Credit Agreement

9 Months Ended

Sep. 30, 2011

Credit Agreement

Credit Agreement

(7) Credit Agreement

On August 10, 2011, the Company and its subsidiary Tsubo, LLC entered into Amendment Number Two to Second Amended and Restated Credit Agreement (“Amendment Number Two”) with Comerica Bank (“Comerica”).  Amendment Number Two amended the terms of that certain Second Amended and Restated Credit Agreement, entered into on May 27, 2010, by and among the Company; Tsubo, LLC; and Comerica (the “Previous Credit Agreement”).  Amendment Number Two amended the Previous Credit Agreement by increasing the maximum availability from $20,000 to $60,000 during the period commencing on August 10, 2011 and ending on November 30, 2011 (the “Increased Commitment Period”).  During the Increased Commitment Period, amounts borrowed under the Credit Agreement would bear interest at Comerica’s prime rate, plus 0.25% or, at the Company’s option, at the London Interbank Offered Rate (LIBOR), plus 1.25%.  Amendment Number Two also increased the percentage fee payable for certain letters of credit during the Increased Commitment Period from 0.75% to 1.25%.  The Company did not borrow under Amendment Number Two.

On August 30, 2011, the Company entered into a Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, National Association as the administrative agent, Comerica Bank and HSBC Bank USA, National Association, as syndication agents, and the lenders party thereto.  The Credit Agreement is a five-year, $200,000 secured revolving credit facility which contains a $50,000 sublimit for the issuance of letters of credit and a $5,000 sublimit for swingline loans and replaces the Previous Credit Agreement and matures on August 30, 2016.  Subject to customary conditions and the approval of any lender whose commitment would be increased, the Company has the option to increase the maximum principal amount available under the Credit Agreement by up to an additional $100,000, resulting in a maximum available principal amount of $300,000.  None of the lenders under the Credit Agreement has committed at this time or is obligated to provide any such increase in the commitments.  At the Company’s option, revolving loans issued under the Credit Agreement will bear interest at either adjusted LIBOR for 30 days (0.24% at September 30, 2011) plus 1.25% per annum, in the case of LIBOR borrowings, or at the alternate base rate plus 0.25% per annum, and thereafter the interest rate will fluctuate between adjusted LIBOR plus 1.25% per annum and adjusted LIBOR plus 1.50% per annum (or between the alternate base rate plus 0.25% per annum and the alternate base rate plus 0.50% per annum), based upon the Company’s total adjusted leverage ratio at such time.  In addition, the Company will initially be required to pay fees of 0.20% per annum on the daily unused amount of the revolving credit facility, and thereafter the fee rate will fluctuate between 0.20% and 0.30% per annum, based upon the Company’s total adjusted leverage ratio.

The Company’s obligations under the Credit Agreement are guaranteed by the Company’s existing and future domestic subsidiaries other than certain immaterial subsidiaries and foreign subsidiaries (the “Guarantors”), and is secured by a first-priority security interest in substantially all of the assets of the Company and the Guarantors’, including all or a portion of the equity interests of certain of the Company’s domestic and foreign subsidiaries.

The Credit Agreement contains financial covenants which include: the asset coverage ratio must be greater than 1.10 to 1.00; and the sum of the consolidated annual earnings before interest, taxes, depreciation, and amortization (EBITDA) and annual rental expense, divided by the sum of the annual interest expense and the annual rental expense must be greater than 2.25 to 1.00; and other customary limitations.  The Credit Agreement contains certain other covenants which include: a maximum additional secured debt related to a capital asset not to exceed $20,000, maximum additional unsecured debt not to exceed $200,000; maximum secured debt not related to a capital asset not to exceed $5,000, maximum judgment of $10,000; maximum ERISA event of $10,000 in one year, $20,000 in all years; the Company may not have a change of control; there is no limit on acquisitions, if the total adjusted leverage ratio does not exceed 2.75 and 1.00 and the Company must have a minimum amount of cash and unused credit of $75,000; and there is no restriction on dividends or share repurchases, if the minimum amount of cash and unused credit is $75,000.  As of September 30, 2011, the Company was in compliance with all covenants.

At September 30, 2011, the Company had outstanding borrowings of $45,000 under the Credit Agreement and outstanding letters of credit of $189.  As a result, $154,811 was available under the Credit Agreement at September 30, 2011.  Subsequent to September 30, 2011, the Company repaid $20,000 of the outstanding borrowings.