CREDIT AGREEMENT among SELECT COMFORT CORPORATION, as Borrower; VARIOUS LENDERS; and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent

Exhibit 10.1     CREDIT AGREEMENT   among   SELECT COMFORT CORPORATION,   as Borrower;   VARIOUS LENDERS;   and   WELLS FARGO BANK, NATIONAL ASSOCIATION,   as Administrative Agent

Closing Date:  March 26, 2010

 

 

 

 

 

ARTICLE I DEFINITIONS		1
Section 1.1	Definitions	1
Section 1.2	Rules of Construction	19

 

 

ARTICLE II CREDIT FACILITIES		20
Section 2.1	Revolving Facility	20
Section 2.2	Procedures for Borrowings	20
Section 2.3	Converting ABR Loans to LIBOR Loans; Procedures	20
Section 2.4	Procedures at End of an Interest Period	21
Section 2.5	Setting and Notice of Rates	21
Section 2.6	Commitment to Issue Letters of Credit	21
Section 2.7	Interest on Loans	25
Section 2.8	Obligation to Repay Advances	26
Section 2.9	Notes; Payment Dates; Mandatory Prepayments	26
Section 2.10	Computation of Interest and Fees	27
Section 2.11	Fees	27
Section 2.12	Use of Proceeds	28
Section 2.13	Voluntary Reduction or Termination of the Commitments; Prepayments	28
Section 2.14	Payments	29
Section 2.15	Increased Costs	31
Section 2.16	Taxes	32
Section 2.17	Illegality	34
Section 2.18	Loan Losses	34
Section 2.19	Right of Lenders to Fund through Other Offices	34
Section 2.20	Discretion of Lenders as to Manner of Loan	34
Section 2.21	Conclusiveness of Statements; Survival of Provisions	35
Section 2.22	Mitigation Obligations; Replacement of Lenders	35

 

 

 

ARTICLE III CONDITIONS TO CREDIT  EXTENSIONS		36
Section 3.1	Conditions Precedent to the Initial Credit Extension	36
Section 3.2	Conditions Precedent to All Credit Extensions	37

 

 

ARTICLE IV REPRESENTATIONS AND WARRANTIES		38
Section 4.1	Legal Existence and Power; Name; Chief Executive Office	38
Section 4.2	Authorization for Borrowings and Letters of Credit; No Conflict as to Law or Agreements	38
Section 4.3	Legal Agreements	39
Section 4.4	Capitalization	39
Section 4.5	Financial Condition	39
Section 4.6	Adverse Change	39
Section 4.7	Projections	39

 

 

 

 

 

Section 4.8	Litigation	39
Section 4.9	Regulation U	40
Section 4.10	Taxes	40
Section 4.11	Titles and Liens	40
Section 4.12	Plans	40
Section 4.13	Environmental Compliance	41
Section 4.14	Submissions to Lenders	42
Section 4.15	Financial Solvency	42
Section 4.16	Information Regarding Owned and Leased Real Estate of the Obligors; Information Regarding the Location of Inventory  and Equipment of the Obligors	43
Section 4.17	Intellectual Property Rights	43
Section 4.18	Conflicts of Interest	44
Section 4.19	Other Relationships	44
Section 4.20	Licenses; Compliance with Laws; Other Agreements, etc.	45
Section 4.21	Capital and Operating Leases	45
Section 4.22	Investment Company Act	45
Section 4.23	Security Documents	45
Section 4.24	Labor Relations	45

 

 

ARTCILE V AFFIRMATIVE COVENANTS		46
Section 5.1	Reporting Requirements	46
Section 5.2	Books and Records; Inspection and Examination	48
Section 5.3	Compliance with Laws	49
Section 5.4	Payment of Taxes and Other Claims	49
Section 5.5	Maintenance of Properties	49
Section 5.6	Insurance	50
Section 5.7	Preservation of Legal Existence	50
Section 5.8	Creation of New Obligors and Subsidiaries	50
Section 5.9	Further Assurances	51
Section 5.10	Appraisals	51
Section 5.11	Minimum Consolidated Net Worth	51
Section 5.12	Minimum Fixed Charge Coverage Ratio	52
Section 5.13	Annual Revolving Advance Clean-Up	52
Section 5.14	Establishment and Maintenance of Bank Accounts	52
Section 5.15	Landlord Waivers, Warehouseman Acknowledgments, etc.	52
Section 5.16	Disclosure of Information Regarding newly Acquired Owned and  Leased Real Estate; Disclosure Regarding New Locations of  Inventory and Equipment of the Obligors	53
Section 5.17	Disclosure of Newly Created or Acquired Intellectual Property Rights	54
Section 5.18	Original Stock Certificates for Capital Stock	54

 

 

ARTICLE VI NEGATIVE COVENANTS		55
Section 6.1	Liens	55
Section 6.2	Debt	56

 

 

 

 

 

 

Section 6.3	Guaranties and other Contingent Liabilities	57
Section 6.4	Investments	57
Section 6.5	Restricted Payments	58
Section 6.6	Restrictions on Sale and Issuance of Subsidiary Stock	58
Section 6.7	Transactions with Affiliates	59
Section 6.8	Fundamental Changes	59
Section 6.9	Sale and Leaseback	60
Section 6.10	Restrictions on Nature of Business	60
Section 6.11	Accounting	60
Section 6.12	Hazardous Substances	60
Section 6.13	Subordinated Debt	60
Section 6.14	Capital Expenditures	61
Section 6.15	Tax Consolidation	61
Section 6.16	Negative Pledges, Restrictive Agreements, etc.	61
Section 6.17	Inconsistent Agreements	61
Section 6.18	Fiscal Year	61
Section 6.19	Contributions to the Select Comfort Executive Investment Plan Trust	61

 

 

ARTICLE VII EVENTS OF DEFAULT; RIGHTS AND REMEDIES		62
Section 7.1	Events of Default	62
Section 7.2	Rights and Remedies	64
Section 7.3	Right of Setoff	65

 

 

ARTICLE VIII AGREEMENT AMONG LENDERS AND ADMINISTRATIVE AGENT		66
Section 8.1	Authorization; Powers; Administrative Agent for Collateral Purposes	66
Section 8.2	Application of Proceeds	66
Section 8.3	Exculpation	67
Section 8.4	Use of the Term "Administrative Agent"	67
Section 8.5	Reimbursement for Costs and Expenses	68
Section 8.6	Payments Received Directly by Lenders	68
Section 8.7	Administrative Agent and Affiliates	68
Section 8.8	Credit Investigation	68
Section 8.9	Defaults	69
Section 8.10	Obligations Several	69
Section 8.11	Resignation and Assignment of Administrative Agent	69
Section 8.12	Borrower not a Beneficiary or Party	70

 

 

ARTICLE IX MISCELLANEOUS		70
Section 9.1	No Waiver; Cumulative Remedies	70
Section 9.2	Amendments, Requested Waivers, Etc.	70
Section 9.3	Successors and assigns; Register	71
Section 9.4	Sharing of Payments by Lenders	74
Section 9.5	Notices; Distribution of Information Via Electronic Means	75
Section 9.6	Expenses; Indemnity; Damage Waiver	76

 

 

 

 

Section 9.7	Replacement of Non-Consenting Lender	77
Section 9.8	Governing Law	78
Section 9.9	Arbitration	78
Section 9.10	Confidentiality	80
Section 9.11	Integration; Inconsistency	81
Section 9.12	Agreement Effectiveness	82
Section 9.13	Advice from Independent Counsel	82
Section 9.14	Judicial Interpretation	82
Section 9.15	Binding Effect; No Assignemnt by Borrower	82
Section 9.16	Severability of Provisions	82
Section 9.17	Headings	82
Section 9.18	Counterparts	82
Section 9.19	Customer Identification - USA Patriot Act Notice	82

 

 

 

 

 

This Agreement is entered into as of March 26, 2010, by and among SELECT COMFORT CORPORATION, a Minnesota corporation (the “Borrower”), the several banks and other financial institutions from time to time party hereto as lenders (the “Lenders”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (“Wells Fargo”), in its capacity as letter of credit issuer (in such capacity, together with any successor thereto in such capacity, the “Letter of Credit Issuer”) and in its capacity as administrative agent for the Lenders (in such capacity, together with any successor thereto in such capacity, the “Administrative Agent”).

 

 

The Borrower has asked the Lenders to provide it with a $20,000,000 revolving line of credit for working capital and general corporate purposes of the Borrower and its subsidiaries, and to facilitate the issuance of letters of credit.  The Lenders are agreeable to meeting the Borrower’s request, provided that the Borrower agrees to the terms and conditions of this Agreement.

 

ACCORDINGLY, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

 

Section 1.1   Definitions.  As used herein:

 

“ABR Advance” means any Advance that bears interest at a rate determined by reference to the Adjusted Base Rate.

 

“ABR Loan” means any Loan that bears interest at a rate determined by reference to the Adjusted Base Rate, including ABR Advances.

 

“Adjusted Base Rate” means, for any day, an annual rate equal to the higher of (a) the Base Rate and (b) the Daily Three-Month LIBO Rate plus one percent (1.0%).

 

“Adjusted LIBO Rate” means, with respect to an Interest Period, the rate obtained by dividing (a) the applicable LIBO Rate by (b) a percentage equal to 1.00 minus the applicable percentage (expressed as a decimal) prescribed by the Board of Governors of the Federal Reserve System (or any successor thereto) for determining the maximum reserve requirements applicable to eurodollar fundings (currently referred to as “Eurocurrency Liabilities” in Regulation D) or any other maximum reserve requirements applicable to a member bank of the Federal Reserve System with respect to such eurodollar fundings, rounded upwards, if necessary, to the nearest 1/16 of 1%.

 

“Administrative Agent” has the meaning specified in the preamble.

 

 

 

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

 

“Advance” means a loan of funds by a Lender to the Borrower under the Revolving Facility.

 

“Affiliate” means, with respect to a Person, (a) any officer of such Person or member of the Governing Board of such Person, (b) any Person who, individually or with his immediate family owns or holds more than 15% of the voting interest in the subject Person, and (c) any Person controlled by, controlling or under common control with such Person, including (but not limited to) any Subsidiary of such Person.  For purposes of this definition, “control”, when used with respect to a Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; provided, however, that for purposes of this Agreement no Lender Party shall be deemed to be an Affiliate of any Obligor.  Unless otherwise specified, “Affiliate” means an Affiliate of the Borrower.

 

“Aggregate Revolving Commitment Amount” means $20,000,000, constituting the sum of the Revolving Commitments of all Lenders, subject to adjustment in accordance with Section 2.13.

 

“Agreement” means this Credit Agreement, including all exhibits and schedules hereto.

 

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee of that Lender’s interest, in substantially the form of Exhibit G or any other form approved by the Administrative Agent.

 

“Banking Services Obligations” means each and every debt, liability and other obligation (whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising) of every type and description owing by the Borrower or any Subsidiary to any Person that was a Lender or an Affiliate of a Lender when such debt, liability or obligation arose, with respect to (a) credit cards, (b) credit card processing services, (c) debit cards, (d) purchase cards, (e) treasury and cash management or related services (including but not limited to controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services), and (f) any agreement that provides for an interes t rate, credit, commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross currency rate swap, currency option, or any combination of, or option with respect to, these or similar transactions, including, without limitation, any debt, liability and other obligation under the Corporate Card Agreement and under the Credit Card Program Agreement to the extent such agreements are provided by a Lender or an Affiliate of a Lender when such debt, liability or obligation arose.

 

“Base Rate” means, for any day, the rate of interest in effect for such day as publicly announced from time to time by the Administrative Agent as its “prime” or “base” rate (whether or not such rate is actually charged by the Administrative Agent), or

 

 

if the Administrative Agent ceases to announce such a rate so designated, any similar successor rate designated by the Administrative Agent in its reasonable discretion.  Any change in the Base Rate announced by the Administrative Agent shall take effect at the opening of business on the day specified in the public announcement of such change.  Such rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer.  Wells Fargo or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Base Rate.

 

“Borrower” has the meanings specified in the preamble.

 

“Borrowing” means a borrowing by the Borrower under the Revolving Facility, consisting of the aggregate of all Advances made by the Lenders to the Borrower pursuant to a request under Section 2.2.

 

“Business Day” means any day other than a Saturday or Sunday on which national banks are required to be open for business in Minneapolis, Minnesota and, in addition, if such day relates to a LIBOR Loan or fixing of a LIBO Rate, a day on which dealings in U.S.  dollar deposits are carried on in the London interbank eurodollar market.

 

“Capital Expenditure” means, with respect to any Person, any expenditure of money for the purchase or construction of fixed assets or for the purchase or construction of any other capital assets, or for improvements or additions thereto, which are presented on the cash flow statement of such Person; provided, however, that Capital Expenditures shall not include expenditures made in connection with the replacement, substitution or restoration of assets to the extent financed (a) from insurance proceeds (or other similar recoveries) paid on account of the loss of or damage to the assets being replaced or restored or (b) with awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced; provided, that for purposes of Section 6.14 only, Capital Expenditures shall include (without duplication) amounts paid for, or reimbursed to, the Borrower or any Subsidiary by any developer, landlord or other third party with respect to leasehold improvements at any retail location leased by the Borrower or any Subsidiary that would otherwise be required to be classified as a fixed or capital asset of the Borrower and its Subsidiaries if paid for by the Borrower or its Subsidiaries.

 

“Capital Lease” means, with respect to any Person, any lease of (or other agreement conveying the right to use) any real or personal property of such Person that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of such Person.

 

“Capital Stock” means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person’s capital stock or equity, whether now outstanding or issued after the date hereof, including all common stock, preferred stock, partnership interests and limited liability company member interests.

 

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

 

“Change of Control” means any event, circumstance or occurrence that results in (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) of Capital Stock representing more than 30% of the issued and outstanding voting Capital Stock of the Borrower, (b) the Borrower failing to own, directly or indirectly through another wholly-owned Subsidiary, all issued and outstanding Capital Stock of each Subsidiary, or (c) a change in the composition of the Governing Board of the Borrower such that continuing directors cease to constitute more than 50% of the Bo rrower’s Governing Board.  As used in this definition, “continuing directors” means, as of any date, (x) those Directors of the applicable Person who assumed office prior to such date, and (y) those Directors of the applicable Person who assumed office after such date and whose appointment or nomination for election by that Person’s Shareholders was approved by a vote of at least 50% of the Directors in office immediately prior to such appointment or nomination.

 

“Closing Date” means the date of this Agreement.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Collateral” means all property or assets in which the Administrative Agent, on behalf of the Lender Parties, has been granted a Lien pursuant to any Security Document, together with all substitutions and replacements for and products and proceeds of any of the foregoing.

 

“Commercially Available Intellectual Property” means all Licensed Intellectual Property that is licensed to an Obligor on a nonexclusive basis and for which licenses are readily available on commercially reasonable terms.

 

“Commitment” means, with respect to any Lender, such Lender’s Revolving Commitment.

 

“Communications” has the meaning specified in Section 9.5(a).

 

“Consolidated Group” means the Borrower and its consolidated Subsidiaries, including but not limited to each Guarantor.

 

“Consolidated Net Income” means, for any period of determination, with respect to the Consolidated Group on a consolidated basis, cumulative net income earned during

 

 

such period (determined before the deduction of minority interests) as determined in accordance with GAAP.

 

“Consolidated Net Worth” means, with respect to the Consolidated Group, as of any date of determination, the aggregate of the Shareholders’ equity in the Consolidated Group, as determined in accordance with GAAP.

 

“Copyright Security Agreement” means a copyright security agreement of one or more of the Obligors in favor of the Administrative Agent, for the benefit of the Lenders.

 

“Corporate Card Agreement” means that certain Bank of America Corporate Card Agreement dated as of April 11, 2007 by and between FIA Card Services, N.A. and the Borrower, as amended, together with any subsequent renewal or replacement of such agreement with Bank of America or another entity that provides similar financial arrangements to the arrangements provided under the Bank of America Corporate Card Agreement, as amended from time to time in accordance with the terms of this Agreement.

 

“Credit Card Program Agreement” means (i) that certain Amended and Restated Private Label Consumer Credit Card Program Agreement dated as of December 14, 2005 among GE Money Bank, the Borrower and Select Comfort Retail Corporation (as amended through the date hereof, the “Current GE Agreement” and (ii) that certain Help Card Agreement dated as of December 1, 2001 by and between the Borrower and Dent-a-Med, Inc. d.b.a. The HELPcard (the “Current Help Card Agreement”), in each case, together with any amendment, supplement, extension or replacement thereof entered into in accordance with the terms of this Agreement, the terms of which relating to the financial obligations of the Borrower and its Subsidiaries are reasonably simila r to those set forth in the Current GE Agreement or the Current Help Card Agreement, as applicable.

 

“Covenant Compliance Date” means the last day of each fiscal quarter of the Borrower.

 

“Covenant Computation Period” means the 4 consecutive fiscal quarters immediately preceding and ending on a Covenant Compliance Date.

 

“Credit Extension” means the making of any Advance, the conversion to or continuation of any LIBOR Loan, or the issuance of any Letter of Credit.

 

“Daily Three-Month LIBO Rate” means, for any day, a rate equal to the Adjusted LIBO Rate with respect to a three-month Interest Period commencing on that day.  For the purposes of this definition, the Adjusted LIBO Rate as of any date shall be determined using the Adjusted LIBO Rate as otherwise determined by the Administrative Agent in accordance with the definitions of “LIBO Rate” and “Adjusted LIBO Rate” hereunder, except that (x) if the day is a Business Day, such determination shall be made on such day (rather than 1 Business Day prior to the commencement of an Interest

 

 

Period), and (y) if the day is not a Business day, the Adjusted LIBO Rate for such day shall be the rate determined by the Administrative Agent pursuant to the preceding clause (x) for the most recent Business Day preceding such day.

 

“Debt” means, with respect to any Person, without duplication (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sales or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (f) all obligations of such Person as lessee under Capital Leases which have been o r should be recorded as liabilities on a balance sheet of such Person in accordance with GAAP, (g) all indebtedness secured by a Lien on any asset of such Person, whether or not such indebtedness has been assumed by such Person; provided, however, to the extent such indebtedness is otherwise non-recourse to such Person only the lesser of (1) the amount of such indebtedness or (2) the value of such asset, (h) all indebtedness and other obligations of others guaranteed by such Person, (i) all net obligations of such Person under currency, commodity or interest rate swap program or any similar agreement, arrangement or undertaking relating to fluctuations in commodity prices, currency values or interest rates, (j) all obligations, contingent or otherwise, with respect to the face amount of letters of credit (whether or not drawn) and bankers’ acceptances issued for the account of such Person, (k) all Redeemable Capital Stock of such Person, (l) all Off-Balance Sheet Liabilities of such Person and (m) all obligations of such Person to advance funds to, or purchase assets, property or services from, any other Person in order to maintain the financial condition of such Person.  For all purposes of this Agreement, the Debt of any Person shall include the Debt of any partnership or joint venture in which such Person is a general partner or a joint venturer; provided, that the portion (if any) of any such Debt which exceeds the amount of such Debt as to which there is recourse to such Person shall not be included hereunder as Debt of such Person.  For purposes of clause (j) of Section 7.1 hereof only, all of the obligations of the Borrower and its Subsidiaries under the Corporate Card Agreement shall be deemed to constitute Debt or indebtedness, as applicable.

 

“Default” means an event that, with giving of notice or passage of time or both, would constitute an Event of Default.

 

“Default Rate” has the meaning specified in Section 2.7(c).

 

“Defaulting Lender” means at any time, any Lender that, at such time (a) has failed to make an Advance or failed to participate in a Letter of Credit as required pursuant to the terms of this Agreement, (b) has failed to pay to any Lender Party an amount owed by such Lender pursuant to the terms hereof, (c) has been deemed insolvent or has become subject to a bankruptcy or insolvency proceeding or to a receiver, trustee or similar official or (d) has notified the Administrative Agent or the Borrower that such

 

Lender does not intend to comply with its obligation to make further Advances or other payments as required under this Agreement.

 

“Director” means, with respect to any Person, (a) if such Person is a corporation, a member of the board of directors of such Person, (b) if such Person is a limited liability company, a governor, manager or managing member of such Person and (c) if such Person is a partnership, a general partner of such Person.

 

“Domestic Subsidiary” means each Subsidiary that is incorporated under the laws of the United States, any State thereof or the District of Columbia.

 

“EBITDAR” means, with respect to the Consolidated Group, for any period of determination, the Consolidated Net Income of the Consolidated Group from continuing operations, plus, to the extent included in the determination of Consolidated Net Income, (a) income taxes and franchise taxes paid or accrued during such period, (b) Interest Expense during such period, (c) and amortization and depreciation deducted in determining Consolidated Net Income for such period, (d) non-cash equity compensation expense deducted in determining Consolidated Net Income for such period, (e) non-cash impairment expenses relating to store closures and/or remodeling during such period, (f) non-cash c harges or gains which are unusual, non-recurring or extraordinary during such period, (g) Operating Lease Expense during such period, and (h) amortization of fees payable in connection with the incurrence of Debt during such period; all as determined in accordance with GAAP.

 

“Eligible Lender” means (a) a financial institution organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development, or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the United States; (c) a Person controlled by, controlling, or under common control with any entity identified in clause (a) or (b) above; or (d) any other Person acceptable to the Administrative Agent and, so long as no Default or Event of Default s hall exist, acceptable to the Borrower.

 

“Environmental Laws” has the meaning specified in Section 4.13.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated) that is, along with the Borrower or any Subsidiary, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in sections 414(b) and 414(c), respectively, of the Code.

 

“Event of Default” has the meaning specified in Section 7.1.

 

“Excluded Taxes” means, with respect to any Lender Party or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located 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 the Borrower is located and (c) in the case of a Foreign Lender, any withholding t ax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new lending office) or is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 2.16(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.16(a).

 

“Exclusively Licensed Intellectual Property” means all Licensed Intellectual Property that is licensed to an Obligor (or a group of Obligors) on an exclusive basis.

 

“Federal Funds Rate” means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor publication, “H.15(519)”) on the preceding Business Day opposite the caption “Federal Funds (Effective)”; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Administrative Agent of the rates for the last transaction in overnight federal funds arranged prior to 9:00 a.m.  (New York City time) on that day by each of the three leading brokers of federal funds transactions in New York City, as selected b y the Administrative Agent in its discretion.

 

“Financial Officer” means the chief financial officer, principal accounting officer, vice president-finance, treasurer or controller of the Borrower.

 

“Financial Covenants” means the covenants contained in Sections 5.11 through 5.13 and Section 6.14.

 

“Fixed Charge Coverage Ratio” means, with respect to the Consolidated Group, for any period of determination, the ratio of (a) the EBITDAR of the Consolidated Group for such period, minus the sum of (i) the Capital Expenditures made during such period, (ii) to the extent included in the determination of EBITDAR during such period, income taxes and franchise taxes paid or accrued during such period, and (iii) Restricted Payments made during such period, to (b) the Fixed Charges of the Consolidated Group for such period.

 

“Fixed Charges” means, with respect to the Consolidated Group, for any period of determination, the sum, without duplication, of (a) the Interest Expense paid during such period, (b) all scheduled installments of principal on Funded Debt which are due on demand or during such period, and (c) the Operating Lease Expense during such period.

 

“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than the United States of America, any state thereof or the District of Columbia.

 

“Foreign Subsidiary” means any Subsidiary that is incorporated or organized under the laws of any jurisdiction other than the United States of America, any State thereof or the District of Columbia.

 

“Funded Debt” of any Person means all Debt of such Person, including but not limited to all Subordinated Debt of such Person, other than any such Debt described in clauses (i) and (m) of the definition of “Debt” herein (including guaranties of any such items of Debt).

 

“GAAP” means generally accepted accounting principles as in effect on the Closing Date and applied on a basis consistent with the accounting practices applied in the financial statements of the Borrower referred to in Section 4.5, except for any change in accounting practices to the extent that, due to a promulgation of the Financial Accounting Standards Board changing or implementing any new accounting standard, the Borrower either (a) is required to implement such change, or (b) for future periods will be required to and for the current period may in accordance with generally accepted accounting principles implement such change, for its financial statements to be in conformity with generally accepted accounting principles (any such change is hereinafter referred to as a “Required GAAP Change”), provided that (x) the Borrower shall fully disclose in such financial statements any such Required GAAP Change and the effects of the Required GAAP Change on the Borrower’s income, retained earnings or other accounts, as applicable, and (y) the Financial Covenants shall be adjusted as necessary to reflect the effects of such Required GAAP Change, provided that if the Required Lenders and the Borrower cannot agree on such adjustments, the Financial Covenants will be calculated without giving effect to the Required GAAP Change.

 

“Governing Board” means, with respect to any corporation, limited liability company or similar Person, the board of directors, board of governors or other body or entity that sets overall institutional direction for such Person.

 

“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

 

“Guarantor” means Select Comfort Retail Corporation, Select Comfort Canada Holding Inc. and selectcomfort.com corporation, together with each Person that executes and delivers a Guaranty in favor of the Administrative Agent for the benefit of the Lender Parties pursuant to Section 5.8.

 

“Guaranty” means a guaranty of a Guarantor made in favor of the Administrative Agent for the benefit of the Lender Parties guarantying payment of all Obligations.

 

“Hazardous Substance” means any asbestos, urea-formaldehyde, polychlorinated biphenyls, nuclear fuel or material, chemical waste, radioactive material, explosives, known carcinogens, petroleum products and by-products and other dangerous, toxic or hazardous pollutants, contaminants, chemicals, materials or substances listed or identified in, or regulated by, any Environmental Laws.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Indemnitees” has the meaning specified in Section 9.6(b).

 

“Intellectual Property Rights” means all actual or prospective rights arising in connection with any intellectual property or other proprietary rights, including all rights arising in connection with copyrights, patents, service marks, trade dress, trade secrets, trademarks, trade names or mask works.

 

“Interest Expense” means, with respect to any Person, for any period of determination, the total gross interest expense on all Debt of such Person during such period including, but not limited to and without duplication, (a) accrued interest (whether or not paid) on all Debt, (b) the amortization of Debt discounts, (c) that portion of any Capital Lease Payment which would constitute imputed interest as determined in accordance with GAAP, (d) all fees and charges with respect to letters of credit issued for the account of such Person, and (e) net costs (or income) of rate hedging in respect of interest rates allocable to such period; provided, however, that Interest Expense excludes amortization of fees payable in connection with the incurrence o f Debt to the extent included in interest expense.

 

“Interest Payment Date” means (a) with respect to each ABR Loan, the last day of each month, (b) with respect to each LIBOR Loan, the last day of the Interest Period applicable thereto, and (c) with respect to each Loan, the Maturity Date.

 

“Interest Period” means, relative to any LIBOR Loan, the period beginning on (and including) the date on which such LIBOR Loan is made, or continued as, or converted into, a LIBOR Loan pursuant to Section 2.2, 2.3 or 2.4 and shall end on (but exclude) the day which numerically corresponds to such date 1, 2 or 3 months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), as the Borrower may select in their relevant notice pursuant to Section 2.2, 2.3 or 2.4; provided, however, that:

 

(a)           No more than 6 different Interest Periods may be outstanding at any one time.

 

(b)           If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless such next following Business Day is the first Business Day of a month, in which case such Interest Period shall end on the next preceding Business Day).

 

(c)           No Interest Period applicable to a Loan may end later than the Maturity Date.

 

(d)           In no event shall the Borrower select Interest Periods with respect to Loans which, in the aggregate, would require payment of funding losses under Section 2.18 in order to make payments of regularly scheduled installments of principal thereunder.

 

“Investment” means any Capital Stock, securities or evidence of indebtedness of, loans or advances to, or other interest in, any Person.

 

“Lender” has the meaning specified in the preamble.

 

“Lender Parties” means, collectively, the Administrative Agent, the Letter of Credit Issuer, the Lenders and each Affiliate of any Lender to whom any Banking Services Obligations are owed.

 

“Letter of Credit” has the meaning specified in Section 2.6.

 

“Letter of Credit Documents” means such applications, reimbursement agreements and other documents as the Letter of Credit Issuer may require as a condition to issuance of a Letter of Credit.

 

“Letter of Credit Exposure” means the sum of (a) the aggregate remaining available amount of all issued and outstanding Letters of Credit and (b) amounts drawn under Letters of Credit for which the Letter of Credit Issuer has not been reimbursed with proceeds of a Borrowing or otherwise.

 

“Letter of Credit Fee” has the meaning specified in Section 2.6(b).

 

“Letter of Credit Issuer” has the meaning specified in the preamble.

 

“Letter of Credit Sublimit” means $10,000,000.

 

“LIBO Rate” means, with respect to an Interest Period, (a) the rate per annum determined by the Administrative Agent on the date 1 Business Day before the commencement of such Interest Period by reference to the British Bankers’ Association Interest Settlement Rates for deposits in dollars offered on the London interbank dollar market for a period corresponding to the term of such Interest Period and in an amount

comparable to the aggregate amount of the relevant Loan (as displayed in the Bloomberg Financial Market System or any successor thereto or any other 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), or (b) if such rate cannot be determined, the rate per annum equal to the rate determined by the Administrative Agent in accordance with Section 2.5 to be a rate at which U.S.  dollar deposits are offered to major banks in the London interbank eurodollar market for funds to be made available on the first day of such Interest Period and maturing at the end of such Interest Period.

 

“LIBOR Advance” means any Advance that bears interest at a rate determined by reference to a LIBO Rate (other than the Daily Three-Month LIBO Rate).

 

“LIBOR Loan” means any Loan that bears interest at a rate determined by reference to a LIBO Rate (other than the Daily Three-Month LIBO Rate), including LIBOR Advances.

 

“License Agreement” has the meaning specified in Section 4.20.

 

“Licensed Intellectual Property” means all Intellectual Property Rights licensed to an Obligor by a Person who is not an Obligor.

 

“Lien” means any mortgage, deed of trust, lien, pledge, security interest or other charge or encumbrance, of any kind whatsoever, including but not limited to the interest of the lessor or titleholder under any Capital Lease, title retention contract or similar agreement.

 

“Loan” means a designated portion of outstanding principal indebtedness under the Revolving Facility that bears interest at a rate determined by reference to a particular LIBO Rate or the Adjusted Base Rate, as the case may be.

 

“Loan Documents” means this Agreement, the Notes, the Guaranties, each Letter of Credit Document and the Security Documents.

 

“Margin” means (a) with respect to computation of the applicable interest rate on ABR Loans, one-half of one percent (.5%) and (b) with respect to computation of the applicable interest rate on LIBOR Loans, three percent (3.0%).

 

“Material Adverse Effect” means, with respect to any event or circumstance, a material adverse effect on:

 

(a)           the business, financial condition, operations or prospects of the Borrower and its Subsidiaries, taken as a whole;

 

(b)           the ability of an Obligor to perform any material obligation under any Loan Document to which it is a party;

 

(c)           the validity, enforceability as to any material provision or collectibility of any Loan Document; or

 

(d)           the status, existence, perfection, priority or enforceability of any Lien granted pursuant to any Security Document with respect to any material portion of the Collateral.

 

“Maturity Date” means July 1, 2012.

 

“Multi-employer Plan” means a multi-employer plan (as defined in section 4001(a)(3) of ERISA) to which the Borrower, any Subsidiary or any ERISA Affiliate contributes or is obligated to contribute.

 

“Non-Consenting Lender” has the meaning specified in Section 9.7.

 

“Note” means a Revolving Note.

 

“Notice” has the meaning specified in Section 9.5(b).

 

“Obligations” means (a) each and every debt, liability and other obligation of every type and description arising under or in connection with any of the Loan Documents which the Borrower may now or at any time hereafter owe to any Lender Party, whether such debt, liability or obligation now exists or is hereafter created or incurred, whether it is direct or indirect, due or to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, or sole, joint, several or joint and several, and including but not limited to principal of and interest on the Notes, all fees due under this Agreement or any related agreement, and the Borrower’s obligation to reimburse any Lender Party for any amount drawn under any Letter of Credit, whether such re imbursement obligation arises directly under this Agreement or under a separate reimbursement agreement, and (b) Banking Services Obligations.

 

“Obligor” means the Borrower or a Guarantor, including but not limited to each additional Person which becomes a Guarantor pursuant to Section 5.8.

 

“Off-Balance Sheet Liability” of a Person means (a) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (b) any liability under any Synthetic Lease entered into by such Person, or (c) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheets of such Person.

 

“Operating Lease” means, with respect to any Person, any leasing or similar arrangement for the lease or use of any real property or personal property assets which, in accordance with GAAP, would not be characterized as a Capital Lease.

 

“Operating Lease Expense” means, with respect to any Person, for any period of determination, the total base rent as reported in the financial statements of such Person in

 

 

connection with any leases of (or other agreements conveying the right to use) any real property or personal property, whether paid or accrued.

 

“Organizational Documents” means, (a) with respect to any corporation, the articles of incorporation and bylaws of such corporation, (b) with respect to any partnership, the partnership agreement of such partnership, (c) with respect to any limited liability company, the articles of organization and operating agreement of such company, and (d) with respect to any entity, any and all other shareholder, partner or member control agreements and similar organizational documents relating to such entity.

 

“Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

 

“Owned Intellectual Property” means all Intellectual Property Rights owned by an Obligor.

 

“Patent and Trademark Security Agreement” means a patent and trademark security agreement of one or more of the Obligors in favor of the Administrative Agent, for the benefit of the Lender Parties.

 

“Pension Plan” means a pension plan (as defined in section 3(2) of ERISA) maintained for employees of the Borrower, any Subsidiary or any ERISA Affiliate and covered by Title IV of ERISA.

 

“Percentage” means, with respect to any Lender, the ratio of that Lender’s Revolving Credit Exposure to the aggregate Revolving Credit Exposure of all Lenders.

 

“Permitted Acquisition” means the acquisition by the Borrower or a Domestic Subsidiary of (x) assets constituting a business, division or product line of any Person not already a Subsidiary, or (y) the Capital Stock of any such Person (including by way of merger) as a result of which stock acquisition such Person shall become a Subsidiary of the Borrower or shall be merged with and into a Subsidiary of the Borrower (such assets or Person are referred to as a “Target”), provided that (in each case):

 

(a)           no Default or Event of Default is continuing at the time of such transaction or would be caused by such transaction;

 

(b)           the business activities of the Target are substantially similar to the business activities conducted by the Borrower and its Subsidiaries at the time of the transaction or a reasonable extension thereof;

 

(c)           prior to such acquisition, the Borrower shall have obtained the written consent or approval for such acquisition from the Shareholders or Governing Board of the Borrower and any applicable Subsidiary;

 

 

(d)           at least 5 Business Days prior to such acquisition, the Borrower has delivered to the Administrative Agent, (A) to the extent reasonably available, financial statements of the Target (or, in the case of assets constituting less than all of the assets of a Person, the equivalent of financial statements with respect to such assets) for the immediately preceding 36 months to the extent available, but in no event for less than the immediately preceding twelve months, and (B) pro forma financial statements reflecting the combined projected performance of the Borrower and its Subsidiaries, including the Target, during the 12 months immediately following consummation of such transaction, certified to the Administrative Agent and the Lenders as being the good faith p rojections of the Borrower (subject to the qualifications described in Section 4.7), in form and detail reasonably acceptable to the Administrative Agent, which projections shall demonstrate (i) that such acquisition will not result in any Default or Event of Default hereunder and (ii) immediately after giving effect to such acquisition, (A) the aggregate amount of cash and cash equivalents (inclusive of short-term Investments) plus (B) the excess of the Aggregate Revolving Commitment Amount over the Revolving Facility Outstanding Amount, will not be less than $10,000,000;

 

(e)           in the case of any asset acquisition, the Borrower or a Subsidiary which is an Obligor shall acquire such assets;

 

(f)           in the case of the acquisition of a Target which is to remain or become a separate Subsidiary of Borrower, such Subsidiary shall become an Obligor as required by Section 5.8 simultaneously with the closing of such acquisition.

 

(g)           in the case of any consolidation or merger involving a Target, the Borrower or an existing Subsidiary which is an Obligor shall be the continuing or surviving corporation (provided, however, that under no circumstances may the Borrower merge into or consolidate with any Subsidiary);

 

(h)           immediately upon the consummation of such acquisition, the Administrative Agent shall hold a perfected, first priority security interest in and Lien on all of the personal property directly or indirectly acquired by the Borrower or any Subsidiary in such transaction (including but not limited to the assets of the Target and, if the Target survives such transaction as a separate Subsidiary, any Capital Stock in the Target), subject only to Permitted Liens;

 

(i)           the aggregate consideration (inclusive of all Debts incurred or assumed) to be paid by the Borrower and its Subsidiaries on account of such transaction, together with the aggregate consideration (inclusive of all Debts incurred or assumed) paid in all other Permitted Acquisitions for the twelve months immediately preceding such acquisition does not exceed $10,000,000;

 

(j)           any Debt incurred or assumed by the Borrower or any Subsidiary (including the Target) on account of such transaction is permitted hereunder;

 

(k)           the Target or the assets so acquired shall not be subject to any Liens other than Permitted Liens;

 

(l)           no Target shall be organized or domiciled under the law of any jurisdiction outside the United States, and no Target shall have more than 15% of its assets or annual revenues based in or from outside of the United States or Canada (as determined from the most recently available financial information for the Target); and

 

(m)           such acquisition is non-hostile (i.e., the prior, effective written consent or approval of the Target’s Governing Board and Shareholders, if applicable, shall have been obtained).

 

“Permitted Liens” has the meaning specified in Section 4.11.

 

“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or Governmental Authority.

 

“Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA) maintained for employees of the Borrower, any Subsidiary or ERISA Affiliate.

 

“Platform” has the meaning specified in Section 9.5(a).

 

“Redeemable Capital Stock” means, with respect to any Person, any Capital Stock of such Person which, either by its terms, by the terms of any security into which it is convertible or exchangeable or otherwise, (a) is or upon the happening of an event or passage of time would be required to be redeemed (for consideration other than shares of the common equity capital of such Person) on or prior to the Maturity Date, (b) is redeemable at the option of the holder thereof (for consideration other than shares of the common equity capital of such Person) on or prior to the Maturity Date or (c) is convertible into or exchangeable for debt securities on or prior to the Maturity Date.

 

“Register” has the meaning specified in Section 9.3(c).

 

“Reportable Event” means a reportable event (as defined in section 4043 of ERISA), other than an event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the Pension Benefit Guaranty Corporation.

 

“Required Lenders” means one or more Lenders having an aggregate Percentage in excess of 50%; provided, however, that if any Lender is a Defaulting Lender at such time of determination, the Percentage of such Defaulting Lender shall be excluded from the determination of Required Lenders; provided, further, that at any time during which only one Lender exists, “Required Lenders” means the Lender.

 

“Required Payment” has the meaning specified in Section 2.14(c).

 

“Restricted Payment” means any payment on account of any Capital Stock of the Borrower or any Subsidiary, including but not limited to any dividend or distribution and any payment in purchase, redemption, retirement or other acquisition thereof.

 

“Revolving Advance” means a loan of funds by a Lender to the Borrower under the Revolving Facility, including both ABR Loans and LIBOR Loans made thereunder.

 

“Revolving Commitment” means, with respect to each Lender, (a) the amount so designated opposite such Lender’s name on Exhibit A, plus or minus any such amount assumed or assigned pursuant to any Assignment and Assumption, or (b) as the context may require, the obligation of such Lender to make Revolving Advances under Section 2.1 and participate in Letters of Credit in accordance with Section 2.6.

 

“Revolving Commitment Termination Date” means the earlier of (a) the Maturity Date and (b) the date on which the Revolving Commitments are terminated pursuant to Section 2.13(a) or 7.2 or reduced to zero pursuant to Section 2.13(a).

 

“Revolving Credit Exposure” means, with respect to any Lender, (a) at all times prior to termination of the Revolving Commitments, such Lender’s Revolving Commitment and (b) thereafter, such Lender’s Revolving Facility Outstanding Amount.

 

“Revolving Facility” means the revolving credit facility being made available to the Borrower by the Lenders pursuant to Article II.

 

“Revolving Facility Outstanding Amount” means, as of the date of determination, the sum of (a) the aggregate principal amount of all outstanding Revolving Advances, and (b) the Letter of Credit Exposure.

 

“Revolving Note” means a promissory note of the Borrower payable to a Lender in the amount of such Lender’s Revolving Commitment, in substantially the form of Exhibit B, as such promissory note may be amended, extended or otherwise modified from time to time, and including each other promissory note accepted from time to time in substitution therefor or in renewal thereof.

 

“Security Agreement” means a security agreement of one or more of the Obligors in favor of the Administrative Agent, for the benefit of the Lender Parties, pursuant to which such Obligor or Obligors grant the Administrative Agent a Lien on substantially all the personal property of such Obligor to secure payment of the Obligations.

 

“Security Documents” means each Security Agreement, each Copyright Security Agreement, each Patent and Trademark Security Agreement and each other security agreement, pledge agreement, mortgage, deed of trust, assignment of rents and leases, control agreement and each and every additional agreement entered into by any one or

 

 

more of the Obligors for the benefit of the Lender Parties to secure payment of the Obligations or otherwise relating to any Collateral.

 

“Select Comfort Canada Holding Inc.” means Select Comfort Canada Holding Inc., a Minnesota corporation.

 

“selectcomfort.com corporation” means selectcomfort.com corporation, a Minnesota corporation.

 

“Select Comfort Executive Investment Plan” means the Select Comfort Executive Investment Plan (January 1, 2009 Revision), as the same may be amended or revised from time to time.

 

“Select Comfort Executive Investment Plan Trust” means that certain trust established under the Trust Agreement establishing the Select Comfort Executive Plan Trust dated as of July 1, 2005, by and between the Borrower and Prudential Bank & Trust, FSB, as the same may be amended or restated from time to time.

 

“Select Comfort Retail Corporation” means Select Comfort Retail Corporation, a Minnesota corporation.

 

“Shareholder” means, with respect to any Person, the holder of any legal or beneficial interest in any Capital Stock of that Person.

 

“Specified Intellectual Property” means all Owned Intellectual Property and Licensed Intellectual Property (other than Commercially Available Intellectual Property) consisting of trademark registrations, service mark registrations, copyright registrations, patents, applications for any of the foregoing, and material unregistered trademarks, service marks and copyrights.

 

“Subordinated Debt” means those items of Funded Debt (including principal, interest, fees and other amounts) which have been subordinated to payment of the Obligations pursuant to a Subordination Agreement on terms and conditions satisfactory to the Required Lenders, in their sole discretion, as to the right and time of payment and as to any other rights and remedies thereunder.

 

“Subordination Agreement” means an agreement (in form and substance satisfactory to the Required Lenders) executed and delivered by each holder of Subordinated Debt in favor of the Administrative Agent, for the benefit of the Lender Parties, pursuant to which such Person subordinates payment of such Subordinated Debt or other obligations as therein provided to payment of the Obligations to the extent provided therein.

 

“Subsidiary” means, with respect to a Person, any corporation, partnership, limited liability company or other entity of which more than 50% of the outstanding Capital Stock having general voting power under ordinary circumstances to elect a majority of the Governing Board of such entity (irrespective of whether or not at the time

 

 

stock or membership interests of any other class or classes shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned by such Person.  Unless otherwise specified, “Subsidiary” means a Subsidiary of the Borrower.

 

“Synthetic Lease” means, with respect to any Person, any lease (including leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) (a) that is not a Capital Lease and (b) in respect of which the lessee retains or obtains ownership of the property so leased for federal income tax purposes, other than any such lease under which such Person is the lessor.

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

“UCC” means the Uniform Commercial Code as in effect from time to time in the state designated in Section 9.8 as the state whose laws shall govern this Agreement, or in any other state whose laws are held to govern this Agreement or any portion hereof.

 

“Unused Fee” has the meaning specified in Section 2.11(a).

 

“Wells Fargo” has the meaning specified in the preamble.

 

Section 1.2   Rules of Construction.  For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

 

(a)           The terms defined in the preamble have the meanings therein assigned to them.

 

(b)           The terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular.

 

(c)           All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP.

 

(d)           References to documents (including this Agreement) shall be deemed to include all subsequent amendments and other modifications thereto and restatements thereof, but only to the extent such amendments, modifications and restatements are not prohibited by the terms of any Loan Document.

 

(e)           All references to times of day in this Agreement shall be references to Minneapolis, Minnesota time unless otherwise specifically provided.

 

(f)           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, without limitation, cash, securities, accounts and contract rights.

 

 

 

 

Section 2.1   Revolving Facility.  Each Lender hereby agrees, on the terms and subject to the conditions herein set forth, including satisfaction of all conditions set forth in Section 3.2, to make Revolving Advances to the Borrower from time to time during the period from the Closing Date to and including the Revolving Commitment Termination Date, in an amount equal to such Lender’s Percentage of each Borrowing from time to time requested by the Borrower under the Revolving Facility; provided, however, that (i)  ;the Revolving Facility Outstanding Amount shall at no time exceed the Aggregate Revolving Commitment Amount, and (ii) no Lender’s Percentage of the Revolving Facility Outstanding Amount shall at any time exceed such Lender’s Revolving Commitment.  Within the above limits, the Borrower may obtain Revolving Advances, prepay Revolving Advances in accordance with the terms hereof and reborrow Revolving Advances in accordance with the applicable terms and conditions of this Agreement.

 

Section 2.2   Procedures for Borrowings.  Each Borrowing shall be funded by the Lenders as either ABR Advances or, so long as no Default or Event of Default has occurred, LIBOR Advances, as the Borrower shall specify in the related notice of proposed Borrowing.  ABR Loans and LIBOR Loans may be outstanding at the same time.  The principal amount of any Borrowing shall be in an amount equal to (a) $500,000 or a higher integral multiple of $500,000 if such Borrowing is funded as an ABR Loan and (b) $500,000 or a higher integral multiple of $100,000 i f such Borrowing is funded as a LIBOR Loan.  The Borrower shall give notice to the Administrative Agent of each proposed Borrowing not later than 12:00 noon on a Business Day that, in the case of a Borrowing that includes only ABR Loans, is the proposed date of such Borrowing or, in the case of a Borrowing that includes LIBOR Loans, is at least 1 Business Day prior to the proposed date of such Borrowing.  Each such notice shall be effective upon receipt by the Administrative Agent, shall be in writing or by telephone or telecopy transmission, to be confirmed in writing by the Borrower if so requested by the Administrative Agent (in the form of Exhibit C), and shall specify the amount of the Borrowing, the date of the Borrowing (which shall be a Business Day), whether the Borrowing is to include ABR Loans, LIBOR Loans or both, and, in the case of a Borrowing that includes LIBOR Loans, the Interest Period to be applicable the reto.  Promptly upon receipt of such notice (but in no event later than 1:00 p.m. with respect to an ABR Advance, and the close of business, with respect to a LIBOR Advance, in each case on the Business Day of receipt of such notice), the Administrative Agent shall advise each Lender of the proposed Borrowing.  Subject to satisfaction of the conditions precedent set forth in Article III with respect to such Borrowing, at or before 2:00 p.m. on the date of the requested Borrowing, each Lender shall provide the Administrative Agent at the principal office of the Administrative Agent in Minneapolis, Minnesota (or such other office as the Administrative Agent may designate), with immediately available funds covering such Lender’s Percentage of such Borrowing.  The Administrative Agent shall pay over proceeds of such Borrowing to the Borrower, in immediately available funds, prior to the clos e of business on the date of the requested Borrowing.

 

Section 2.3   Converting ABR Loans to LIBOR Loans; Procedures.  So long as no Default or Event of Default exists, the Borrower may convert all or any part of any

 

 

outstanding ABR Loan under the Revolving Facility into a LIBOR Loan by giving notice to the Administrative Agent of such conversion not later than 12:00 noon on a Business Day that is at least 1 Business Day prior to the date of the requested conversion.  Each such notice shall be irrevocable, shall be effective upon receipt by the Administrative Agent, shall be in writing or by telephone or telecopy transmission, to be confirmed in writing by the Borrower if so requested by the Administrative Agent (in the form of Exhibit D), shall specify the date and amount of such conversion, the total amount of the Loan to be so converted and the Interest Period therefor.  Each conversion of a Loan shall be on a Business Day, and the aggregate amount of each such co nversion of an ABR Loan to a LIBOR Loan shall be in an amount equal to $500,000 or a higher integral multiple of $100,000.

 

Section 2.4    Procedures at End of an Interest Period.  Unless the Borrower requests a new LIBOR Loan in accordance with the procedures set forth below, or prepays the principal of an outstanding LIBOR Loan at the expiration of an Interest Period, each Lender shall automatically and without request of the Borrower convert each LIBOR Loan to an ABR Loan on the last day of the relevant Interest Period.  So long as no Default or Event of Default exists, the Borrower may cause all or any part of any outstanding LIBOR Loan to continue as a LIBOR Loan after the end of the then applicable Interest Period by notifying the Administrative Agent not later than 12:00 noon on a Business Day that is at least 1 Business Day prior to the first day of the new Interest Period.  Each such notice shall be irrevocable, effective when received by the Administrative Agent, shall be in writing or by telephone or telecopy transmission, to be confirmed in writing by the Borrower if so requested by the Administrative Agent (in the form of Exhibit E), and shall specify the first day of the applicable Interest Period, the amount of the expiring LIBOR Loan to be continued and the Interest Period therefor.  Each new Interest Period shall begin on a Business Day and the amount of each LIBOR Loan shall be in an amount equal to $500,000 or a higher integral multiple of $100,000.

 

Section 2.5   Setting and Notice of Rates.  The applicable LIBO Rate for each Interest Period shall be determined by the Administrative Agent on the first Business Day prior to the beginning of such Interest Period, whereupon notice thereof (which may be by telephone) shall be given by the Administrative Agent to the Borrower and each Lender.  Each such determination of the applicable LIBO Rate shall be conclusive and binding upon the parties hereto, in the absence of manifest error.  The Administrative Agent, upon written request of the Borrower or any Lender, sha ll deliver to the Borrower or such requesting Lender a statement showing the computations used by the Administrative Agent in determining the applicable LIBO Rate hereunder.

 

Section 2.6   Commitment to Issue Letters of Credit.  The Letter of Credit Issuer agrees, from the Closing Date to and including the thirtieth (30th) day prior to the Revolving Commitment Termination Date, to issue one or more standby letters of credit (including those which include a provision which automatically extends the expiry date thereof for a specified period unless, within the same prior of time in advance of the then applicable expiry date thereof, the Letter of Credit Issuer gives notice to the beneficiary there of to the effect that such letter of credit shall not be so extended) or commercial letters of credit for the account of the Borrower, and the Lenders agree to participate in the risk of such letters of credit issued

 

 

(a)           Each letter of credit issued pursuant to this Section 2.6 shall be referred to herein as a “Letter of Credit.”  No Letter of Credit shall be issued by the Letter of Credit Issuer if, after giving effect to the issuance of such Letter of Credit (i) the Letter of Credit Exposure would exceed the Letter of Credit Sublimit or (ii) the Revolving Facility Outstanding Amount would exceed the Aggregate Revolving Commitment Amount.  The expiration date of any Letter of Credit constituting a commercial letter of credit shall not be later than the earlier of (i) 180 days after the date of issuance of such Letter of Credit and (ii)&# 160;10 days prior to the Revolving Commitment Termination Date.  The expiration date of any Letter of Credit constituting a standby letter of credit shall not be later than the earlier of (i) one year after the date of issuance of such Letter of Credit and (ii) 10 days prior to the Revolving Commitment Termination Date.  Each Letter of Credit will be issued under and pursuant to the terms and conditions of such Letter of Credit Documents as the Letter of Credit Issuer may reasonably require.  The Borrower shall request each Letter of Credit upon not less than three (3) Business Days’ prior written application on the Letter of Credit Issuer’s standard form or such other form as may be agreed to by the Letter of Credit Issuer and the Borrower.  If any of the terms of any Letter of Credit Document are inconsistent with the terms and provisions of this Agreement, the terms and provisions of this Agreement shall govern.  The Letter of Credit Issuer shall not be obligated to issue a Letter of Credit unless on the date of issuance all of the conditions precedent specified in Section 3.2 shall have been satisfied as fully as if the issuance of such Letter of Credit were a Revolving Advance.  Promptly after issuance of a Letter of Credit pursuant hereto, the Administrative Agent shall so advise each Lender of all relevant information with respect thereto.

 

(b)           The Borrower will pay to the Administrative Agent, for the pro rata account of all Lenders, a fee with respect to each undrawn Letter of Credit (the “Letter of Credit Fee”) at an annual rate equal to (i) two and one-half percent (2.5%) of the undrawn amount of each outstanding Letter of Credit constituting a standby letter of credit and (ii) such fee as shall be determined by the Required Lenders with respect to each outstanding Letter of Credit constituting a commercial letter of credit; provided, however, that from and after the occurrence of an Event of Default and continuing thereafter until such Event of Default shall be remedied to the written sa tisfaction of the Required Lenders, upon written notice from the Administrative Agent the Letter of Credit Fee payable hereunder with respect to each Letter of Credit shall be equal to the sum of the applicable fee under clause (i) or (ii) above plus two percent (2.0%).  The Letter of Credit Fee shall be payable in arrears on the last day of each calendar quarter, and on the Maturity Date, or upon such other terms as may be agreed upon by the Borrower and the Required Lenders at the time of issuance of any such Letter of Credit.  Letter of Credit Fees payable by the Borrower to the Lenders in accordance with this subsection (b) shall be shared among the Lenders pro rata in accordance with their respective Percentages.

 

(c)           Upon issuance of a Letter of Credit hereunder, and without any further notice to any Lender, each Lender shall be deemed to, and hereby irrevocably and

 

 

 

unconditionally agrees to, purchase from the Letter of Credit Issuer an undivided participating interest in the Letter of Credit Issuer’s risk and obligation under such Letter of Credit and in the obligation of the Letter of Credit Issuer to honor drafts thereunder, and in the amount of any drawing thereunder, and in all rights of the Letter of Credit Issuer to obtain reimbursement from the Borrower in the amount of such drawing, and all other rights of the Letter of Credit Issuer with respect thereto, in an amount equal to such Lender’s Percentage of the maximum amount available to be drawn under such Letter of Credit and the amount of any drawing thereunder.  Whenever a draft submitted under a Letter of Credit is paid by the Letter of Credit Issuer, the Letter of Credit Issuer shall so notify the Administrative Ag ent, the Administrative Agent shall so notify each Lender and shall request immediate reimbursement from the Borrower for the amount of the draft.  If sufficient funds are not immediately paid to the Administrative Agent by the Borrower, the Borrower shall be deemed to have requested a Borrowing pursuant to Section 2.2 and the Lenders shall be notified of such request in accordance with Section 2.2 and shall fund such request for a Borrowing as ABR Advances (in accordance with their respective Percentages) for purposes of reimbursing the Letter of Credit Issuer for the amount of such draft so paid by the Letter of Credit Issuer (less any amounts realized by the Letter of Credit Issuer pursuant to the second sentence of this Section 2.6(c)).  If for any reason or under any circumstance (including but not limited to the occurrence of a Default or Event of Default or the failure to satisfy any of the conditions set forth in Section 3.2) the Lenders do not make such Revolv ing Advances as contemplated above and the Borrower does not otherwise reimburse the Letter of Credit Issuer for the amount of the draft so paid by the Letter of Credit Issuer, the Borrower shall nonetheless be obligated to reimburse the amount of the draft to the Letter of Credit Issuer, with interest upon such amount at the Default Rate from and after the date such draft is paid by the Letter of Credit Issuer until the amount thereof is repaid to the Letter of Credit Issuer in full.  If the Letter of Credit Issuer shall not have obtained reimbursement for any drawing under a Letter of Credit (whether from the Borrower or as proceeds of a Borrowing), upon demand of the Administrative Agent each Lender shall immediately advance the amount of its participation in such drawing to the Letter of Credit Issuer and shall be entitled to interest on such participating interest at the Default Rate until reimbursed in full by the Borrower.

 

(d)           Each Lender and the Borrower agrees that, in paying any drawing under a Letter of Credit, the Letter of Credit Issuer shall not have any responsibility to obtain any document (other than any sight draft and certificates expressly required by such Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document.  The Letter of Credit Issuer shall not be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders (including the Required Lenders, as applicable); (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execut ion, effectiveness, validity or enforceability of any document executed in connection with a Letter of Credit.

 

(e)           The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided that this

 

assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as the Borrower may have against the beneficiary or transferee at law or under any other agreement.  The Letter of Credit Issuer shall not be liable or responsible for any of the matters described in clauses (i) through (vii) of subsection (f) below.  In furtherance and not in limitation of the foregoing: (i) the Letter of Credit Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary; and (ii) the Letter of Credit Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.

 

(f)           The obligation of the Borrower under this Agreement to reimburse the Letter of Credit Issuer for a drawing under a Letter of Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

 

(i)           Any lack of validity or enforceability of this Agreement or any Letter of Credit Document.

 

(ii)           Any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of the Borrower in respect of any Letter of Credit or any other amendment or waiver of or any consent to departure from any Letter of Credit Document.

 

(iii)           The existence of any claim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of any Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the Letter of Credit Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or any unrelated transaction.

 

 

(iv)           Any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit.

 

 

(v)           Any payment by the Letter of Credit Issuer under any Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of any Letter of Credit; or any payment made by the Letter of Credit Issuer under any Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of any Letter of Credit, including any arising in connection with any insolvency proceeding.

 

 

(vi)           Any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guarantee, for all or any of the obligations of the Borrower in respect of any Letter of Credit.

 

(vii)           Any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or any other Obligor.

 

(g)           Notwithstanding anything in this Section 2.6 to the contrary, including particularly subsections (e) and (f) above, the Borrower may have a claim against the Letter of Credit Issuer and the Letter of Credit Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by the Letter of Credit Issuer’s willful misconduct or gross negligence or the willful and wrongful failure by the Letter of Credit Issuer to pay under any Letter of Credit after the presentation to the Letter of Credit Issuer by the beneficiary of a sight draft and certificate strictly complying with the terms and conditions of such Letter of Credi t.

 

(h)           The Borrower shall indemnify, protect, defend and hold harmless each Indemnitee from and against all losses, liabilities, claims, damages, judgments, costs and expenses, including but not limited to all reasonable attorneys’ fees and legal expenses, incurred by the Indemnitees or imposed upon the Indemnitees at any time by reason of the issuance, demand for honor or honor of any Letter of Credit or the enforcement, protection or collection of the Letter of Credit Issuer’s claims against the Borrower under this Section 2.6 or by reason of any act or omission of any Indemnitee in connection with any of the foregoing; provided, however, that such indemnification shall not extend to losses, liabilities, claims, damages, judgments, costs and expenses to the extent arising from any act or omission of an Indemnitee which constitutes gross negligence or willful misconduct.

 

(i)           The Borrower will pay to the Letter of Credit Issuer, on demand, all administrative fees charged by the Letter of Credit Issuer in the ordinary course of business in connection with the issuance of Letters of Credit, honoring of drafts under Letters of Credit, amendments thereto, transfers thereof and all other activity with respect to Letters of Credit, at the then current rates established by the Letter of Credit Issuer from time to time for such services rendered on behalf of customers of the Letter of Credit Issuer generally.

 

Section 2.7   Interest on Loans.  The Borrower will pay interest on the unpaid principal amount of each Loan for the period commencing on the date of this Agreement until the unpaid principal amount thereof is paid in full, in accordance with the following:

 

(a)           ABR Loans.  Subject to subsection (c) below, while any outstanding principal of a Loan constitutes an ABR Loan, the outstanding principal balance thereof

 

 

 

shall bear interest at an annual rate at all times equal to the Adjusted Base Rate applicable to such ABR Loan, plus the applicable Margin.

 

(b)           LIBOR Loans.  Subject to subsection (c) below, while any outstanding principal of a Loan constitutes a LIBOR Loan, the outstanding principal balance thereof shall bear interest at an annual rate equal to the Adjusted LIBO Rate established with respect such LIBOR Loan in accordance with Section 2.2, 2.3 or 2.4, plus the applicable Margin.

 

(c)           Default Rate.  From and after written notice from the Administrative Agent to the Borrower following the occurrence of an Event of Default and continuing thereafter until such Event of Default shall be remedied to the written satisfaction of the Required Lenders, the outstanding principal balance of each Loan shall bear interest, until paid in full, at an annual rate equal to the sum of (i) the interest rate otherwise in effect with respect to such outstanding principal and (ii) two percent (2.0%).  In addition, any unreimbursed amounts payable under Section 2.6 and all fees, indemnification obligations and other Obligations not p aid when due hereunder shall bear interest, until paid in full, at an annual rate equal to the sum of (x) the Adjusted Base Rate, (y) the Margin applicable to ABR Loans, and (z) two percent (2.0%) (each rate described in this subsection (c) herein, a “Default Rate”).

 

(d)           Savings Clause.  Notwithstanding anything in this Section 2.7 to the contrary, at no time shall the Borrower be obligated or required to pay interest on any Obligation at a rate which could subject any Lender to either civil or criminal liability as a result of being in excess of the maximum interest rate which the Borrower is permitted by applicable law.  If, under the terms of this Agreement or any other Loan Document, the Borrower is at any time required or obligated to pay interest on any Obligation at a rate in excess of such maximum rate, the applicable interest rate shall be deemed to be immediately reduced to such maximum rate and all previous payments in excess of the max imum rate shall be deemed to have been payments in reduction of principal and not on account of any interest thereon due hereunder.  All sums paid or agreed to be paid to a Lender for the use, forbearance or retention of any Obligation, shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full stated term of the Obligation to which such payment applies until payment in full so that the rate or amount of interest on account of any such Obligation does not exceed the maximum lawful rate of interest from time to time in effect and applicable to such Obligation for so long as the Obligation is outstanding.

 

Section 2.8   Obligation to Repay Advances.  The Borrower shall be obligated to repay all Advances under this Article II notwithstanding the failure of the Administrative Agent to receive any written request therefor or written confirmation thereof and notwithstanding the fact that the Person requesting the same was not in fact authorized to do so.

 

Section 2.9   Notes; Payment Dates; Mandatory Prepayments.

 

 

(a)           Promissory Notes.  The Borrower’s obligation to repay the principal of and interest on the Advances made by each Lender shall be evidenced in the Register and shall, if requested by such Lender, also be evidenced by a Revolving Note, duly executed and delivered by the Borrower, with blanks appropriately completed, with respect to Revolving Advances made by such Lender.

 

(b)           Interest.  The Borrower shall pay accrued but unpaid interest on each Loan on each Interest Payment Date with respect to that Loan.

 

(c)           Revolving Facility Principal.  The aggregate unpaid principal amount of all Revolving Advances shall be payable on the Maturity Date.

 

(d)           Mandatory Prepayments as a Result of Excess Borrowing.  If the Revolving Facility Outstanding Amount shall on any date exceed the Aggregate Revolving Commitment Amount, then the Borrower, not later than the next Business Day following such date, shall prepay the Revolving Advances in an amount equal to such excess, without notice or demand by the Administrative Agent or any Lender.

 

Section 2.10   Computation of Interest and Fees.  Interest accruing on the LIBOR Loans shall be computed on the basis of the actual number of days elapsed in a year of 360 days.  Interest accruing on the ABR Loans and on the unreimbursed portion of any Letter of Credit Exposure, all Letter of Credit Fees, Unused Fees and other fees described in Section 2.11 shall be computed on the basis of the actual number of days elapsed in a year of 365 or 366 days, as the case may be.

 

Section 2.11   Fees.  The Borrower will pay fees to the Lender Parties in accordance with the following:

 

(a)           Unused Fee.  The Borrower will pay to the Administrative Agent, for the pro rata account of the Lenders in accordance with their Percentages, an ongoing Unused Fee (the “Unused Fee”) from the Closing Date to and including the Revolving Commitment Termination Date, payable quarterly in arrears on the last Business Day of each calendar quarter, computed as the product of (i) an annual rate equal to one-half of one percent (.5%) and (ii) the daily average amount by whi ch (A) the sum of the Aggregate Revolving Commitment Amount exceeds (B) the Revolving Facility Outstanding Amount; provided, however, in the event any Lender becomes a Defaulting Lender as a result of a circumstance described in clause (a) or (d) of the definition of Defaulting Lender, then, for the period of time such Lender is a Defaulting Lender as a result of a circumstance described in clause (a) or (d) of the definition of Defaulting Lender, the Unused Fee shall cease to accrue on such Defaulting Lender’s Percentage of the difference between the Aggregate Revolving Commitment Amount and the Revolving Facility Outstanding Amount and such Defaulting Lender shall not be entitled to receive any portion of the Unused Fee with respect to such period of time.  Any Unused Fee remaining unpaid on the Revolving Commitment Termination Date shall be due and payable on such date.

 

(b)           Audit Fees.  The Borrower will pay to the Administrative Agent, on written demand, reasonable fees charged by the Administrative Agent in connection with any audits or inspections by the Administrative Agent (or by the employees, agents, consultants or auditors of the Administrative Agent) of any Collateral or the operations or businesses of the Borrower, any Subsidiary of the Borrower or any other Obligor, together with actual out-of-pocket costs and expenses incurred in conducting any such audit or inspection; provided, however, that if no Event of Default has occurred and is continuing, only one such audit or inspection of the Collateral and of the operations of the Borrower and its Subsidiaries period calendar year shall be at the sole expense of the Borrower.

 

Section 2.12   Use of Proceeds.  Proceeds of the Loans will be used to (i) provide for the Borrower’s working capital requirements and general corporate purposes, and (ii) pay fees and expenses in connection with the negotiation, execution and delivery of this Agreement and all other matters related thereto.

 

Section 2.13   Voluntary Reduction or Termination of the Commitments; Prepayments.

 

(a)           Reduction or Termination of Aggregate Revolving Commitment Amount.  The Borrower, from time to time upon not less than 3 Business Days’ prior written notice to the Administrative Agent, may permanently reduce the Aggregate Revolving Commitment Amount; provided, however, that no such reduction shall reduce the Aggregate Revolving Commitment Amount to an amount less than the Revolving Facility Outstanding Amount.  Any such voluntary reduction shall be pro rata as to all Revolving Commitments according to each Lender’s Percentage and shall be in an aggregate amount equal to $5,000,000 or a higher integral multiple of $1,000 ,000.  The Borrower at any time prior to the Revolving Commitment Termination Date may terminate the Revolving Commitments by (i) providing to the Administrative Agent not less than 5 Business Days’ prior written notice of its intention to so terminate the Revolving Commitments and (ii) making payment in full of all Loans and all other monetary Obligations and terminating (or making a cash deposit of 105% of the then-current Letter of Credit Exposure with respect to) outstanding Letters of Credit; provided, however, that the written notice of termination of the Revolving Commitments delivered by the Borrower may state that such termination is conditioned upon the effectiveness of other credit facilities to refinance the Revolving Commitments, in which case such notice of termination may be revoked by the Borrower if such condition is not satisfied, by the Borrower’s delivery of written notice of such revocation to the Administrative Agent on or prior to the date previously specified as the termination date by the Borrower.

 

(b)           Voluntary Prepayments.  The Borrower from time to time may voluntarily prepay the Loans in whole or in part; provided, however, that the Borrower must notify the Administrative Agent not later than 12:00 noon on a Business Day that is at least 1 Business Day prior to any date on which the Borrower will make a voluntary prepayment of any LIBOR Loan.  In the event of either mandatory prepayment under Section 2.9(d)

 

 

Section 2.14   Payments.

 

(a)           Making of Payments.  All payments of principal of and interest due with respect to the Revolving Facility shall be made to the Administrative Agent for the account of the applicable Lenders pro rata according to their respective Percentages.  All payments of fees pursuant to Section 2.11 shall be made to the Administrative Agent for the account of the Administrative Agent or the Lenders, as specified in Section 2.11.  All payments hereunder shall be made to the Administrative Agent at its office in Minneapolis, Minnesota (or at such other location as the Administrative Agent may direct by notice to the Borrower) not later than 2:00 p.m. on the date due, in immediately available funds, without set-off or counterclaim, and funds received after that hour shall be deemed to have been received on the next following Business Day.  The Borrower hereby authorizes the Administrative Agent to charge the demand deposit account of the Borrower maintained with the Administrative Agent (or with any other Lender) for the amount of any Obligation on its due date, but the Administrative Agent’s failure to so charge any such account shall in no way affect the obligation of the Borrower to make any such payment.  The Administrative Agent shall remit to each Lender in immediately available funds on the same Business Day as received by the Administrative Agent its share of all such payments received by the Administrative Agent for the account of such Lender.  All payments under Sections 2.15, 2.16 or 2.18 shall be made by the Borrower directly to the Lender entitled thereto.

 

(b)           Effect of Payments.  Each payment by the Borrower to the Administrative Agent for the account of any Lender pursuant to Section 2.14(a) shall be deemed to constitute payment by the Borrower directly to such Lender, provided, however, that in the event any such payment by the Borrower to the Administrative Agent is required to

 

 

be returned to the Borrower for any reason whatsoever, then the Borrower’s obligation to such Lender with respect to such payment shall be deemed to be automatically reinstated.

 

(c)           Distributions by Administrative Agent.  Unless the Administrative Agent shall have been notified by a Lender or the Borrower prior to the date on which such Lender or the Borrower are scheduled to make payment to the Administrative Agent of (in the case of a Lender) the proceeds of an Advance to be made by it hereunder or (in the case of the Borrower) a payment to the Administrative Agent for the account of one or more of the Lenders hereunder (such payment by a Lender or the Borrower (as the case may be) being herein called a “Required Payment”), which notice shall be effec tive upon receipt, that it does not intend to make the Required Payment to the Administrative Agent, the Administrative Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient(s) on such date and, if such Lender or the Borrower (as the case may be) has not in fact made the Required Payment to the Administrative Agent, the recipient(s) of such payment shall, on demand, repay to the Administrative Agent the amount so made available together with interest thereon for each day during the period commencing on the date such amount was so made available by the Administrative Agent until the date the Administrative Agent recovers such amount at an annual rate (i) equal to the Federal Funds Rate for such day, in the case of a Required Payment owing by a Lender, or (ii) equal to the applicable rate of interest as provided in this Agreement, in the case of a Required Payment o wing by the Borrower.

 

(d)           Setoff.  The Borrower agrees that each Lender, subject to such Lender's sharing obligations set forth in Section 8.6, shall have all rights of setoff and bankers’ lien provided by applicable law, and in addition thereto, the Borrower agrees that if at any time any Obligation is due and owing by the Borrower under this Agreement to any Lender at a time when an Event of Default has occurred and is continuing hereunder, any Lender may apply any and all balances, credits, and deposits, accounts or moneys of the Borrower then in the possession of such Lender (excluding, however, any trust or escrow accounts held by the Borrower for the benefit of any third party) to the payment thereof.

 

(e)           Due Date Extension.  Subject to subsection (b) of the definition of “Interest Period” with respect to LIBOR Loans, if any payment of principal of or interest on any Loan or any fees payable hereunder falls due on a day which is not a Business Day, then such due date shall be extended to the next following Business Day, and (in the case of principal) additional interest shall accrue and be payable for the period of such extension.

 

(f)           Application of Payments.  Except as otherwise provided herein, so long as no Default or Event of Default has occurred and is continuing hereunder, each payment received from the Borrower shall be applied to such Obligation as the Borrower shall specify by notice to be received by the Administrative Agent on or before the date of such payment.  In the absence of such notice and in any event during the continuance of any Default or Event of Default, payments received from the Borrower or any other Obligor shall be applied, first, to the payment of the Obligations, other than Banking

 

 

Services Obligations, in such order as the Administrative Agent shall determine in its discretion, and, second, to the payment of any Banking Services Obligations.  Concurrently with each remittance to any Lender of its appropriate share of any such payment (based upon such Lender’s Percentage), the Administrative Agent shall advise such Lender as to the application of such payment.

 

Section 2.15   Increased Costs.

 

(a)           Increased Costs Generally.  If any Change in Law shall:

 

(i)           impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement reflected in the Adjusted LIBO Rate) or the Letter of Credit Issuer;

 

(ii)           subject any Lender or the Letter of Credit Issuer to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any LIBOR Loan made by it, or change the basis of taxation of payments to such Lender or the Letter of Credit Issuer in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 2.16 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender or the Letter of Credit Issuer); or

 

(iii)           impose on any Lender or the Letter of Credit Issuer or the London interbank market any other condition, cost or expense affecting this Agreement or LIBOR Loans made by such Lender or any Letter of Credit or participation therein;

 

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any LIBOR Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the Letter of Credit Issuer of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the Letter of Credit Issuer hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the Letter of Credit Issuer, the Borrower will pay to such Lender or the Letter of Credit Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the Letter of Credit Issuer, as the case may be, for su ch additional costs incurred or reduction suffered.

 

(b)           Capital Requirements.  If any Lender or the Letter of Credit Issuer determines that any Change in Law affecting such Lender or the Letter of Credit Issuer or any lending office of such Lender or such Lender’s or the Letter of Credit Issuer’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the Letter of Credit Issuer’s capital or on the capital of such Lender’s or the Letter of Credit Issuer’s holding company, if any, as a

 

 

consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Letter of Credit Issuer, to a level below that which such Lender or the Letter of Credit Issuer or such Lender’s or the Letter of Credit Issuer’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Letter of Credit Issuer’s policies and the policies of such Lender’s or the Letter of Credit Issuer’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the Letter of Credit Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the Letter of Credit Issuer or such Len der’s or the Letter of Credit Issuer’s holding company for any such reduction suffered.

 

(c)           Certificates for Reimbursement.  A certificate of a Lender or the Letter of Credit Issuer setting forth the amount or amounts necessary to compensate such Lender or the Letter of Credit Issuer or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent manifest error.  The Borrower shall pay such Lender or the Letter of Credit Issuer, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

 

(d)           Delay in Requests.  Failure or delay on the part of any Lender or the Letter of Credit Issuer to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or the Letter of Credit Issuer’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or the Letter of Credit Issuer pursuant to this Section for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender or the Letter of Credit Issuer, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the Letter of Credi t Issuer’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

 

Section 2.16   Taxes.

 

(a)           Payments Free of Taxes.  Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if the Borrower shall be required by applicable law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Lender Party ent itled thereto receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, and (iii) the Borrower shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

 

(b)           Payment of Other Taxes by the Borrower.  Without limiting the provisions of paragraph (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

 

(c)           Indemnification by the Borrower.  The Borrower shall indemnify each Lender Party within 10 Business Days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by such Lender Party, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender Party (with a copy to th e Administrative Agent) shall be conclusive absent manifest error.

 

(d)           Evidence of Payments.  As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the 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)           Status of Lenders.  Any Foreign Lender shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times it first becomes a Lender hereunder or when prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments hereunder or under any other Loan Documents to be made without withholding.  In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by t he Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.

 

(f)           Treatment of Certain Refunds.  If any Lender Party determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of such Lender Party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refu nd), provided that the Borrower, upon the request of a Lender Party, will repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Lender Party in the event such Lender Party is required to repay such refund to such Governmental Authority.  This paragraph shall not be construed to require any Lender Party to make available its tax

 

 

 returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

 

Section 2.17   Illegality.  If any change in (including the adoption of any new) applicable laws or regulations, or any change in the interpretation of applicable laws or regulations by any governmental authority, central bank, comparable agency or any other regulatory body charged with the interpretation, implementation or administration thereof, or compliance by a Lender with any request or directive (whether or not having the force of law) of any such authority, central bank, comparable agency or other regulatory body, should make it or, in the good faith judgment of the affected Lender, shall raise a substantial question as to whether it is unlawful for such Lender to make, maintain or fund LIBOR Loans, then (i) the affected Lender shall promptly notify the Borrower and the Administrative Agent, (ii) the obligation of the affected Lender to make, maintain or convert into LIBOR Loans shall, upon the effectiveness of such event, be suspended for the duration of such unlawfulness, and (iii) for the duration of such unlawfulness, any notice by the Borrower pursuant to Section 2.2, 2.3 or 2.4 requesting the affected Lender to make or convert into LIBOR Loans shall be construed as a request to make or to continue making ABR Loans.

 

Section 2.18   Loan Losses.  The Borrower hereby agrees that upon demand by any Lender (which demand shall be accompanied by a statement setting forth the basis for the calculations of the amount being claimed) the Borrower will indemnify such Lender against any loss or expense which such Lender may have sustained or incurred (including but not limited to any net loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain LIBOR Loans) or which such Lender may be deemed to have sustained or incurred, as reas onably determined by such Lender, (i) as a consequence of any failure by the Borrower to make any payment when due of any amount due hereunder in connection with any LIBOR Loans, (ii) due to any failure of the Borrower to borrow or convert any LIBOR Loans on a date specified therefor in a notice thereof or (iii) due to any payment or prepayment of any LIBOR Loan on a date other than the last day of the applicable Interest Period for such LIBOR Loan.  For this purpose, all notices under Sections 2.2, 2.3 and 2.4 shall be deemed to be irrevocable.

 

Section 2.19   Right of Lenders to Fund through Other Offices.  Each Lender, if it so elects, may fulfill its agreements hereunder with respect to any LIBOR Loan by causing a foreign branch or affiliate of such Lender to make such LIBOR Loan; provided, that in such event the obligation of the Borrower to repay such LIBOR Loan shall nevertheless be to such Lender and such LIBOR Loan shall be deemed held by such Lender for the account of such branch or affiliate.

 

Section 2.20   Discretion of Lenders as to Manner of Loan.  Notwithstanding any provision of this Agreement to the contrary, each Lender shall be entitled to fund and maintain all or any part of its LIBOR Loans in any manner it deems fit, it being understood, however, that for the purposes of this Agreement (including but not limited to Section 2.18 hereof) all determinations hereunder shall be made as if each Lender had actually funded and maintained each LIBOR Loan during each Interest Period for such LIBOR Loan through the

 

 

Section 2.21   Conclusiveness of Statements; Survival of Provisions.  Determinations and statements of a Lender pursuant to Sections 2.15, 2.16 or 2.18 shall be conclusive absent manifest error.  Each Lender may use reasonable averaging and attribution methods in determining compensation pursuant to such Sections 2.15, 2.16 and 2.18 and the provisions of Sections 2.15, 2.16 and 2.18 shall survive termination of this Agreement.

 

Section 2.22   Mitigation Obligations; Replacement of Lenders.

 

(a)           If any Lender requests compensation under Section 2.15, or, if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.16, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender.  Each Lender also agrees to use its reasonable efforts to make such designation or assignment prior to the occurrence of any circumstance described in Section 2.15 or Section 2.16 in the event it has knowledge of such circumstance prior to its occurrence or as soon thereafter as it becomes aware any circumstance prior to its occurrence or as soon thereafter as it becomes aware thereof.  The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

(b)           If any Lender requests compensation under Section 2.15 or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.16 or if any Lender becomes a Defaulting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.3), all of its interests, rights and obligations under this Agreement and the other Loan Documents to an assignee that shall assume such rights and obligations (which assignee may be another Lender, if another Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent and the Issuing Bank, and (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its 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 Borrower (in the case of all other amounts).  A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a wavier by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

 

 

 

 

Section 3.1   Conditions Precedent to the Initial Credit Extension.  The obligation of the Lenders to effect any Credit Extension is subject to the condition precedent that, on or before the day of the first Credit Extension, the Administrative Agent shall have received the following, each in form and substance satisfactory to the Required Lenders:

 

(a)           Such Notes as shall be requested by any Lenders, each properly executed on behalf of the Borrower.

 

(b)           The Guaranty, duly executed by each Guarantor.

 

(c)           The Security Documents, each properly executed on behalf of the appropriate Obligor and any other party thereto, together with:

 

(i)           Financing statements and other filings with respect to each Obligor to be filed in each jurisdiction and other offices which, in the opinion of the Administrative Agent, is reasonably necessary to perfect the Liens created by the Security Documents, to the extent such Liens can be perfected by filing.

 

(ii)           Current searches of appropriate filing offices in each jurisdiction in which an Obligor is organized, has an office or otherwise conducts business (including but not limited to patent and trademark offices, secretaries of state and other offices to the extent required by the Administrative Agent) showing that no state or federal tax liens have been filed and remain in effect against any Obligor, and that no financing statements or other notifications or filings have been filed and remain in effect against any Obligor, other than those for which the Administrative Agent has received an appropriate release, termination or satisfaction or those permitted in accordance with Section 6.1.

 

(iii)           Pursuant to the terms of the payoff letter described in subsection (d) below, the agreement of JPMorgan Chase Bank, National Association, to deliver to the Administrative Agent, the original stock certificates (or other applicable evidence of ownership) evidencing (i) all issued and outstanding Capital Stock of each Obligor (other than the Borrower), together with stock powers executed in blank by the relevant Obligor, and (ii) 65% of all issued and outstanding Capital Stock of each Subsidiary which is a Foreign Subsidiary.

 

(iv)           stock powers executed in blank by the relevant Obligor with respect to the Capital Stock described in subsection (c)(ii) above.

 

(d)           A payoff letter in form and content acceptable to the Administrative Agent from JPMorgan Chase Bank, National Association, as administrative agent and collateral agent, together with evidence of payment in full of all Debt (other than certain letters of credit to be cash collateralized) of the Borrower arising from or related to the Amended and Restated Credit Agreement dated November 13, 2009, among the Borrower, certain

 

lenders party thereto, JPMorgan Chase Bank, National Association, as administrative agent and collateral agent, and release of all related Liens.

 

(e)           Evidence of all insurance required by this Agreement and the Security Documents, together with certificates showing the Administrative Agent, for the benefit of the Lender Parties, as lender loss payee and additional insured thereunder.

 

(f)           Certificates of the secretary or other appropriate officer of the Borrower and each other Obligor (i) certifying that the execution, delivery and performance of the Loan Documents and other documents contemplated hereunder to which the Borrower or such Obligor, as applicable, is a party have been duly approved by all necessary action of the Governing Board of the Borrower or such Obligor, as applicable, and attaching true and correct copies of the applicable resolutions granting such approval, (ii) certifying that attached to such certificate are true and correct copies of the Organizational Documents of the Borrower or such Obligor, as applicable, together with such copies, and (iii) certifying the names of the officers of the Borrower or such Obligor, as applicable, that are authorized to sign the Loan Documents and other documents contemplated hereunder, together with the true signatures of such officers.  The Lender Parties may conclusively rely on such certificate until the Administrative Agent receives a further certificate of the Secretary or Assistant Secretary of the Borrower or such Obligor, as applicable, canceling or amending the prior certificate and submitting the signatures of the officers named in such further certificate.

 

(g)           A certificate of good standing for the Borrower and each other Obligor from the Secretary of State (or the appropriate official) of the state of formation of the Borrower or such Obligor, as applicable, dated not more than 30 days prior to the Closing Date.

 

(h)           A signed copy of an opinion of counsel for the Borrower and each other Obligor addressed to the Administrative Agent, on behalf of the Lenders, with respect to the matters contemplated by the Loan Documents.

 

(i)           Payment of all fees and expenses then due and payable pursuant to Sections 2.11 and 9.6(a) hereof.

 

Section 3.2   Conditions Precedent to All Credit Extensions.  The obligation of the Lenders to effect any Credit Extension shall be subject to the further conditions precedent that on the date of such Credit Extension:

 

(a)           The representations and warranties contained in Article IV and in each other Loan Document are correct in all material respects on and as of the date of such Credit Extension as though made on and as of such date, except to the extent any such representation or warranty expressly relates to a specific earlier date.

 

(b)           No event has occurred and is continuing, or would result from such Credit Extension, which constitutes a Default or an Event of Default.

 

Any request for a Credit Extension, whether written, telephonic, telecopy or otherwise, shall be deemed to be a representation by the Borrower that (i) the statements set forth in this Section 3.2 are correct as of the time of the request and (ii) if such Credit Extension is a Borrowing or Letter of Credit, the amount of the requested Borrowing or Letter of Credit, when added to the Revolving Facility Outstanding Amount, would not cause the sum of the Revolving Facility Outstanding Amount to exceed the Aggregate Revolving Commitment Amount.

 

 

The Borrower represent and warrant to the Lender Parties as follows:

 

Section 4.1   Legal Existence and Power; Name; Chief Executive Office.  The Borrower and each Subsidiary is a legal entity duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization, and is duly licensed or qualified to transact business in all jurisdictions where the character of the property owned or leased or the nature of the business transacted by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified, individually or in the aggregate, could not be reasonably expected t o result in a Material Adverse Effect.  The Borrower and each Subsidiary has all requisite power and authority, corporate or otherwise, to conduct its business, to own its properties and to execute and deliver, and to perform all of its obligations under, the Loan Documents to which it is a party.  Within the last 12 months, the Borrower and each Subsidiary has done business solely under the names set forth in Schedule 4.1.  The state of organization and the chief executive office and principal place of business of the Borrower and each Subsidiary is designated as such in Schedule 4.1, each other place of business of the Borrower and each Subsidiary is located at the address set forth in Schedule 4.1 or in Schedule 4.16, as replaced from time to time as contemplated in Section 5.16, and all records relating to their respective businesses are kept at those locations.

 

Section 4.2   Authorization for Borrowings and Letters of Credit; No Conflict as to Law or Agreements.  The execution, delivery and performance by the Borrower and each Subsidiary of the Loan Documents to which it is a party, and the Letters of Credit and Advances from time to time obtained hereunder, have been duly authorized by all necessary corporate action and do not and will not (a) require any consent or approval which has not been obtained prior to the date hereof, (b) require any authorization, consent or approval by, or registration, declaration or filing (other than filing of financing statements as contemplate d hereunder) with, or notice to, any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, or any third party, except such authorization, consent, approval, registration, declaration, filing or notice as has been obtained, accomplished or given prior to the date hereof, (c) violate any provision of any law, rule or regulation (including but not limited to Regulations T, U or X of the Board of Governors of the Federal Reserve System) or of any order, writ, injunction or decree presently in effect having applicability to the Borrower or any Subsidiary or of the Organizational Documents of the Borrower or any Subsidiary, (d) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other

 

 

material agreement, lease or instrument to which the Borrower or any Subsidiary is a party or by which it or its properties may be bound or affected, or (e) result in, or require, the creation or imposition of any Lien of any nature upon or with respect to any of the properties now owned or hereafter acquired by the Borrower or any Subsidiary (other than as required in favor of the Administrative Agent, for the benefit of the Lender Parties or as otherwise permitted by this Agreement).

 

Section 4.3   Legal Agreements.  Each of the Loan Documents constitutes the legal, valid and binding obligations and agreements of the Borrower and each Subsidiary which is a party thereto, enforceable against the Borrower and each such Subsidiary in accordance with its terms, except to the extent that enforcement thereof may be limited by an applicable bankruptcy, insolvency or similar laws now or hereafter in effect affecting creditors’ rights generally and by general principles of equity.

 

Section 4.4   Capitalization.  The holder, class and percentage interests of the ownership of the Subsidiaries (both direct and indirect) are set forth and described in Schedule 4.4, wherein each Subsidiary which is a Guarantor is so noted.  All of the issued and outstanding Capital Stock of each Subsidiary is duly authorized, validly issued, fully paid and nonassessable.  No violation of any preemptive rights will be triggered by virtue of the transactions contemplated by the Loan Documents.

 

Section 4.5   Financial Condition.  The Borrower has heretofore furnished to the Administrative Agent the audited financial statements of the Consolidated Group for the fiscal year ended January 2, 2010.  Those financial statements fairly present, in all material respects, the financial condition of the Consolidated Group on the date thereof and the results of operations and cash flows of the Consolidated Group for the periods then ended and were prepared in accordance with GAAP.

 

Section 4.6   Adverse Change.  There has been no material adverse change in the business, properties or condition (financial or otherwise) of the Consolidated Group, taken as a whole, since the date of the financial statement referred to in Section 4.5.

 

Section 4.7   Projections.  The Borrower has heretofore furnished to the Administrative Agent pro forma financial statements reflecting the projected performance of the Consolidated Group during the period from the date hereof through December 31, 2011.  The Borrower has prepared such pro forma financial statements in good faith based upon assumptions (believed by the Borrower at the date of this Agreement to be reasonable) disclosed to the Lender Parties subject to general business conditions and economic factors which may be beyond its control or other unanticip ated future events which could have an unforeseen impact on the performance or condition of the Consolidated Group.

 

Section 4.8   Litigation.  Except as set forth and described in Schedule 4.8, there are no actions, suits, investigations, claims or proceedings pending or, to the best of the Borrower’s knowledge, threatened against or affecting the Borrower or any Subsidiary or the properties or business of the Borrower or any Subsidiary before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, (i) as to

 

 

Section 4.9   Regulation U.  Neither the Borrower nor any Subsidiary has engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any Advance or Letter of Credit will be used to purchase or carry any margin stock in violation of Regulation T, U or X of the Board of Governors of the Federal Reserve System or to extend credit to any other Person for the purpose of purchasing or carrying any margin stock.

 

Section 4.10   Taxes.  The Borrower and each Subsidiary has paid or caused to be paid to the proper authorities when due all federal, state, foreign and local taxes required to be withheld by it.  The Borrower and each Subsidiary has filed all federal, state, foreign and local tax returns which are required to be filed, and the Borrower and each Subsidiary has paid or caused to be paid to the respective taxing authorities all taxes as shown on said returns or on any assessment received by it to the extent such taxes have become due, except for any such tax, assessment, charge or claim whose amount, applicability or validity is being contested by the Borrower or such Subsidiary in good faith and by proper proceedings and for which the Borrower or such Subsidiary shall have set aside adequate reserves in accordance with GAAP.  Proper and accurate amounts have been withheld by the Borrower and each Subsidiary from its respective employees for all periods in compliance with the tax, social security and any employment withholding provisions of applicable federal, state, foreign and local law, and proper and accurate federal, state, foreign and local returns have been filed by the Borrower and each Subsidiary for all periods for which returns were due with respect to employee income tax withholding, social security and unemployment taxes, and the amounts shown thereon to be due and payable have been paid in full or provision therefor included on the books of the Borrower and each Subsidiary in accordance with and to the extent required by GAAP.  Except as set forth and described in Schedule 4.10, there are no pending investigations of the Borrower or any Subsidiary by any taxing authority (i) as to which there is a reasonable possibility of an adverse determination and (ii) which, if determined adversely to such Person, could reasonably be expected to have a Material Adverse Effect.

 

Section 4.11   Titles and Liens.  The Borrower and each Subsidiary has good and absolute fee or leasehold title, as the case may be, to all of its properties and assets reflected in the latest consolidated balance sheets referred to in Section 4.5, free and clear of all Liens, except for the following Liens (“Permitted Liens”): (a) Liens permitted by Section 6.1, and (b) covenants, restrictions, rights, easements and minor irregularities in title which do not (i) materially interfere with the business or operat ions of the Borrower or any Subsidiary as presently conducted or (ii) materially impair the value of the property to which they attach.  In addition, no financing statement naming the Borrower or any Subsidiary as debtor is on file in any office except to perfect only Liens permitted by Section 6.1.

 

Section 4.12   Plans.  None of the Borrower, any Subsidiary or any ERISA Affiliate (i) maintains or has maintained any Pension Plan, (ii) contributes or has contributed to any Multi-employer Plan or (iii) provides or has provided post-retirement medical or insurance

 

benefits with respect to employees or former employees (other than benefits required under Section 601 of ERISA, Section 4980B of the Code or applicable state law).  None of the Borrower, any Subsidiary or any ERISA Affiliate has received any notice or has any knowledge to the effect that it is not in substantial compliance with any of the requirements of ERISA, the Code or applicable state law with respect to any Plan.  No Reportable Event exists in connection with any Pension Plan.  Each Plan which is intended to qualify under the Code is so qualified, and no fact or circumstance exists which may have an adverse effect on the Plan’s tax-qualified status that is not correctable under available government correction programs.  None of the Borrower, any Subsidiary or any ERISA Affiliate has (i)  any accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code) under any Plan, whether or not waived, (ii) any material liability under Section 4201 or 4243 of ERISA for any withdrawal, partial withdrawal, reorganization or other event under any Multi-employer Plan or (iii) any liability or knowledge of any facts or circumstances which could result in any liability to the Pension Benefit Guaranty Corporation, the Internal Revenue Service, the Department of Labor or any participant in connection with any Plan (other than routine claims for benefits under the Plan), except for such facts or circumstances described in this clause (iii) which, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.  Other than claims for benefits in the ordinary course of business, there are no actions, suits, disputes, arbitrations or other material claims pending or, to the Borrower’s knowledge, threatened wi th respect to any Plan, which, if determined adversely, could reasonably be expected to result in a Material Adverse Effect.

 

Section 4.13   Environmental Compliance.  The Borrower and each Subsidiary has obtained all permits, licenses and other authorizations which are required under federal, state and local laws and regulations relating to emissions, discharges, releases of pollutants, contaminants, hazardous or toxic materials, or wastes into ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, co ntaminants or hazardous or toxic materials or wastes (“Environmental Laws”) at its facilities or in connection with the operation of its facilities, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.  The Borrower and each Subsidiary and all activities of the Borrower and each Subsidiary at its facilities comply with all material Environmental Laws and with all terms and conditions of any required permits, licenses and authorizations applicable to such Person with respect thereto, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.  The Borrower and each Subsidiary is in compliance with all limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in Environmental Laws or conta ined in any plan, order, decree, judgment or notice of which the Borrower and such Subsidiary is aware and with respect to which noncompliance could reasonably be expected to have a Material Adverse Effect.  Neither the Borrower nor any Subsidiary is aware of, or has received notice of, any events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent continued compliance with, or which may give rise to any material liability under, any Environmental Laws.

 

Section 4.14   Submissions to Lenders.  This Agreement, together with each other Loan Document and the exhibits, schedules, attachments, written or oral statements, documents, certificates and other items prepared or supplied to any Lender Party by or on behalf of the Borrower or any Subsidiary with respect to the transactions contemplated hereby or thereby, does not contain any untrue statement of a material fact or omit a material fact necessary to make each statement contained herein or therein not misleading (and, as to projections, valuations or pro forma financial statements, all of such information presents a good faith opi nion based on assumptions believed by the Borrower to be reasonable as of the date made as to such projections, valuations and pro forma condition and results).  There is no fact which the Borrower has not disclosed to the Lender Parties in writing and of which any of its Financial Officers is aware and which has had or could reasonably be expected to have a Material Adverse Effect.  Notwithstanding the foregoing, the Lender Parties acknowledge that the financial projections and pro forma information as to future periods contained therein are subject to general business conditions and economic factors which may be beyond the control of the Borrower and the Subsidiaries or other unanticipated future events which could have an unforeseen impact on the performance or condition of the Borrower and the Subsidiaries, it being understood that all such financial projections will be subject to uncertainties and contingencies and that no representation is given that any particular financial project ion will ultimately be realized.

 

Section 4.15   Financial Solvency.  Both before and after giving effect to all of the loans, guaranties and other financial accommodations contemplated herein, the Borrower and each Subsidiary:

 

(a)           was not and will not be insolvent, as that term is used and defined in Section 101(32) of the United States Bankruptcy Code and Section 2 of the Uniform Fraudulent Transfer Act;

 

(b)           does not have unreasonably small capital and is not engaged or about to engage in a business or a transaction for which any remaining assets of the Borrower or such Subsidiary are unreasonably small;

 

(c)           does not, by executing, delivering or performing its obligations under the Loan Documents to which it is a party or by taking any action with respect thereto, intend to, nor believe that it will, incur debts beyond its ability to pay them as they mature;

 

(d)           does not, by executing, delivering or performing its obligations under the Loan Documents to which it is a party or by taking any action with respect thereto, intend to hinder, delay or defraud either its present or future creditors; and

 

(e)           does not contemplate filing a petition in bankruptcy or for an arrangement or reorganization or similar proceeding under any law any jurisdiction or country, and, to the best knowledge of the Borrower, is not the subject of any bankruptcy or insolvency proceedings or similar proceedings under any law of any jurisdiction or country threatened or pending against the Borrower or such Subsidiary.

 

 

Section 4.16   Information Regarding Owned and Leased Real Estate of the Obligors; Information Regarding the Location of Inventory and Equipment of the Obligors.

 

(a)           Set forth and described in Schedule 4.16 is a correct and complete list of all interests (including but not limited to all fee simple interests and leasehold interests) of each Obligor in any real property, wherever located (including the name of any such landlord (other than a retail store landlord) and the address of such real property), except for any such interest in any real property which has been acquired by an Obligor but which the Borrower is not yet required to disclose to the Administrative Agent pursuant to Section 5.16(a).  Schedule 4.16 specifically identifies any leased location which has or could reasonably be expected to have at such location at any time inventory and equipment of the Obligors having an aggregate value in exces s of $250,000.

 

(b)           Set forth and described in Schedule 4.16 is a correct and complete list of all locations of inventory or equipment of the Obligors in the possession of bailees, warehousemen, processors or consignees (including the name and address of any such bailee, warehouseman, processor or consignee). Schedule 4.16 specifically identifies any such bailee, warehouseman, processor or consignee which has or which could reasonably be expected to have in its possession at any time inventory and equipment of the Obligors having an aggregate value in excess of $250,000.

 

Section 4.17   Intellectual Property Rights.

 

(a)           Specified Intellectual Property.  Schedule 4.17 is a complete list of all Specified Intellectual Property, including the owner of each item and the application, registration or patent number of each item, except for any additional item of Specified Intellectual Property which has been acquired by an Obligor but which the Borrower is not yet required to disclose to the Administrative Agent pursuant to Section 5.17.

 

(b)           Owned Intellectual Property.  Except as disclosed on Schedule 4.17, (i) each Obligor owns its Owned Intellectual Property free and clear of all restrictions (including covenants not to sue a third Person), court orders, injunctions, decrees, writs or Liens (other than Permitted Liens), whether by written agreement or otherwise, (ii) no Person other than an Obligor owns or has been granted any right in the Owned Intellectual Property, (iii) all Owned Intellectual Property is valid, subsisting and enforceable, and (iv) each Obligor has taken all commercially reasonable action necessary to maintain, protect and enforce the Owned Intellectual Property owned by it.