participate in the exchange offer, you should carefully read and follow the instructions set forth in the Letter of Transmittal and the Prospectus.
If the holders of notes wish to tender, but it is impracticable for them to forward their certificates for notes prior to the expiration of the exchange offer or to comply with the book-entry transfer procedures on a timely basis, they may tender the notes by following the guaranteed delivery procedures described in the Prospectus under The Exchange OfferGuaranteed Delivery Procedures.
The Issuer will not pay any fees or commissions to brokers, dealers, nominees or other persons, other than the exchange agent, for soliciting tenders of outstanding notes pursuant to the exchange offer. The Issuer will, however, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. The Issuer will pay any stock transfer taxes payable on the transfer of notes to it, except as otherwise provided in Instruction 5 of the Letter of Transmittal.
You may direct any questions and requests for assistance with respect to the exchange offer or for additional copies of the Prospectus, Letter of Transmittal and other enclosed materials to the exchange agent at its address and telephone number set forth on the front of the Letter of Transmittal.
Nothing contained in this letter or in the enclosed documents shall constitute you or any other person as an agent of Issuer, the exchange agent, or any affiliate of either of them, or authorize you or any other person to make any statements or use any documents on behalf of any of them in connection with the exchange offer other than the enclosed documents and the statements contained therein.
Very truly yours,
THE GYMBOREE CORPORATION
-2-
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