エドガーで原本を確認する
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-21835
HELIOS TECHNOLOGIES, INC.
(Exact Name of Registration as Specified in its Charter)
FLORIDA |
|
59-2754337 |
|
(State or Other Jurisdiction of Incorporation or Organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
|
7456 16th St E SARASOTA, FLORIDA |
|
34243 |
(Address of Principal Executive Offices) |
|
(Zip Code) |
(941)362-1200
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
Common Stock $.001 Par Value |
|
HLIO |
|
The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
☒ |
|
Accelerated filer |
|
☐ |
Non-accelerated filer |
|
☐ |
|
Smaller Reporting Company |
|
☐ |
|
|
|
|
Emerging growth company |
|
☐ |
|
|
|
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The registrant had 32,645,046 shares of common stock, par value $.001, outstanding as of April 28, 2023.
Helios Technologies, Inc.
INDEX
For the quarter ended
April 1, 2023
|
|
|
Page |
|
|
|
|
||
|
3 |
|||
|
|
|
|
|
|
Item 1. |
|
3 |
|
|
|
|
|
|
|
Consolidated Balance Sheets as of April 1, 2023 (unaudited) and December 31, 2022 |
|
3 |
|
|
|
|
|
|
|
|
4 |
||
|
|
|
|
|
|
Consolidated Statements of Comprehensive Income for the Three Months Ended April 1, 2023 (unaudited) and April 2, 2022 (unaudited) |
|
5 |
|
|
|
|
|
|
|
|
6 |
||
|
|
|
|
|
|
Consolidated Statements of Cash Flows for the Three Months Ended April 1, 2023 (unaudited) and April 2, 2022 (unaudited) |
|
7 |
|
|
|
|
|
|
|
Condensed Notes to the Consolidated, Unaudited Financial Statements |
|
8 |
|
|
|
|
|
|
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
21 |
|
|
|
|
|
|
Item 3. |
|
29 |
|
|
|
|
|
|
|
Item 4. |
|
29 |
|
|
|
|
|
|
|
30 |
|||
|
|
|
|
|
|
Item 1. |
|
30 |
|
|
|
|
|
|
|
Item 1A. |
|
30 |
|
|
|
|
|
|
|
Item 2. |
|
30 |
|
|
|
|
|
|
|
Item 3. |
|
30 |
|
|
|
|
|
|
|
Item 4. |
|
30 |
|
|
|
|
|
|
|
Item 5. |
|
30 |
|
|
|
|
|
|
|
Item 6. |
|
31 |
|
2
PART I: FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
Helios Technologies, Inc.
Consolidated Balance Sheets
(in millions, except per share data)
|
|
April 1, 2023 |
|
|
December 31, 2022 |
|
||
|
|
(unaudited) |
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
36.3 |
|
|
$ |
43.7 |
|
Accounts receivable, net of allowance for credit losses of $1.6 and $1.5 |
|
|
139.5 |
|
|
|
125.1 |
|
Inventories, net |
|
|
202.4 |
|
|
|
191.6 |
|
Income taxes receivable |
|
|
8.7 |
|
|
|
10.2 |
|
Other current assets |
|
|
21.7 |
|
|
|
17.9 |
|
Total current assets |
|
|
408.6 |
|
|
|
388.5 |
|
Property, plant and equipment, net |
|
|
202.6 |
|
|
|
175.7 |
|
Deferred income taxes |
|
|
1.8 |
|
|
|
1.6 |
|
Goodwill |
|
|
483.5 |
|
|
|
468.5 |
|
Other intangible assets, net |
|
|
438.7 |
|
|
|
405.6 |
|
Other assets |
|
|
21.6 |
|
|
|
23.8 |
|
Total assets |
|
$ |
1,556.8 |
|
|
$ |
1,463.7 |
|
Liabilities and shareholders' equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
71.7 |
|
|
$ |
73.7 |
|
Accrued compensation and benefits |
|
|
19.5 |
|
|
|
21.1 |
|
Other accrued expenses and current liabilities |
|
|
30.7 |
|
|
|
32.0 |
|
Current portion of long-term non-revolving debt, net |
|
|
20.2 |
|
|
|
19.0 |
|
Dividends payable |
|
|
3.0 |
|
|
|
2.9 |
|
Income taxes payable |
|
|
7.9 |
|
|
|
3.6 |
|
Total current liabilities |
|
|
153.0 |
|
|
|
152.3 |
|
Revolving line of credit |
|
|
345.6 |
|
|
|
261.3 |
|
Long-term non-revolving debt, net |
|
|
158.9 |
|
|
|
164.2 |
|
Deferred income taxes |
|
|
61.0 |
|
|
|
61.0 |
|
Other noncurrent liabilities |
|
|
29.7 |
|
|
|
30.0 |
|
Total liabilities |
|
|
748.2 |
|
|
|
668.8 |
|
Commitments and contingencies |
|
|
— |
|
|
|
— |
|
Shareholders' equity: |
|
|
|
|
|
|
||
Preferred stock, par value $0.001, 2.0 shares authorized, |
|
|
— |
|
|
|
— |
|
Common stock, par value $0.001, 100.0 shares authorized, |
|
|
— |
|
|
|
— |
|
Capital in excess of par value |
|
|
406.4 |
|
|
|
404.3 |
|
Retained earnings |
|
|
460.9 |
|
|
|
450.0 |
|
Accumulated other comprehensive loss |
|
|
(58.7 |
) |
|
|
(59.4 |
) |
Total shareholders' equity |
|
|
808.6 |
|
|
|
794.9 |
|
Total liabilities and shareholders' equity |
|
$ |
1,556.8 |
|
|
$ |
1,463.7 |
|
The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.
3
Helios Technologies, Inc.
Consolidated Statements of Operations
(in millions, except per share data)
|
|
Three Months Ended |
|
|||||
|
|
April 1, 2023 |
|
|
April 2, 2022 |
|
||
|
|
(unaudited) |
|
|
(unaudited) |
|
||
Net sales |
|
$ |
213.2 |
|
|
$ |
240.5 |
|
Cost of sales |
|
|
142.2 |
|
|
|
156.9 |
|
Gross profit |
|
|
71.0 |
|
|
|
83.6 |
|
Selling, engineering and administrative expenses |
|
|
38.1 |
|
|
|
33.7 |
|
Amortization of intangible assets |
|
|
8.1 |
|
|
|
7.0 |
|
Operating income |
|
|
24.8 |
|
|
|
42.9 |
|
Interest expense, net |
|
|
6.2 |
|
|
|
3.8 |
|
Foreign currency transaction loss (gain), net |
|
|
0.4 |
|
|
|
(0.9 |
) |
Other non-operating expense, net |
|
|
0.2 |
|
|
|
0.7 |
|
Income before income taxes |
|
|
18.0 |
|
|
|
39.3 |
|
Income tax provision |
|
|
4.1 |
|
|
|
8.8 |
|
Net income |
|
$ |
13.9 |
|
|
$ |
30.5 |
|
|
|
|
|
|
|
|
||
Net income per share: |
|
|
|
|
|
|
||
Basic |
|
$ |
0.43 |
|
|
$ |
0.94 |
|
Diluted |
|
$ |
0.42 |
|
|
$ |
0.94 |
|
|
|
|
|
|
|
|
||
Weighted average shares outstanding: |
|
|
|
|
|
|
||
Basic |
|
|
32.6 |
|
|
|
32.4 |
|
Diluted |
|
|
32.7 |
|
|
|
32.5 |
|
|
|
|
|
|
|
|
||
Dividends declared per share |
|
$ |
0.09 |
|
|
$ |
0.09 |
|
The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.
4
Helios Technologies, Inc.
Consolidated Statements of Comprehensive Income
(in millions)
|
|
Three Months Ended |
|
|||||
|
|
April 1, 2023 |
|
|
April 2, 2022 |
|
||
|
|
(unaudited) |
|
|
(unaudited) |
|
||
Net income |
|
$ |
13.9 |
|
|
$ |
30.5 |
|
Other comprehensive income (loss) |
|
|
|
|
|
|
||
Foreign currency translation adjustments, net of tax |
|
|
3.1 |
|
|
|
(7.7 |
) |
Unrealized (loss) gain on interest rate swaps, net of tax |
|
|
(2.4 |
) |
|
|
5.6 |
|
Total other comprehensive income (loss) |
|
|
0.7 |
|
|
|
(2.1 |
) |
Comprehensive income |
|
$ |
14.6 |
|
|
$ |
28.4 |
|
The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.
5
Helios Technologies, Inc.
Consolidated Statements of Shareholders’ Equity (unaudited)
Three Months Ended
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital in |
|
|
|
|
|
other |
|
|
|
|
||||||||
|
|
Preferred |
|
|
Preferred |
|
|
Common |
|
|
Common |
|
|
excess of |
|
|
Retained |
|
|
comprehensive |
|
|
|
|
||||||||
|
|
shares |
|
|
stock |
|
|
shares |
|
|
stock |
|
|
par value |
|
|
earnings |
|
|
loss |
|
|
Total |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance at December 31, 2022 |
|
|
— |
|
|
$ |
— |
|
|
|
32.6 |
|
|
$ |
— |
|
|
$ |
404.3 |
|
|
$ |
450.0 |
|
|
$ |
(59.4 |
) |
|
$ |
794.9 |
|
Shares issued, ESPP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.5 |
|
|
|
|
|
|
|
|
|
0.5 |
|
||||||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.4 |
|
|
|
|
|
|
|
|
|
3.4 |
|
||||||
Cancellation of shares for payment of employee tax withholding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.8 |
) |
|
|
|
|
|
|
|
|
(1.8 |
) |
||||||
Dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3.0 |
) |
|
|
|
|
|
(3.0 |
) |
||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.9 |
|
|
|
|
|
|
13.9 |
|
||||||
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.7 |
|
|
|
0.7 |
|
||||||
Balance at April 1, 2023 |
|
|
— |
|
|
$ |
— |
|
|
|
32.6 |
|
|
$ |
— |
|
|
$ |
406.4 |
|
|
$ |
460.9 |
|
|
$ |
(58.7 |
) |
|
$ |
808.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance at January 1, 2022 |
|
|
— |
|
|
$ |
— |
|
|
|
32.4 |
|
|
$ |
— |
|
|
$ |
394.6 |
|
|
$ |
363.3 |
|
|
$ |
(49.0 |
) |
|
$ |
709.0 |
|
Shares issued, restricted stock |
|
|
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
0.1 |
|
|||||
Shares issued, ESPP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.5 |
|
|
|
|
|
|
|
|
|
0.5 |
|
||||||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.5 |
|
|
|
|
|
|
|
|
|
2.5 |
|
||||||
Cancellation of shares for payment of employee tax withholding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.9 |
) |
|
|
|
|
|
|
|
|
(1.9 |
) |
||||||
Dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.9 |
) |
|
|
|
|
|
(2.9 |
) |
||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30.5 |
|
|
|
|
|
|
30.5 |
|
||||||
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.1 |
) |
|
|
(2.1 |
) |
||||||
Balance at April 2, 2022 |
|
|
— |
|
|
$ |
— |
|
|
|
32.5 |
|
|
$ |
— |
|
|
$ |
395.8 |
|
|
$ |
390.9 |
|
|
$ |
(51.1 |
) |
|
$ |
735.7 |
|
The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.
6
Helios Technologies, Inc.
Consolidated Statements of Cash Flows
(in millions)
|
|
Three Months Ended |
|
|||||
|
|
April 1, 2023 |
|
|
April 2, 2022 |
|
||
|
|
(unaudited) |
|
|
(unaudited) |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income |
|
$ |
13.9 |
|
|
$ |
30.5 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
15.2 |
|
|
|
12.6 |
|
Stock-based compensation expense |
|
|
3.4 |
|
|
|
2.5 |
|
Amortization of debt issuance costs |
|
|
0.1 |
|
|
|
0.1 |
|
Benefit for deferred income taxes |
|
|
(1.1 |
) |
|
|
(1.1 |
) |
Forward contract losses (gains), net |
|
|
0.3 |
|
|
|
(1.6 |
) |
Other, net |
|
|
0.1 |
|
|
|
0.7 |
|
(Increase) decrease in, net of acquisitions: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
(9.5 |
) |
|
|
(17.4 |
) |
Inventories |
|
|
(6.5 |
) |
|
|
(15.5 |
) |
Income taxes receivable |
|
|
1.6 |
|
|
|
0.9 |
|
Other current assets |
|
|
(4.1 |
) |
|
|
(2.4 |
) |
Other assets |
|
|
2.4 |
|
|
|
2.2 |
|
Increase (decrease) in, net of acquisitions: |
|
|
|
|
|
|
||
Accounts payable |
|
|
(3.1 |
) |
|
|
4.1 |
|
Accrued expenses and other liabilities |
|
|
(3.4 |
) |
|
|
(8.0 |
) |
Income taxes payable |
|
|
4.3 |
|
|
|
8.2 |
|
Other noncurrent liabilities |
|
|
(1.3 |
) |
|
|
(1.1 |
) |
Net cash provided by operating activities |
|
|
12.3 |
|
|
|
14.7 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
||
Business acquisitions, net of cash acquired |
|
|
(84.7 |
) |
|
|
1.3 |
|
Capital expenditures |
|
|
(9.1 |
) |
|
|
(5.6 |
) |
Proceeds from dispositions of property, plant and equipment |
|
|
— |
|
|
|
1.8 |
|
Cash settlement of forward contracts |
|
|
0.3 |
|
|
|
0.7 |
|
Software development costs |
|
|
(1.1 |
) |
|
|
(0.9 |
) |
Net cash used in investing activities |
|
|
(94.6 |
) |
|
|
(2.7 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Borrowings on revolving credit facilities |
|
|
95.0 |
|
|
|
23.5 |
|
Repayment of borrowings on revolving credit facilities |
|
|
(12.5 |
) |
|
|
(23.6 |
) |
Repayment of borrowings on long-term non-revolving debt |
|
|
(4.1 |
) |
|
|
(4.2 |
) |
Proceeds from stock issued |
|
|
0.5 |
|
|
|
0.6 |
|
Dividends to shareholders |
|
|
(3.0 |
) |
|
|
(2.9 |
) |
Payment of employee tax withholding on equity award vestings |
|
|
(1.8 |
) |
|
|
(1.9 |
) |
Other financing activities |
|
|
(0.3 |
) |
|
|
(0.3 |
) |
Net cash provided by (used in) financing activities |
|
|
73.8 |
|
|
|
(8.8 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
1.1 |
|
|
|
1.3 |
|
Net (decrease) increase in cash and cash equivalents |
|
|
(7.4 |
) |
|
|
4.5 |
|
Cash and cash equivalents, beginning of period |
|
|
43.7 |
|
|
|
28.6 |
|
Cash and cash equivalents, end of period |
|
$ |
36.3 |
|
|
$ |
33.1 |
|
The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.
7
HELIOS TECHNOLOGIES, INC.
CONDENSED NOTES TO THE CONSOLIDATED, UNAUDITED FINANCIAL STATEMENTS
(Currencies in millions, except per share data)
1. COMPANY BACKGROUND
Helios Technologies, Inc. (“Helios,” or the “Company”) together with its wholly owned subsidiaries, is a global leader in highly engineered motion control and electronic controls technology for diverse end markets, including construction, material handling, agriculture, energy, recreational vehicles, marine and health and wellness. Helios sells its products to customers in over 90 countries around the world. The Company’s strategy for growth is to be the leading provider in niche markets, with premier products and solutions through innovative product development and acquisitions.
The Company operates in two business segments: Hydraulics and Electronics. There are three key technologies within the Hydraulics segment: cartridge valve technology (“CVT”), quick-release hydraulic coupling solutions (“QRC”) and hydraulic system solutions (“Systems”), which often incorporate manifold solutions with CVT and QRC technologies. CVT products provide functions important to a hydraulic system: to control rates and direction of fluid flow and to regulate and control pressures. QRC products allow users to connect and disconnect quickly from any hydraulic circuit without leakage and ensure high-performance under high temperature and pressure using one or multiple couplers. Systems provide engineered solutions for machine users, manufacturers or designers to fulfill complete system design requirements including electro-hydraulic, remote control, electronic control and programmable logic controller systems, as well as automation of existing equipment. The Electronics segment provides complete, fully-tailored display and control solutions for engines, engine-driven equipment, specialty vehicles, therapy baths and traditional and swim spas. This broad range of products is complemented by extensive application expertise and unparalleled depth of software, embedded programming, hardware and sustaining engineering teams.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q. Accordingly, certain information and footnotes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements are not included herein. The financial statements are prepared on a consistent basis (including normal recurring adjustments) and should be read in conjunction with the consolidated financial statements and related notes contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (“Form 10-K”), filed by Helios with the Securities and Exchange Commission on February 28, 2023. In management’s opinion, all adjustments necessary for a fair presentation of the Company’s financial statements are reflected in the interim periods presented. Operating results for the three months ended April 1, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ended December 30, 2023.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
8
Earnings Per Share
The following table presents the computation of basic and diluted earnings per common share (in millions, except per share data):
|
|
Three Months Ended |
|
|||||
|
|
April 1, 2023 |
|
|
April 2, 2022 |
|
||
Net income |
|
$ |
13.9 |
|
|
$ |
30.5 |
|
|
|
|
|
|
|
|
||
Weighted average shares outstanding - Basic |
|
|
32.6 |
|
|
|
32.4 |
|
Net effect of dilutive securities - Stock based compensation |
|
|
0.1 |
|
|
|
0.1 |
|
Weighted average shares outstanding - Diluted |
|
|
32.7 |
|
|
|
32.5 |
|
|
|
|
|
|
|
|
||
Net income per share: |
|
|
|
|
|
|
||
Basic |
|
$ |
0.43 |
|
|
$ |
0.94 |
|
Diluted |
|
$ |
0.42 |
|
|
$ |
0.94 |
|
Recently Adopted Accounting Standards
In March 2020, and clarified through December 2022, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This update provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. The guidance was effective immediately upon issuance in March 2020 and cannot be applied subsequent to December 31, 2024, except for certain optional expedients. The Company adopted the standard for the fiscal year beginning January 1, 2023. In March 2023, the Company executed an amendment to the term loan and revolving credit facility to modify and replace reference to the London Interbank Offered Rate ("LIBOR"). Additionally in March 2023, the company executed an amendment to the interest rate swap agreements to modify and replace reference to LIBOR. The company applied the accounting relief in accordance with ASC 848 as the relevant contract and hedge accounting relationship modifications were executed. The adoption of this standard did not have a material impact on our accounting policies or consolidated financial statements.
3. BUSINESS ACQUISITION
Acquisition of Schultes
On January 27, 2023, the Company completed the acquisition of Schultes Precision Manufacturing, Inc. ("Schultes"), an Illinois corporation. The acquisition was completed pursuant to a Stock Purchase Agreement ("Agreement") among the Company and the owners of Schultes.
Schultes is a highly trusted specialist in manufacturing precision machined components and assemblies for customers requiring very tight tolerances, superior quality and exceptional value-added manufacturing processes. Currently serving the hydraulic, aerospace, communication, food services, medical device and dental industries, Schultes brings the manufacturing quality, reliability and responsiveness critical to its customers’ success. The results of Schultes' operations are reported in the Company’s Hydraulics segment and have been included in the Consolidated, Unaudited Financial Statements since the date of acquisition.
Initial cash consideration paid at closing, net of cash acquired, totaled $84.7. Total consideration for the acquisition is subject to a post-closing adjustment in accordance with the terms of the Agreement. Cash consideration paid at closing was funded with additional borrowings on the Company’s credit facility.
9
The Company recorded $11.8 of goodwill, $38.8 of other identifiable intangible assets, $26.2 of property, plant and equipment and $7.9 of other net assets in connection with the acquisition. The purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The fair value of identified intangibles assets acquired was based on estimates and assumptions made by management at the time of acquisition. As additional information becomes available, as of the acquisition date, management will finalize its analysis of the estimated fair value. The purchase price allocation is preliminary, pending post-closing adjustments, final intangibles valuation and tax related adjustments, and may be revised during the remainder of the measurement period (which will not exceed 12 months from the acquisition date). Any such revisions or changes to the fair values of the tangible and intangible assets acquired and liabilities assumed could be material.
Certain disclosures have not been presented as the effect of the acquisition was not material to the Company's financial results.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following tables provide information regarding the Company’s assets and liabilities measured at fair value on a recurring basis at April 1, 2023 and December 31, 2022.
|
|
April 1, 2023 |
|
|||||||||||||
|
|
|
|
|
Quoted Market |
|
|
Significant Other Observable |
|
|
Significant Unobservable |
|
||||
|
|
Total |
|
|
Prices (Level 1) |
|
|
Inputs (Level 2) |
|
|
Inputs (Level 3) |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swap contracts |
|
$ |
8.8 |
|
|
$ |
— |
|
|
$ |
8.8 |
|
|
$ |
— |
|
Forward foreign exchange contracts |
|
|
0.6 |
|
|
|
— |
|
|
|
0.6 |
|
|
|
— |
|
Total |
|
$ |
9.4 |
|
|
$ |
— |
|
|
$ |
9.4 |
|
|
$ |
— |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swap contracts |
|
$ |
0.8 |
|
|
$ |
— |
|
|
$ |
0.8 |
|
|
$ |
— |
|
Forward foreign exchange contracts |
|
|
0.3 |
|
|
|
— |
|
|
|
0.3 |
|
|
|
— |
|
Contingent consideration |
|
|
6.9 |
|
|
|
— |
|
|
|
— |
|
|
|
6.9 |
|
Total |
|
$ |
8.0 |
|
|
$ |
— |
|
|
$ |
1.1 |
|
|
$ |
6.9 |
|
|
|
December 31, 2022 |
|
|||||||||||||
|
|
|
|
|
Quoted Market |
|
|
Significant Other Observable |
|
|
Significant Unobservable |
|
||||
|
|
Total |
|
|
Prices (Level 1) |
|
|
Inputs (Level 2) |
|
|
Inputs (Level 3) |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swap contracts |
|
$ |
11.1 |
|
|
$ |
— |
|
|
$ |
11.1 |
|
|
$ |
— |
|
Forward foreign exchange contracts |
|
|
1.0 |
|
|
|
— |
|
|
|
1.0 |
|
|
|
— |
|
Total |
|
$ |
12.1 |
|
|
$ |
— |
|
|
$ |
12.1 |
|
|
$ |
— |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward foreign exchange contracts |
|
$ |
0.3 |
|
|
$ |
— |
|
|
$ |
0.3 |
|
|
$ |
— |
|
Contingent consideration |
|
|
6.7 |
|
|
|
— |
|
|
|
— |
|
|
|
6.7 |
|
Total |
|
$ |
7.0 |
|
|
$ |
— |
|
|
$ |
0.3 |
|
|
$ |
6.7 |
|
10
A summary of the changes in the estimated fair value of contingent consideration at April 1, 2023 is as follows:
Balance at December 31, 2022 |
|
$ |
6.7 |
|
Change in estimated fair value |
|
|
0.1 |
|
Accretion in value |
|
|
0.1 |
|
Balance at April 1, 2023 |
|
$ |
6.9 |
|
5. INVENTORIES, NET
At April 1, 2023 and December 31, 2022, inventory consisted of the following:
|
|
April 1, 2023 |
|
|
December 31, 2022 |
|
||
Raw materials |
|
$ |
115.3 |
|
|
$ |
119.2 |
|
Work in process |
|
|
54.4 |
|
|
|
41.6 |
|
Finished goods |
|
|
43.0 |
|
|
|
40.8 |
|
Provision for obsolete and slow-moving inventory |
|
|
(10.3 |
) |
|
|
(10.0 |
) |
Total |
|
$ |
202.4 |
|
|
$ |
191.6 |
|
6. OPERATING LEASES
The Company leases machinery, equipment, vehicles, buildings and office space, throughout its locations, which are classified as operating leases. Remaining terms on these leases range from less than one year to nine years. For the three months ended April 1, 2023 and April 2, 2022, operating lease costs totaled $1.7 and $1.7, respectively.
Supplemental balance sheet information related to operating leases is as follows:
|
|
April 1, 2023 |
|
|
December 31, 2022 |
|
||
Right-of-use assets |
|
$ |
17.9 |
|
|
$ |
19.2 |
|
Lease liabilities: |
|
|
|
|
|
|
||
Current lease liabilities |
|
$ |
5.4 |
|
|
$ |
5.8 |
|
Non-current lease liabilities |
|
|
13.5 |
|
|
|
14.5 |
|
Total lease liabilities |
|
$ |
18.9 |
|
|
$ |
20.3 |
|
|
|
|
|
|
|
|
||
Weighted average remaining lease term (in years): |
|
|
4.5 |
|
|
|
|
|
Weighted average discount rate: |
|
|
4.6 |
% |
|
|
|
|
Supplemental cash flow information related to leases is as follows:
|
|
Three Months Ended |
|
|||||
|
|
April 1, 2023 |
|
|
April 2, 2022 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
||
Operating cash flows from operating leases |
|
$ |
1.7 |
|
|
$ |
1.8 |
|
Non-cash impact of new leases and lease modifications |
|
$ |
0.1 |
|
|
$ |
0.1 |
|
11
Maturities of lease liabilities are as follows:
2023 Remaining |
|
|
|
$ |
5.3 |
|
2024 |
|
|
|
|
4.5 |
|
2025 |
|
|
|
|
4.1 |
|
2026 |
|
|
|
|
3.4 |
|
2027 |
|
|
|
|
1.4 |
|
2028 |
|
|
|
|
0.9 |
|
Thereafter |
|
|
|
|
1.9 |
|
Total lease payments |
|
|
|
|
21.5 |
|
Less: Imputed interest |
|
|
|
|
(2.6 |
) |
Total lease obligations |
|
|
|
|
18.9 |
|
Less: Current lease liabilities |
|
|
|
|
(5.4 |
) |
Non-current lease liabilities |
|
|
|
$ |
13.5 |
|
7. GOODWILL AND INTANGIBLE ASSETS
Goodwill
A summary of changes in goodwill by segment for the three months ended April 1, 2023, is as follows:
|
|
Hydraulics |
|
|
Electronics |
|
|
Total |
|
|||
Balance at December 31, 2022 |
|
$ |
282.5 |
|
|
$ |
186.0 |
|
|
$ |
468.5 |
|
Acquisition of Schultes |
|
|
11.8 |
|
|
|
— |
|
|
|
11.8 |
|
Currency translation |
|
|
3.2 |
|
|
|
— |
|
|
|
3.2 |
|
Balance at April 1, 2023 |
|
$ |
297.5 |
|
|
$ |
186.0 |
|
|
$ |
483.5 |
|
Acquired Intangible Assets
At April 1, 2023 and December 31, 2022, acquired intangible assets consisted of the following:
|
|
April 1, 2023 |
|
|
December 31, 2022 |
|
||||||||||||||||||
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
||||||
Definite-lived intangibles: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Trade names and brands |
|
$ |
94.1 |
|
|
$ |
(19.9 |
) |
|
$ |
74.2 |
|
|
$ |
87.5 |
|
|
$ |
(18.5 |
) |
|
$ |
69.0 |
|
Non-compete agreements |
|
|
2.1 |
|
|
|
(0.8 |
) |
|
|
1.3 |
|
|
|
2.1 |
|
|
|
(0.7 |
) |
|
|
1.4 |
|
Technology |
|
|
51.0 |
|
|
|
(22.7 |
) |
|
|
28.3 |
|
|
|
50.8 |
|
|
|
(21.3 |
) |
|
|
29.5 |
|
Supply agreement |
|
|
21.0 |
|
|
|
(13.3 |
) |
|
|
7.7 |
|
|
|
21.0 |
|
|
|
(12.8 |
) |
|
|
8.2 |
|
Customer relationships |
|
|
383.7 |
|
|
|
(60.7 |
) |
|
|
323.0 |
|
|
|
349.4 |
|
|
|
(56.1 |
) |
|
|
293.3 |
|
Sales order backlog |
|
|
1.4 |
|
|
|
(0.8 |
) |
|
|
0.6 |
|
|
|
0.7 |
|
|
|
(0.4 |
) |
|
|
0.3 |
|
Workforce |
|
|
6.1 |
|
|
|
(2.5 |
) |
|
|
3.6 |
|
|
|
6.1 |
|
|
|
(2.2 |
) |
|
|
3.9 |
|
|
|
$ |
559.4 |
|
|
$ |
(120.7 |
) |
|
$ |
438.7 |
|
|
$ |
517.6 |
|
|
$ |
(112.0 |
) |
|
$ |
405.6 |
|
12
Amortization expense on acquired intangible assets for the three months ended April 1, 2023 and April 2, 2022, was $8.1 and $7.0, respectively. Future estimated amortization expense is presented below.
Year: |
|
|
|
|
2023 Remaining |
|
$ |
24.7 |
|
2024 |
|
|
31.3 |
|
2025 |
|
|
31.1 |
|
2026 |
|
|
29.4 |
|
2027 |
|
|
26.1 |
|
2028 |
|
|
25.7 |
|
Thereafter |
|
|
270.4 |
|
Total |
|
$ |
438.7 |
|
8. DERIVATIVE INSTRUMENTS & HEDGING ACTIVITIES
The Company addresses certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments and hedging activities.
The fair value of the Company’s derivative financial instruments included in the Consolidated Balance Sheets is presented as follows:
|
Asset Derivatives |
|
|
Liability Derivatives |
|
||||||||||||
|
Balance Sheet |
|
Fair Value (1) |
|
Fair Value (1) |
|
|
Balance Sheet |
|
Fair Value (1) |
|
Fair Value (1) |
|
||||
|
Location |
|
April 1, 2023 |
|
December 31, 2022 |
|
|
Location |
|
April 1, 2023 |
|
December 31, 2022 |
|
||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|||||||||
Interest rate swap contracts |
Other assets |
|
$ |
8.8 |
|
$ |
11.1 |
|
|
Other non-current liabilities |
|
$ |
0.8 |
|
$ |
— |
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|||||||||
Forward foreign exchange contracts |
Other current assets |
|
|
0.5 |
|
|
1.0 |
|
|
Other current liabilities |
|
|
0.3 |
|
|
— |
|
Forward foreign exchange contracts |
Other assets |
|
|
0.1 |
|
|
— |
|
|
Other non-current liabilities |
|
|
— |
|
|
0.3 |
|
Total derivatives |
|
|
$ |
9.4 |
|
$ |
12.1 |
|
|
|
|
$ |
1.1 |
|
$ |
0.3 |
|
(1) See Note 4 for information regarding the inputs used in determining the fair value of derivative assets and liabilities.
The amount of gains and losses related to the Company’s derivative financial instruments for the three months ended April 1, 2023 and April 2, 2022, are presented as follows:
|
|
Amount of Gain or (Loss) Recognized in |
|
|
Location of Gain or (Loss) Reclassified |
Amount of Gain or (Loss) Reclassified from Accumulated |
|
|||||||||
|
|
April 1, 2023 |
|
April 2, 2022 |
|
|
into Earnings (Effective Portion) |
|
April 1, 2023 |
|
April 2, 2022 |
|
||||
Derivatives in cash flow hedging relationships: |
|
|
|
|
|
|
|
|
||||||||
Interest rate swap contracts |
|
$ |
(3.1 |
) |
$ |
7.4 |
|
|
Interest expense, net |
|
$ |
1.8 |
|
$ |
(1.1 |
) |
Interest expense presented in the Consolidated Statements of Operations, in which the effects of cash flow hedges are recorded, totaled $6.2 and $3.8 for the three months ended April 1, 2023 and April 2, 2022, respectively.
13
|
|
Amount of Gain or (Loss) Recognized |
|
|
Location of Gain or (Loss) Recognized |
||||
|
|
April 1, 2023 |
|
April 2, 2022 |
|
|
in Earnings on Derivatives |
||
Derivatives not designated as hedging instruments: |
|
|
|
||||||
Forward foreign exchange contracts |
|
$ |
(0.3 |
) |
$ |
1.6 |
|
|
Foreign currency transaction gain / loss, net |
Interest Rate Swap Contracts
The Company has entered into interest rate swap transactions to hedge the variable interest rate payments on its credit facilities. In connection with the transactions, the Company pays interest based upon a fixed rate as agreed upon with the respective counterparties and receives variable rate interest payments. The interest rate swaps are designated as hedging instruments and are accounted for as cash flow hedges. The aggregate notional amount of the swaps was $345.0 as of April 1, 2023. The notional amount decreases periodically through the dates of expiration in April 2023, October 2025 and April 2028. The contracts are settled with the respective counterparties on a net basis at each settlement date.
Forward Foreign Exchange Contracts
The Company has entered into forward contracts to economically hedge translational and transactional exposure associated with various business units whose local currency differs from the Company’s reporting currency. The Company’s forward contracts are not designated as hedging instruments for accounting purposes.
At April 1, 2023, the Company had five forward foreign exchange contracts with an aggregate notional value of €16.5, maturing at various dates through June 2024.
Net Investment Hedge
The Company utilizes foreign currency denominated debt to hedge currency exposure in foreign operations. The Company has designated €90.0 of borrowings on the revolving credit facility as a net investment hedge of a portion of the Company’s European operations. The carrying value of the euro denominated debt totaled $97.6 as of April 1, 2023 and is included in the Revolving line of credit line item in the Consolidated Balance Sheets. The loss on the net investment hedge recorded in accumulated other comprehensive income as part of the currency translation adjustment was $1.0, net of tax, for the three months ended April 1, 2023.
9. CREDIT FACILITIES
Total non-revolving debt consists of the following:
|
Maturity Date |
|
April 1, 2023 |
|
|
December 31, 2022 |
|
||
Long-term non-revolving debt: |
|
|
|
|
|
|
|
||
Term loan with PNC Bank |
Oct 2025 |
|
$ |
171.2 |
|
|
$ |
175.0 |
|
Term loans with Citibank |
Various |
|
|
8.2 |
|
|
|
8.6 |
|
Total non-revolving debt |
|
|
|
179.4 |
|
|
|
183.6 |
|
Less: current portion of long-term non-revolving debt |
|
|
|
20.2 |
|
|
|
19.0 |
|
Less: unamortized debt issuance costs |
|
|
|
0.3 |
|
|
|
0.4 |
|
Total long-term non-revolving debt, net |
|
|
$ |
158.9 |
|
|
$ |
164.2 |
|
Information on the Company’s revolving credit facilities is as follows:
|
|
|
Balance |
|
|
Available Credit |
|
||||||||||
|
Maturity Date |
|
April 1, 2023 |
|
|
December 31, 2022 |
|
|
April 1, 2023 |
|
|
December 31, 2022 |
|
||||
Revolving line of credit with PNC Bank |
Oct 2025 |
|
$ |
345.6 |
|
|
$ |
261.3 |
|
|
$ |
53.1 |
|
|
$ |
138.1 |
|
Revolving line of credit with Citibank |
May 2023 |
|
|
1.1 |
|
|
|
1.6 |
|
|
|
1.2 |
|
|
|
0.7 |
|
14
Future maturities of total debt are as follows:
Year: |
|
|
|
2023 Remaining |
$ |
16.1 |
|
2024 |
|
24.5 |
|
2025 |
|
485.5 |
|
Total |
$ |
526.1 |
|
Term Loan and Line of Credit with PNC Bank
The Company has a credit agreement that includes a revolving line of credit and term loan credit facility with PNC Bank, National Association, as administrative agent, and the lenders party thereto. The revolving line of credit allows for borrowings up to an aggregate maximum principal amount of $400.0.
To hedge currency exposure in foreign operations, €90.0 of the borrowings on the line of credit are denominated in euros. The borrowings have been designated as a net investment hedge, see additional information in Note 8.
The effective interest rate on the credit agreement at April 1, 2023 was 6.5%. Interest expense recognized on the credit agreement during the three months ended April 1, 2023 and April 2, 2022, totaled $7.9 and $2.6, respectively. As of April 1, 2023, the Company was in compliance with all debt covenants related to the credit agreement.
Term Loans and Line of Credit with Citibank
The Company has an uncommitted fixed asset facility agreement (the “Fixed Asset Facility”), short-term revolving facility agreement (the “Working Capital Facility”) and term loan facility agreement (the "Shanghai Branch Term Loan Facility") with Citibank (China) Co., Ltd. Shanghai Branch, as lender.
Under the Fixed Asset Facility, the Company borrowed on a secured basis RMB 2.6. The proceeds of the loan were used for purchases of equipment. Outstanding borrowings under the Fixed Asset Facility accrue interest at a rate equal to the National Interbank Funding Center 1-year loan prime rate plus 1.5%, to be repaid on a specified schedule with the final payment due in May 2023.
Under the Working Capital Facility, the Company may, from time-to-time, borrow amounts on an unsecured revolving facility up to a total of RMB 16.0. Proceeds may only be used for expenditures related to production at the Company’s facility located in Kunshan City, China. Outstanding borrowings under the Working Capital Facility accrue interest at a rate equal to the National Interbank Funding Center 1-year loan prime rate plus 0.5%. All outstanding balances will be due in May 2023.
Under the Shanghai Branch Term Loan Facility, the Company borrowed on a secured basis RMB 42.7. Outstanding borrowings under the Shanghai Branch Term Loan Facility accrue interest at a rate equal to the National Interbank Funding Center 1-year loan prime rate plus 1.5%, to be repaid on a specified schedule with the final payment due in October 2024.
The Company has a term loan facility agreement (the “Sydney Branch Term Loan Facility”) with Citibank, N.A., Sydney Branch, as lender. Under the Sydney Branch Term Loan Facility, the Company borrowed on a secured basis AUD 7.5. Outstanding borrowings under the Sydney Branch Term Loan Facility accrue interest at a rate equal to the Australian Bank Bill Swap Reference Rate plus 2.0%, to be repaid throughout the term of the loan with a final payment due date of December 2024.
As of April 1, 2023, the Company was in compliance with all debt covenants related to the Fixed Asset Facility, Working Capital Facility and Term Loan Facilities.
15
10. INCOME TAXES
The provision for income taxes for the three months ended April 1, 2023 and April 2, 2022 was 22.8% and 22.4% of pretax income, respectively. These effective rates fluctuate relative to the levels of income and different tax rates in effect among the countries in which the Company sells products. The change in the comparable prior-year quarter is primarily due to an overall decrease in discrete tax benefits.
At April 1, 2023, the Company had an unrecognized tax benefit of $8.4 including accrued interest. If recognized, $2.7 of unrecognized tax benefit would reduce the effective tax rate in future periods. The Company recognizes interest and penalties related to income tax matters in income tax expense. Interest accrued as of April 1, 2023 is not considered material to the Company’s Consolidated, Unaudited Financial Statements.
The Company is currently under state audit and remains subject to income tax examinations in various state and foreign jurisdictions for tax years 2017-2021. The Company believes it has adequately reserved for income taxes that could result from any audit adjustments.
11. STOCK-BASED COMPENSATION
Equity Incentive Plan
The Company’s 2019 Equity Incentive Plan ("2019 Plan") provides for the grant of shares of restricted stock, restricted stock units, stock options, stock appreciation rights, dividend or dividend equivalent rights, stock awards and other awards valued in whole or in part by reference to or otherwise based on the Company’s common stock, to officers, employees and directors of the Company.
Restricted Stock Units
The Company grants restricted stock units (“RSUs”) to employees in connection with a long-term incentive plan. Awards with time-based vesting requirements primarily vest ratably over a three-year period. Awards with performance-based vesting requirements cliff vest after a three-year performance cycle and only after the achievement of certain performance criteria over that cycle. The number of shares ultimately issued for the performance-based units may vary from 0% to 200% of their target amount based on the achievement of defined performance targets. Compensation expense recognized for RSUs granted to employees totaled $2.3 and $2.3, respectively, for the three months ended April 1, 2023 and April 2, 2022.
The Helios Technologies, Inc. Non-Employee Director Compensation Policy compensates Non-Employee Directors for their board service with cash awards and equity-based compensation through grants of RSUs, issued pursuant to the 2019 Plan, which vest over a one-year period. Directors were granted 3,939 and 3,799 RSUs during the three months ended April 1, 2023 and April 2, 2022, respectively. The Company recognized director stock compensation expense on the RSUs of $0.4 and $0.0 for the three months ended April 1, 2023 and April 2, 2022, respectively.
16
The following table summarizes RSU activity for the three months ended April 1, 2023:
|
|
|
|
|
Weighted Average |
|
||
|
|
Number of Units |
|
|
Grant-Date |
|
||
|
|
(in thousands) |
|
|
Fair Value per Share |
|
||
Nonvested balance at December 31, 2022 |
|
|
217 |
|
|
$ |
66.98 |
|
Granted |
|
|
202 |
|
|
|
56.26 |
|
Vested |
|
|
(72 |
) |
|
|
54.48 |
|
Forfeited |
|
|
(17 |
) |
|
|
63.18 |
|
Nonvested balance at April 1, 2023 (1) |
|
|
330 |
|
|
$ |
63.35 |
|
(1) Includes 144,574 nonvested performance-based RSUs.
The Company had $15.6 of total unrecognized compensation cost related to the RSU awards as of April 1, 2023. That cost is expected to be recognized over a weighted average period of 2.2 years.
Stock Options
The Company has granted stock options with market-based exercise conditions to its officers. As of April 1, 2023, there were 78,500 unvested options and no vested unexercised options. The exercise price per share is $50.60, which is equal to the market price of Helios stock on the grant date. The options vest after achievement of defined stock prices and after the required service periods, which range from one to two years. These options have a 10-year expiration. The grant date fair value of the options was estimated using a Monte Carlo simulation.
The Company has also granted stock options with only time-based vesting conditions to its officers. As of April 1, 2023, there were 6,708 unvested options and 17,525 vested unexercised options. The exercise prices per share, which range from $35.04 to $55.03, are equal to the market price of Helios stock on the respective grant dates. The options vest ratably over a three-year period and have a 10-year expiration. The grant date fair value of the options was estimated using a Black Scholes valuation model.
At April 1, 2023, the Company had $1.2 of unrecognized compensation cost related to the options, which is expected to be recognized over a weighted average period of 0.6 years. The Company recognized expense on the stock options of $0.5 and $0.1 for the three months ended April 1, 2023 and April 2, 2022, respectively.
Employee Stock Purchase Plans
The Company maintains an Employee Stock Purchase Plan (“ESPP”) in which U.S. employees are eligible to participate. Employees who choose to participate are granted an opportunity to purchase common stock at 85 percent of market value on the first or last day of the quarterly purchase period, whichever is lower. Employees in the United Kingdom (“UK”), under a separate plan, are granted an opportunity to purchase the Company’s common stock at market value, on the first or last day of the quarterly purchase period, whichever is lower, with the Company issuing one additional free share of common stock for each six shares purchased by the employee under the plan. Employees purchased 11,437 shares at a weighted average price of $46.31, and 7,734 shares at a weighted average price of $68.48, under the ESPP and UK plans during the three months ended April 1, 2023 and April 2, 2022, respectively. The Company recognized $0.2 and $0.1 of compensation expense during the three months ended April 1, 2023 and April 2, 2022, respectively.
17
12. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following tables present changes in accumulated other comprehensive loss by component:
|
|
Unrealized |
|
|
Foreign |
|
|
Total |
|
|||
Balance at December 31, 2022 |
|
$ |
8.5 |
|
|
$ |
(67.9 |
) |
|
$ |
(59.4 |
) |
Other comprehensive (loss) income before reclassifications |
|
|
(4.5 |
) |
|
|
4.3 |
|
|
|
(0.2 |
) |
Amounts reclassified from accumulated other comprehensive loss, net of tax |
|
|
1.4 |
|
|
|
— |
|
|
|
1.4 |
|
Tax effect |
|
|
0.7 |
|
|
|
(1.2 |
) |
|
|
(0.5 |
) |
Net current period other comprehensive (loss) income |
|
|
(2.4 |
) |
|
|
3.1 |
|
|
|
0.7 |
|
Balance at April 1, 2023 |
|
$ |
6.1 |
|
|
$ |
(64.8 |
) |
|
$ |
(58.7 |
) |
|
|
|
|
|
|
|
|
|
|
|||
|
|
Unrealized |
|
|
Foreign |
|
|
Total |
|
|||
Balance at January 1, 2022 |
|
$ |
(1.3 |
) |
|
$ |
(47.7 |
) |
|
$ |
(49.0 |
) |
Other comprehensive income (loss) before reclassifications |
|
|
8.2 |
|
|
|
(10.0 |
) |
|
|
(1.8 |
) |
Amounts reclassified from accumulated other comprehensive loss, net of tax |
|
|
(0.8 |
) |
|
|
— |
|
|
|
(0.8 |
) |
Tax effect |
|
|
(1.8 |
) |
|
|
2.3 |
|
|
|
0.5 |
|
Net current period other comprehensive income (loss) |
|
|
5.6 |
|
|
|
(7.7 |
) |
|
|
(2.1 |
) |
Balance at April 2, 2022 |
|
$ |
4.3 |
|
|
$ |
(55.4 |
) |
|
$ |
(51.1 |
) |
13. SEGMENT REPORTING
The Company has two reportable segments: Hydraulics and Electronics. These segments are organized primarily based on the similar nature of products offered for sale, the types of customers served and the methods of distribution and are consistent with how the segments are managed, how resources are allocated and how information is used by the chief operating decision maker.
The Company evaluates performance and allocates resources based primarily on segment operating income. Certain costs were not allocated to the business segments as they are not used in evaluating the results of, or in allocating resources to the Company’s segments. These costs are presented in the Corporate and other line item. For the three months ended April 1, 2023, the unallocated costs totaled $10.7 and included certain corporate costs not deemed to be allocable to either business segment of $0.8, amortization of acquisition-related intangible assets of $8.1 and other acquisition and integration-related costs of $1.8. The accounting policies of the Company’s operating segments are the same as those used to prepare the accompanying Consolidated, Unaudited Financial Statements.
18
The following table presents financial information by reportable segment:
|
|
Three Months Ended |
|
|||||
|
|
April 1, 2023 |
|
|
April 2, 2022 |
|
||
Net sales |
|
|
|
|
|
|
||
Hydraulics |
|
$ |
147.7 |
|
|
$ |
137.1 |
|
Electronics |
|
|
65.5 |
|
|
|
103.4 |
|
Total |
|
$ |
213.2 |
|
|
$ |
240.5 |
|
Operating income |
|
|
|
|
|
|
||
Hydraulics |
|
$ |
28.0 |
|
|
$ |
31.6 |
|
Electronics |
|
|
7.5 |
|
|
|
20.5 |
|
Corporate and other |
|
|
(10.7 |
) |
|
|
(9.2 |
) |
Total |
|
$ |
24.8 |
|
|
$ |
42.9 |
|
Capital expenditures |
|
|
|
|
|
|
||
Hydraulics |
|
$ |
6.9 |
|
|
$ |
3.0 |
|
Electronics |
|
|
2.2 |
|
|
|
2.6 |
|
Total |
|
$ |
9.1 |
|
|
$ |
5.6 |
|
|
|
April 1, 2023 |
|
|
December 31, 2022 |
|
||
Total assets |
|
|
|
|
|
|
||
Hydraulics |
|
$ |
976.0 |
|
|
$ |
874.8 |
|
Electronics |
|
|
565.5 |
|
|
|
567.1 |
|
Corporate |
|
|
15.3 |
|
|
|
21.8 |
|
Total |
|
$ |
1,556.8 |
|
|
$ |
1,463.7 |
|
Geographic Region Information
Net sales are measured based on the geographic destination of sales. Tangible long-lived assets are shown based on the physical location of the assets and primarily include net property, plant and equipment and exclude right-of-use assets. The following table presents financial information by region:
|
|
Three Months Ended |
|
|||||
|
|
April 1, 2023 |
|
|
April 2, 2022 |
|
||
Net sales |
|
|
|
|
|
|
||
Americas |
|
$ |
113.0 |
|
|
$ |
120.8 |
|
EMEA |
|
|
56.1 |
|
|
|
64.7 |
|
APAC |
|
|
44.1 |
|
|
|
55.0 |
|
Total |
|
$ |
213.2 |
|
|
$ |
240.5 |
|
|
|
April 1, 2023 |
|
|
December 31, 2022 |
|
||
Tangible long-lived assets |
|
|
|
|
|
|
||
Americas |
|
$ |
133.3 |
|
|
$ |
105.7 |
|
EMEA |
|
|
32.8 |
|
|
|
33.1 |
|
APAC |
|
|
18.6 |
|
|
|
17.7 |
|
Total |
|
$ |
184.7 |
|
|
$ |
156.5 |
|
19
14. RELATED PARTY TRANSACTIONS
The Company sells inventory to an entity managed by a director of Helios. For the three months ended April 1, 2023 and April 2, 2022, sales to the entity totaled $0.7 and $0.8, respectively. At April 1, 2023 and December 31, 2022, amounts due from the entity totaled $0.4 and $0.4, respectively.
15. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company is not a party to any legal proceedings other than routine litigation incidental to its business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the results of operations, financial position or cash flows of the Company.
16. SUBSEQUENT EVENTS
In May 2023, the Company signed a Membership Interest Purchase Agreement (“Purchase Agreement”) to acquire i3 Product Development, Inc. (“i3”), a Wisconsin corporation. The transaction is expected to close in the second quarter of 2023, subject to customary closing conditions.
i3 is a custom engineering services firm, with over 55 engineers, embodying expertise in electronics, mechanical, industrial, embedded and software engineering. Their solutions are used across many sectors, including medical, off-highway, recreational and commercial marine, power sports, health and wellness, agriculture, consumer goods, industrial, sports and fitness. Additionally, they specialize in working to transform customers' ideas into industrial design solutions through rapid prototyping and creating 3D models in-house.
The Company will fund the acquisition through a combination of cash and equity. Initial consideration to be paid at closing is $45.2, plus customary adjustments to the purchase price as agreed to by the parties. Total consideration for the acquisition will be subject to a post-closing adjustment in accordance with the terms of the Purchase Agreement. Cash consideration is expected to be funded with borrowings on the Company’s credit facility. The Company determined this acquisition was not a significant acquisition under Rule 3-05 of Regulation S-X.
20
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The words "expects," "anticipates," "believes," "intends," "plans," "will" and similar expressions identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this Form 10-Q with the Securities and Exchange Commission. These forward-looking statements are subject to risks and uncertainties, including, without limitation, those discussed in this report and those identified in Part I, Item 1A, "Risk Factors" included in our Form 10-K. In addition, new risks emerge from time to time, and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. Accordingly, our future results may differ materially from historical results or from those discussed or implied by these forward-looking statements. Given these risks and uncertainties, the reader should not place undue reliance on these forward-looking statements.
OVERVIEW
We are a global leader in highly engineered motion control and electronic controls technology for diverse end markets, including construction, material handling, agriculture, energy, recreational vehicles, marine and health and wellness.
We operate under two business segments: Hydraulics and Electronics. The Hydraulics segment designs and manufactures hydraulic cartridge valves, manifolds, hydraulic quick release couplings, machined components and assemblies as well as engineers hydraulic solutions and in some cases complete systems. Our Hydraulics segment includes products sold under the Sun Hydraulics, Faster, Custom Fluidpower, Seungwon, NEM, Taimi, Daman and Schultes brands. The Electronics segment designs and manufactures customized electronic controls systems and displays for a variety of end markets including industrial and mobile, recreational and health and wellness. The Electronics segment includes products sold under the Enovation Controls, Murphy, Zero Off, HCT, Balboa Water Group and Joyonway brands.
During 2021, we augmented our strategy and accelerated our growth plans by two years with intent to achieve our targeted milestone of over $1 billion in sales with top tier adjusted EBITDA margin of approximately 25% in 2023. We plan to achieve this milestone on a run-rate basis ending the fourth quarter of 2023 through a combination of organic growth, acquisitions made to date as well as execution of our manufacturing and operating strategy.
Recent Acquisitions
In January 2023, we completed the acquisition of Schultes Precision Manufacturing, Inc. Schultes is a highly trusted specialist in manufacturing precision machined components and assemblies for customers requiring very tight tolerances, superior quality and exceptional value-added manufacturing processes. Currently serving the hydraulic, aerospace, communication, food services, medical device and dental industries, Schultes brings the manufacturing quality, reliability and responsiveness critical to its customers’ success. Schultes provides additional manufacturing know-how and expands our business into new end markets with attractive secular tailwinds.
We recently announced our intent to acquire i3 Product Development (or “i3”.) i3 is a custom design and engineering services firm, with over 55 engineers with expertise in electronics, mechanical, industrial, embedded and software engineering. They will equip Helios with significant value-added professional services capabilities to provide customization to Helios platforms or develop greenfield solutions. They have also built and patented a remote support platform that provides customers in the field support for their IoT (Internet of Things) devices.
21
Restructuring Activities
We continued our restructuring activities within our Hydraulics segment related to the creation of our two new Regional Operational Centers of Excellence ("CoE"). Facility expansion is currently underway in Mishawaka, Indiana, the future Hydraulic Manifold Solutions CoE, to accept the manifold machining and integrated package assembly operations from Sun Hydraulics, the integrated package business from Faster Inc. and to allow for Daman’s core organic growth. The quick release coupling (QRC) manufacturing will then transfer from Maumee, OH to the cartridge valve technology location in Sarasota, FL to complete the Hydraulic Valve and Coupling Solutions CoE. The relocation of manufacturing operations is expected to be completed in the third quarter of 2023.
Manufacturing and Operating Strategy Activities
Over the last couple years, we have presented the major areas for integration as we transform from being a holding company into an operating company. We have developed the strategies and tactics and have several projects in various phases from ideation to execution. We started with the Electronics segment and then moved to the Hydraulics segment. We created manufacturing roadmaps with several programs, each of which might stretch over a couple of years, and are comprised of multiple projects that have clear structure and owners. Work is moving forward on multiple programs and projects simultaneously. This is a continuous improvement process that will drive efficiency and improvements across the business, and we are now doing this as an integrated operating company versus at the business unit level. Some of our recent notable activities include: the creation of our new Centers of Excellence, transferring some of the board assembly and wire harness production from our Tulsa location to our facility in Tijuana, adding capacity at our plants in both India and Tijuana and constructing an automated warehouse for our Faster Italy location which also frees up space for additional production capacity.
Global Economic Conditions
We continue to navigate through challenges and disruptions created by the Russia-Ukraine war and the ongoing impacts of the COVID-19 pandemic that have created economic uncertainty, market disruption, supply constraints and inflation. We have been mitigating some of the inflation effects through pricing efforts and cost savings measures. We continue to face constraints related to sourcing certain electronic and other components, which originated from the high demand for these products caused by the pandemic. We are mitigating some of the impact with our procurement efforts, production schedule adjustments and product redesigns.
Demand in the health and wellness market was favorably impacted by the pandemic in 2020 and 2021, as consumers invested in leisure products and activities. However, during 2022, we experienced a sharp decline in sales in this end market as demand declined and inventory levels in the channel increased. The trend continued in the first quarter of 2023, although we have seen a small positive trend in order rates for spa and bath products recently.
Refer to Item 1A "Risk Factors" of our Form 10-K for additional discussion of risks related to global economic conditions.
Industry Conditions
Market demand for our products is dependent on demand for the industrial goods in which the products are incorporated. The capital goods industries in general, and the Hydraulics and Electronics segments specifically, are subject to economic cycles. We utilize industry trend reports from various sources, as well as feedback from customers and distributors, to evaluate economic trends. We also rely on global government statistics such as Gross Domestic Product and Purchasing Managers Index to understand macroeconomic conditions.
22
Hydraulics
According to the National Fluid Power Association (the fluid power industry’s trade association in the U.S.), the U.S. index of shipments of hydraulic products increased 17% during the first three months of 2023, after increasing 20% during 2022. In Europe, the CEMA Business Barometer reported in April that the general business climate index for the European agricultural machinery industry remains at a good level but has declined in the past few months driven by a less favorable evaluation of the current business situation and a downgrade of future expectations. Easing on the supply side has been seen but uncertainties are increasing with regard to the market side and confidence levels are declining accordingly. The CECE (Committee for European Construction Equipment) business climate index stayed in high levels throughout the first quarter of the year despite the challenging economic and geopolitical environment. They reported incoming orders have calmed down slightly and industry order backlog and production capacity utilization are getting closer to normal levels.
Electronics
The Federal Reserve’s Industrial Production Index, which measures the real output of all relevant establishments located in the U.S., reports first quarter 2023 sales of semiconductors and other electronics components declined to the lowest level since the third quarter of 2020. The Institute of Printed Circuits Association (“IPC”) reported that total North American printed circuit board (“PCB”) shipments were up 11.6% in March 2023 compared with the same month last year but PCB bookings were down 10.5% in March compared to the same month last year. Further noted was that order flow is holding steady but at lower levels than a year ago. The IPC also reported that North American electronics manufacturing services (“EMS”) shipments were down 3.1% in March 2023 compared with the same month last year and EMS bookings in March were down 7.1% compared with the same month last year. Further noted was that EMS shipments continue to show strength as supply chain challenges dissipate but order flow remains weak.
2023 First Quarter Results and Comparison of the Three Months Ended April 1, 2023 and April 2, 2022
(in millions except per share data)
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
April 1, 2023 |
|
|
April 2, 2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Net sales |
|
$ |
213.2 |
|
|
$ |
240.5 |
|
|
$ |
(27.3 |
) |
|
|
(11.4 |
)% |
Gross profit |
|
$ |
71.0 |
|
|
$ |
83.6 |
|
|
$ |
(12.6 |
) |
|
|
(15.1 |
)% |
Gross profit % |
|
|
33.3 |
% |
|
|
34.8 |
% |
|
|
|
|
|
|
||
Operating income |
|
$ |
24.8 |
|
|
$ |
42.9 |
|
|
$ |
(18.1 |
) |
|
|
(42.2 |
)% |
Operating income % |
|
|
11.6 |
% |
|
|
17.8 |
% |
|
|
|
|
|
|
||
Net income |
|
$ |
13.9 |
|
|
$ |
30.5 |
|
|
$ |
(16.6 |
) |
|
|
(54.4 |
)% |
Diluted net income per share |
|
$ |
0.42 |
|
|
$ |
0.94 |
|
|
$ |
(0.52 |
) |
|
|
(55.3 |
)% |
First quarter consolidated net sales declined $27.3 million, 11.4%, over the prior-year first quarter. We experienced organic net sales decline of $41.0 million, 17%, over the prior-year first quarter, which was offset partially by acquisition growth of $13.7 million. Discrete impacts to our first quarter organic sales compared to the prior-year quarter are as follows:
Organic sales were impacted by reduced demand for electronics products in our health and wellness end market, which declined sharply from the prior-year first quarter. Sales in this end market were previously strengthened by the pandemic as consumers invested in health and leisure products. Sales were down in all regions compared to the prior-year first quarter, with organic sales to the Americas region having the largest impact.
23
First quarter gross profit decreased $12.6 million, 15.1%, over the prior-year first quarter driven by lower volume as well as unfavorable foreign currency. Changes in foreign currency exchange rates compared to the first quarter of 2022 reduced gross profit by $0.9 million. Gross margin declined by 150 basis points compared with the prior-year first quarter, impacted most significantly by lower leverage of our fixed cost base on the reduced sales. Acquisitions unfavorably impacted gross margin due to their margin profile, which generally has higher cost of sales and lower selling, engineering and administrative expenses (“SEA”). Material costs as a percentage of sales were favorable compared to the first quarter of 2022 primarily from segment and product mix. Excluding pricing changes and acquisition-related sales, material costs as a percentage of sales decreased by 110 basis points compared to the prior-year first quarter.
In the first quarter of 2023, we incurred $1.2 million of costs related to our restructuring activities in the Hydraulics segment; $0.7 million of the costs are included in cost of goods sold and $0.5 million are reflected in SEA expenses. The restructuring costs are comprised of $0.6 million of labor costs, which are not expected to continue after completion of the projects, and $0.6 million of travel and other expenses associated with the manufacturing relocation.
Operating income as a percentage of sales decreased 6.2 percentage points to 11.6% in the first quarter of 2023 compared to the prior-year first quarter. The margin erosion was primarily caused by: gross margin level changes, restructuring costs that were $0.9 million higher than the prior-period quarter, amortization expense increase of $1.1 million from our 2022 and 2023 acquisitions, higher officer transition costs of $0.5 million, increased wages and benefit costs totaling $1.6 million for merit increases, market adjustments and new hires for investments primarily in engineering, sales and corporate activities and reduced leverage of our SEA level fixed cost base on the lower sales volume.
SEGMENT RESULTS
Hydraulics
The following table sets forth the results of operations for the Hydraulics segment (in millions):
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
April 1, 2023 |
|
|
April 2, 2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Net sales |
|
$ |
147.7 |
|
|
$ |
137.1 |
|
|
$ |
10.6 |
|
|
|
7.7 |
% |
Gross profit |
|
$ |
50.0 |
|
|
$ |
50.8 |
|
|
$ |
(0.8 |
) |
|
|
(1.6 |
)% |
Gross profit % |
|
|
33.9 |
% |
|
|
37.1 |
% |
|
|
|
|
|
|
||
Operating income |
|
$ |
28.0 |
|
|
$ |
31.6 |
|
|
$ |
(3.6 |
) |
|
|
(11.4 |
)% |
Operating income % |
|
|
19.0 |
% |
|
|
23.1 |
% |
|
|
|
|
|
|
||
First quarter net sales for the Hydraulics segment increased by $10.6 million, 7.7%, compared with the prior-year first quarter. We experienced organic net sales decline of $3.1 million, 2.3%, over the prior-year first quarter and acquisition growth of $13.7 million. Discrete impacts to our first quarter organic sales compared to the prior-year quarter are as follows:
The following table presents net sales based on the geographic region of the sale for the Hydraulics segment (in millions):
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
April 1, 2023 |
|
|
April 2, 2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Americas |
|
$ |
57.9 |
|
|
$ |
43.1 |
|
|
$ |
14.8 |
|
|
|
34.3 |
% |
EMEA |
|
|
49.4 |
|
|
|
52.9 |
|
|
|
(3.5 |
) |
|
|
(6.6 |
)% |
APAC |
|
|
40.4 |
|
|
|
41.1 |
|
|
|
(0.7 |
) |
|
|
(1.7 |
)% |
Total |
|
$ |
147.7 |
|
|
$ |
137.1 |
|
|
|
|
|
|
|
||
Regional sales performance in the first quarter compared to the prior-year quarter was driven by:
24
Americas - pricing and our recent acquisitions contributed to a 34.3% increase in sales
EMEA - excluding unfavorable changes in foreign currency rates of $2.2 million, sales were down $1.3 million, 2.5%, primarily from softer demand in the region
APAC - excluding unfavorable changes in foreign currency rates of $1.1 million, sales improved $0.4 million, 1.0%, primarily from pricing
In the first quarter of 2023, gross profit decreased $0.8 million, 1.6%, compared with the same quarter of the prior year. Changes in foreign currency exchange rates compared to the first quarter of 2022 reduced gross profit by $0.8 million. Gross profit margin declined over the same period by 320 basis points to 33.9%, which is attributable to rising material and energy costs, for which margin was not fully recovered by pricing efforts, as well as the different margin profile of our recent acquisitions. Material costs as a percentage of sales, excluding pricing changes and acquisition-related sales, increased in the first quarter by 230 basis points compared to the prior-year first quarter.
Restructuring costs totaled $1.2 million for the first quarter of 2023; $0.7 million of the costs are included in cost of goods sold and $0.5 million are reflected in SEA expenses.
SEA expenses increased $2.8 million, 14.6%, in the first quarter of 2023 compared with the prior-year quarter. Changes in foreign currency rates compared to the prior year reduced SEA costs by $0.5 million. SEA expenses increased from our acquisitions and higher operating costs for: restructuring activities of $0.2 million, travel and marketing of $0.4 million and benefit costs of $0.5 million. SEA as a percent of sales was 14.9%, an increase of 90 basis points compared to the 2022 first quarter.
Electronics
The following table sets forth the results of operations for the Electronics segment (in millions):
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
April 1, 2023 |
|
|
April 2, 2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Net sales |
|
$ |
65.5 |
|
|
$ |
103.4 |
|
|
$ |
(37.9 |
) |
|
|
(36.7 |
)% |
Gross profit |
|
$ |
21.0 |
|
|
$ |
32.8 |
|
|
$ |
(11.8 |
) |
|
|
(36.0 |
)% |
Gross profit % |
|
|
32.1 |
% |
|
|
31.7 |
% |
|
|
|
|
|
|
||
Operating income |
|
$ |
7.5 |
|
|
$ |
20.5 |
|
|
$ |
(13.0 |
) |
|
|
(63.4 |
)% |
Operating income % |
|
|
11.5 |
% |
|
|
19.8 |
% |
|
|
|
|
|
|
||
First quarter net sales for the Electronics segment declined $37.9 million, 36.7%, compared with the prior-year first quarter. Discrete impacts to our first quarter sales compared to the prior-year quarter are as follows:
First quarter demand in our health and wellness end market declined sharply compared to the prior-year quarter, which was strengthened by the pandemic as consumers invested in health and leisure products. Inventory held by customers remained inflated in this end market, which further led to the decline. We have seen a small positive trend in order rates for spa and bath products over the past few months. We realized growth in our mobile and industrial machinery end markets compared to the first quarter of 2022.
The following table presents net sales based on the geographic region of the sale for the Electronics segment (in millions):
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
April 1, 2023 |
|
|
April 2, 2022 |
|
|
$ Change |
|
|
% Change |
|
||||
Americas |
|
$ |
55.1 |
|
|
$ |
77.7 |
|
|
$ |
(22.6 |
) |
|
|
(29.1 |
)% |
EMEA |
|
|
6.7 |
|
|
|
11.8 |
|
|
|
(5.1 |
) |
|
|
(43.2 |
)% |
APAC |
|
|
3.7 |
|
|
|
13.9 |
|
|
|
(10.2 |
) |
|
|
(73.4 |
)% |
Total |
|
$ |
65.5 |
|
|
$ |
103.4 |
|
|
|
|
|
|
|
||
25
Reduced demand in the health and wellness end market contributed the decline in sales in all regions in the first quarter compared to the prior-year quarter.
First quarter gross profit decreased $11.8 million, 36.0%, compared with the first quarter of the prior year due to the lower sales volume. Gross margin improved over the same period by 40 basis points to 32.1% as a favorable sales mix more than offset the reduced leverage of our fixed cost base on the lower sales and labor inefficiencies from decreased production. Material costs as a percentage of sales, excluding pricing changes and acquisition-related sales, decreased in the first quarter by 430 basis points compared to the prior-year quarter due to the favorable sales mix.
SEA expenses increased by $1.2 million, 9.8%, in the first quarter of 2023, compared with the first quarter of 2022, primarily from wages and benefits for merit increases, market adjustments and new hires for investments in engineering, sales and corporate activities. SEA costs as a percentage of sales increased to 20.6%, in the first quarter of 2023 compared with 11.9% in the prior-year first quarter further impacted by lost leverage of our fixed costs on the lower sales.
Corporate and Other
Certain costs are excluded from business segment results as they are not used in evaluating the results of, or in allocating resources to, our operating segments. For the first quarter of 2023, these costs totaled $10.7 million for: transition costs for one of our executive officers of $0.8 million, amortization of acquisition-related intangible assets of $8.1 million and $1.8 million related to our acquisition and integration activities.
Interest Expense, net
Net interest expense increased $2.4 million to $6.2 million in the first quarter of 2023 compared with $3.8 million in the prior-year first quarter. In addition to higher interest rates in the current quarter, average net debt balances increased with the acquisitions of Daman in September 2022 and Schultes in January 2023. Average net debt increased to $446.0 million during the first quarter of 2023 compared with $410.8 million during the first quarter of 2022.
Income Taxes
The provision for income taxes for the first quarter of 2023 was 22.8% of pretax income compared to 22.4% for the prior-year first quarter. These effective rates fluctuate relative to the levels of income and different tax rates in effect among the countries in which we sell our products.
On August 16, 2022, the Inflation Reduction Act was enacted into law, and includes, among other things, a new 15% minimum tax and 1% excise tax on stock repurchases after December 31, 2022. These tax law changes have no immediate material effect and are not expected to have a material impact on our future financial results, we will continue to evaluate its impact as further information becomes available.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of capital are cash generated from operations and borrowings on our credit facilities to fund acquisitions. During the first three months of 2023, cash provided by operating activities totaled $12.3 million. At the end of the first quarter, we had $36.3 million of available cash and cash equivalents on hand and $54.3 million of available credit on our revolving credit facilities. We also have a $300.0 million accordion feature available on our credit facility, subject to certain pro forma compliance requirements, intended to support potential future acquisitions.
Our principal uses of cash are operating expenses, capital expenditures, servicing debt, acquisition-related payments and dividends to shareholders.
26
We believe that cash generated from operations and our borrowing availability under our credit facilities will be sufficient to satisfy our operating expenses. In the event that economic conditions were to severely worsen for a protracted period of time, we would have several options available to ensure liquidity in addition to increased borrowings. Capital expenditures could be postponed since they primarily pertain to long-term improvements in operations, operating expense reductions could be made and finally, the dividend to shareholders could be reduced or suspended.
Cash Flows
The following table summarizes our cash flows for the periods (in millions):
|
|
Three Months Ended |
|
|
|
|
||||||
|
|
April 1, 2023 |
|
|
April 2, 2022 |
|
|
$ Change |
|
|||
Net cash provided by operating activities |
|
$ |
12.3 |
|
|
$ |
14.7 |
|
|
$ |
(2.4 |
) |
Net cash used in investing activities |
|
|
(94.6 |
) |
|
|
(2.7 |
) |
|
|
(91.9 |
) |
Net cash provided by (used in) financing activities |
|
|
73.8 |
|
|
|
(8.8 |
) |
|
|
82.6 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
1.1 |
|
|
|
1.3 |
|
|
|
(0.2 |
) |
Net (decrease) increase in cash and cash equivalents |
|
$ |
(7.4 |
) |
|
$ |
4.5 |
|
|
$ |
(11.9 |
) |
Cash on hand decreased $7.4 million in the first quarter of 2023 to $36.3 million as of April 1, 2023. Changes in exchange rates during the three months ended April 1, 2023, favorably impacted cash and cash equivalents by $1.1 million. Cash balances on hand are a result of our cash management strategy, which focuses on maintaining sufficient cash to fund operations while reinvesting cash in the Company and paying down borrowings on our credit facilities.
Operating activities
Cash from operations declined by $2.4 million in the first quarter of 2023 compared to the prior-year first quarter. Current quarter cash earnings (calculated as net income plus adjustments to reconcile net income to net cash provided by operating activities, excluding changes in net operating assets and liabilities) decreased by $11.8 million over the prior-year period. Changes in net operating assets and liabilities improved cash flow by $9.4 million, compared to the prior-year period, primarily from favorable cash flows from accounts receivable and inventories only partially offset by reductions in accounts payable. Investments in inventory reduced cash by $6.5 million and $15.5 million in the first quarter of 2023 and 2022, respectively. Days of inventory on hand increased to 126 days as of April 1, 2023, compared with 100 days as of April 2, 2022. The increase is due to the decline in sales to the health and wellness end market. We have higher inventory than needed for current sales levels to that end market. Changes in accounts receivable reduced cash by $9.5 million and $17.4 million in the first quarter of 2023 and 2022, respectively. Days sales outstanding increased slightly to 60 days as of April 1, 2023, compared to 57 days as of April 2, 2022, as our collection patterns remain fairly consistent with the prior period.
Investing activities
Cash used in investing activities totaled $94.6 million in the first quarter of 2023, compared to cash used of $2.7 million in the first quarter of the prior year. Cash paid, net of cash acquired, for our acquisition of Schultes in the first quarter of 2023 totaled $84.7 million.
Capital expenditures totaled $9.1 million for the first quarter of 2023, an increase of $3.5 million over the prior-year comparable period. Capital expenditures for 2023 are forecasted to be approximately 3%-5% of sales, for investments in machinery and equipment for capacity expansion projects, improvements to manufacturing technology and maintaining/replacing existing machine capabilities.
27
Financing activities
Net cash provided by financing activities totaled $73.8 million during the first quarter of 2023, compared with cash used of $8.8 million in the prior-year period. We borrowed $88.5 million on our credit facility to fund the acquisition of Schultes in January 2023. Excluding these acquisition related borrowings, repayments, net of borrowings, on our credit facilities totaled $10.1 million for the first quarter of 2023 compared to $4.3 million during the same period of 2022.
During the first quarter of 2023, we declared a quarterly cash dividend of $0.09 per share payable on January 20, 2023, to shareholders of record as of January 5, 2023. The declaration and payment of future dividends is subject to the sole discretion of the board of directors, and any determination as to the payment of future dividends will depend upon our profitability, financial condition, capital needs, future prospects and other factors deemed pertinent by the board of directors.
Off Balance Sheet Arrangements
We do not engage in any off-balance sheet financing arrangements. In particular, we do not have any material interest in variable interest entities, which include special purpose entities and structured finance entities.
Inflation
As more fully described in Item 2 above, we are experiencing supply shortages and increasing material costs. Continued increases in the global demand for the materials used in our products could result in significant increases in the costs of the components we purchase, and we may not be able to fully offset such higher costs through price increases. There is no assurance that our business will not be materially affected by inflation in the future.
Critical Accounting Policies and Estimates
We currently apply judgment and estimates that may have a material effect on the eventual outcome of assets, liabilities, revenues and expenses for impairment of long-lived assets, inventory, goodwill, accruals, income taxes and fair value measurements. Our critical accounting policies and estimates are included in our Form 10-K, and any changes made during the first three months of 2023, are disclosed in Note 2 to the Consolidated, Unaudited Financial Statements.
28
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See “Item 7A – Quantitative and Qualitative Disclosures about Market Risk” in our Form 10-K. There were no material changes during the three months ended April 1, 2023.
Item 4. CONTROLS AND PROCEDURES.
The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report, have concluded that our disclosure controls and procedures are effective and are designed to ensure that the information we are required to disclose is recorded, processed, summarized and reported within the necessary time periods. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports that we file or submit pursuant to the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in our internal control over financial reporting identified in management's evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Securities Exchange Act of 1934, as amended, during the period covered by this report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
29
PART II: OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
None.
Item 1A. RISK FACTORS.
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors that affect our business and financial results that are discussed in Part I, Item 1A, “Risk Factors” of our Form 10-K. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report. There have been no material changes to such risk factors.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None.
Item 4. MINE SAFETY DISCLOSURES.
Not applicable.
Item 5. OTHER INFORMATION.
None.
30
Item 6. EXHIBITS.
Exhibits:
|
Exhibit Number |
|
Exhibit Description |
|
|
|
10.1+ |
|
|
|
|
|
10.2 |
|
|
|
|
|
31.1 |
|
CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2 |
|
CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.1 |
|
|
|
|
|
32.2 |
|
|
|
|
|
101.INS |
|
XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
|
|
|
101.SCH |
|
XBRL Schema Document |
|
|
|
101.CAL |
|
XBRL Calculation Linkbase Document |
|
|
|
101.DEF |
|
XBRL Definition Linkbase Document |
|
|
|
101.LAB |
|
XBRL Label Linkbase Document |
|
|
|
101.PRE |
|
XBRL Presentation Linkbase Document |
|
|
|
|
104
|
|
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2023, has been formatted in Inline XBRL. |
|
|
|
+ |
|
Executive management contract or compensatory plan or arrangement. |
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 9, 2023 |
HELIOS TECHNOLOGIES, INC. |
||
|
|
|
|
|
By: |
|
/s/ Tricia L. Fulton |
|
|
|
Tricia L. Fulton |
|
|
|
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
32
Exhibit 10.1
SEPARATION AGREEMENT AND FULL AND FINAL RELEASE
This Separation Agreement and Full and Final Release (“Agreement”) is entered into by and between Jason Morgan (“Employee”) and Helios Technologies, Inc (“Company”). Employee and the Company are both parties to this Agreement and are collectively referred to herein as the “Parties.” The Parties desire to enter into this Agreement to fully resolve all questions of compensation, entitlement to benefits, and any and all other claims, whether known or unknown, which the Parties may have relating to Employee’s employment with, and separation from, the Company.
Employee acknowledges, understands, and agrees that Employee’s active employment with the Company will terminate on March 30, 2023 (“Separation Date”).
WHEREAS, the Company and Employee have agreed upon the terms for an orderly transition and the continuation of certain services by Employee, as hereinafter set forth;
WHEREAS, Company has determined that Employee shall be afforded the separation benefits as set forth in the Executive Officer Severance Agreement dated June 21, 2021 (“Executive Officer Agreement”);
NOW, THEREFORE, in exchange for the consideration described in this Agreement, and intending to be legally bound hereby, the Parties agree as follows:
Employee agrees to release and discharge the Company not only from any and all claims or causes of action which Employee could make on Employee’s own behalf, but also those that may or could be brought by any person or organization on Employee’s behalf, and Employee specifically waives any right to become, and promises not to become, a member of any class in any proceeding or case in which any such claim or cause of action against the Company may arise, in whole or in part, from any event which occurred on or before the date of this Agreement.
Page 2
It is expressly agreed and understood that this is a GENERAL RELEASE.
Nothing in this Agreement is intended to waive: (i) rights or claims that may arise after the date of Employee’s execution of this Agreement; (ii) Employee’s entitlement to vested benefits under any retirement plan or other ERISA-covered benefit plan provided by the Company; (iii) any rights Employee may have under state unemployment and/or workers’ compensation laws; and/or (iv) claims which by law cannot be released by private agreement.
Employee’s Obligations. In consideration for this Agreement, and in addition to the full and final release set forth above, Employee agrees to the following:
6. Acknowledgment. Employee acknowledges that if Employee materially breaches any of the provisions of Paragraph 5 of this Agreement, in addition to any other of the Company's rights and remedies, the Company shall immediately cease all payments or benefits described in Paragraph 4 above.
Page 3
7. Covenant Not To Sue. Employee warrants that Employee has not filed any complaints, charges or claims for relief against the Company with any local, state or federal court or administrative agency that are currently outstanding. Employee further agrees and covenants not to sue, or to bring any claims or charges against, the Company with respect to any matter arising at the time of Employee’s execution of this Agreement or covered by the release set forth in Paragraph 2 above, and not to assert against the Company in any action, suit, litigation or proceeding any matter arising before Employee’s execution of this Agreement or covered by the release set forth in Paragraph 2 above.
Nothing in this Agreement (i) limits or affects Employee’s right to challenge the validity of this Agreement; (ii) prevents or precludes Employee from filing a charge or complaint with or from participating in an investigation or proceeding conducted by the EEOC, the National Labor Relations Board, the Securities and Exchange Commission, or any other federal, state or local agency charged with the enforcement of any laws, including providing documents or other information; or (iii) prevents Employee from exercising his or her rights under Section 7 of the National Labor Relations Act (“NLRA”) to engage in protected, concerted activity with other employees, although by signing this Agreement Employee waives any right to recover any individual relief (including back pay, front pay, reinstatement or other legal or equitable relief) in any charge, complaint, or lawsuit or other proceeding brought by Employee or on his or her behalf by any third party, either individually, or as part of any class or collective action, except for any right Employee may have to receive a payment from a government agency (and not the Company) for information provided to the government agency.
8. Participation in Litigation, Governmental Proceedings and Protected Activity. No provision of this Agreement shall be construed or enforced in a manner that would prevent Employee from testifying fully and truthfully under oath in any court, arbitration, governmental or administrative agency proceeding, or from providing complete and truthful information in the course of any government investigation. No provision of this Agreement shall be construed or enforced in a manner that would interfere with Employee’s rights under the NLRA to discuss or comment on terms and conditions of employment.
9. No Admission of Liability. It is expressly understood and agreed that this Agreement, and any acts undertaken hereunder, shall not be construed as an admission of liability or wrongdoing by the Company. Neither this Agreement nor anything in it shall be admissible in any proceeding as evidence of any unlawful or wrongful conduct by the Company.
10. Controlling Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Florida.
11. Jurisdiction. Any action arising out of, or relating to, any of the provisions of this Agreement may, at the election of the Company, be brought and prosecuted only in the courts of, or located in, the State of Florida, and in the event of such election, the Parties consent to the jurisdiction and venue of said courts.
Page 4
12. Entire Agreement. Excepting the Confidentiality and Non-Disclosure Agreement signed previously, which shall remain in full force and effect, the Parties understand that no promise, inducement, or other agreement not expressly contained herein has been made conferring any benefit upon them; that the Agreement contains the entire Agreement between them; and that the terms of the Agreement are contractual and not recitals only.
13. Severability. If any provision of this Agreement is construed to be invalid, illegal or unenforceable, then the remaining provisions hereof shall not be affected thereby and shall be enforceable without regard thereto.
14. Section Headings. Section and subsection headings in this Agreement are for convenience of reference only and shall neither constitute a part of this Agreement nor affect its interpretation.
15. Amendment. The Parties agree that this Agreement may not be altered, amended, or modified, in any respect, except by a writing duly executed by both Parties.
16. Knowing and Voluntary Release. Employee acknowledges and agrees that:
Page 5
EMPLOYEE REPRESENTS THAT EMPLOYEE: HAS READ THE TERMS OF THIS AGREEMENT, HAS HAD AN OPPORTUNITY TO FULLY DISCUSS AND REVIEW THE TERMS OF THIS AGREEMENT WITH AN ATTORNEY, UNDERSTANDS THE CONTENTS HEREOF, FREELY AND VOLUNTARILY ASSENTS TO ALL THE TERMS AND CONDITIONS HEREOF, AND SIGNS THIS AGREEMENT AS EMPLOYEE’S OWN FREE ACT, AND WITH THE INTENTION OF RELEASING THE COMPANY FROM EACH AND EVERY CLAIM RELATING IN ANY WAY TO EMPLOYEE’S EMPLOYMENT WITH THE COMPANY.
IN WITNESS WHEREOF,and intending to be legally bound, the Parties agree to the terms of this Agreement, effective as of the eighth day after Employee signs the Agreement or once all company owned property is returned, whichever is latest to occur (“Effective Date”), provided that Employee has not revoked Employee’s acceptance during the time period provided in Paragraph 16(c).
Date: _____________ By: ______________________________________
Jason Morgan
For the Company:
Date: _____________ By: ______________________________________
Page 6
EXHIBIT A
EXECUTIVE OFFICER SEVERANCE AGREEMENT
THIS EXECUTIVE OFFICER SEVERANCE AGREEMENT (“Agreement”) made and entered into as of the ____ day of ______, 202_, by and between HELIOS TECHNOLOGIES, INC., a Florida corporation, along with its affiliates and subsidiaries (together, the “Company”) and ________ (“Executive”).
W I T N E S S E TH:
WHEREAS, Executive is the ____________________; and
WHEREAS, the Company wishes to provide severance benefits to Executive in the event of an involuntary terminations of Executive’s employment, as specified herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the agreements of the parties contained herein, the parties do hereby agree as follows:
1. Purpose and Intent. The Board of Directors of the Company (the “Board”) desires to provide certain protections to the Executive in the event of an involuntary termination of his or her employment that does not occur in connection with a change in ownership or control of the Company. Accordingly, the Board has determined that appropriate steps should be taken to enter into an agreement to provide such protections to the Executive. This Agreement is not intended to alter materially the compensation and benefits that Executive could reasonably expect in the absence of an “Involuntary Termination of Employment” (as defined below in Section 4) and, accordingly, this Agreement, although taking effect upon the parties’ execution hereof, will be operative only upon an Involuntary Termination of Employment.
2. Term of Agreement. This Agreement shall be effective upon the execution by the parties, and shall remain in effect until the date Executive’s employment by the Company is terminated; provided, however, that if Executive experiences an Involuntary Termination of Employment, the term shall continue in effect until all payments and benefits have been made or provided to Executive under this Agreement.
3. Eligibility for Severance. Executive becomes eligible to receive Severance (as defined below in Section 5) under this Agreement upon an Involuntary Termination of Employment, provided that the Executive:
(a) performs all transition and other matters required of the Executive by the Company prior to Executive’s Involuntary Termination of Employment;
(b) returns to the Company any property of the Company which has come into the Executive’s possession;
(c) returns (and does not thereafter revoke), within sixty (60) days from receipt, a signed original general release in a form acceptable to the Company, in its sole and absolute discretion (the “Release”), under which the Executive, among other things, release and discharges the Company and its subsidiaries and affiliates from all claims and liabilities, including without limitation, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Family and Medical Leave Act, the Equal Pay Act, ERISA, the Age Discrimination in Employment Act, the Civil Rights Act of 1991, Section 1981 of U.S.C.
Page 7
Title 42, the Sarbanes-Oxley Act of 2002, the Worker Adjustment and Retraining Notification Act of 1988, and the Older Workers’ Benefit Protection Act of 1990; and
(d) complies with the restrictive covenants set forth in any other agreement between the Company and Executive. Executive shall forfeit, and repay if already paid by the Company, the Severance, if he or she violates any of these restrictive covenants.
4. Involuntary Termination. For purposes of this Agreement, an Involuntary Termination of Employment shall be deemed to occur if:
(c) any material breach by the Company of any provision of this Agreement.
5. Compensation Upon an Involuntary Termination of Employment.
(a) Subject to the terms of this Agreement, including but not limited to the satisfaction of the requirements in Section 3, upon an Involuntary Termination of Employment during the term of this Agreement, Executive shall be entitled to receive the following payments and benefits:
Page 8
(i) continuation of Executive’s annual base salary at the time of termination for the twelve (12) month period following the date of the Involuntary Termination of Employment, payable according to the Company’s normal payroll cycle;
(ii) the target value at the time of grant of the annual short-term incentive compensation award to the Executive, if any, granted during the current fiscal year or, if the Compensation Committee of the Board of Directors has not yet met to consider the annual short-term incentive compensation award to the Executive for the current fiscal year, then the target value at the time of grant of the annual short-term incentive compensation award to the Executive, if any, granted during the immediately preceding fiscal year, payable within fifteen (15) days following the expiration of the period in which the Executive has the right to revoke the Release described in Section 3(c); and
(iii) continuing medical, dental, life, disability and hospitalization benefits as elected by the Executive under the Company’s employee benefit plans after termination pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), at Company expense, for Executive and his or her family as then in effect, for a period of twelve (12) months following the date of termination.
The employer contribution for COBRA coverage will not be provided to the Executive, however, to the extent that the Company reasonably determines that doing so would subject the Company to the excise tax under Section 4980D of the Code (as a result of discriminatory coverage under an insured health plan). Except as required by law, under no circumstances shall the Company have the right to delay payment of any amounts due under this Agreement.
(b) Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Agreement be reduced by any amounts earned or accrued through the date of termination or by any amounts to which Executive shall be entitled by law (nor shall payment hereunder be deemed in lieu of such amounts), by any retirement benefits after the date of termination, or otherwise.
(c) The treatment of any equity incentive awards that are held by Executive upon an Involuntary Termination of Employment shall be governed under the terms of the Company’s equity incentive plans and the award agreements under which such awards were granted. No awards shall be subject to accelerated vesting or exercisability as a result of an Involuntary Termination of Employment.
(d) Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to Executive or his or her estate or beneficiaries shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Company may reasonably determine it should withhold pursuant to applicable law or regulation. In lieu of withholding such amounts, the Company may accept other provisions to the end that it has sufficient funds to pay all taxes required to be withheld in respect of any of such payments.
Page 9
6. Tax Matters.
Page 10
Page 11
7. Definition of “For Cause”. The termination of Executive’s employment by the Company shall be deemed “For Cause” if it results from (a) the commission of an act of fraud, embezzlement, theft or proven dishonesty, or any other illegal act or practice (whether or not resulting in criminal prosecution or conviction), including theft or destruction of property of the Company, or any other act or practice which the Board of Directors of the Company (the “Board”) shall, in good faith, deem to have resulted in the recipient’s becoming unbondable under the Company’s fidelity bond; (b) the willful engaging in misconduct which is deemed by the Board, in good faith, to be materially injurious to the Company, monetarily or otherwise, including, but not limited to, improperly disclosing trade secrets or other confidential or sensitive business information and data about the Company and competing with the Company, or soliciting employees, consultants or customers of the Company in violation of law or any employment or other agreement to which the recipient is a party; (c) the continued failure or habitual neglect by the Executive to perform his or her duties with the Company; or (d) other disregard of the Company’s Bylaws, Code of Business Conduct and Ethics, or other rules or policies of the Company or any subsidiary, or conduct evidencing willful or wanton disregard of the interests of the Company. For purposes of this Agreement, no act or failure to act by the recipient shall be deemed “willful” unless done or omitted to be done by the Executive not in good faith and without reasonable belief that the Executive’s action or omission was in the best interest of the Company. Notwithstanding the foregoing, if Executive has entered into an employment agreement that is binding as of the date of such event, and if such employment agreement defines “Cause,” then the definition of “Cause” in such agreement shall apply. The determination of whether the Executive has engaged in an act that constitutes Cause shall be made by the Board, which prior to making such determination shall provide written notice of the event of Cause to the Executive and allow the Executive a reasonable opportunity to cure such event.
8. Miscellaneous.
Page 12
(d) Successors and Assigns. This Agreement shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amount would still be payable to Executive hereunder if Executive had continued to live, all such amounts, shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee or other designee or, if there is no such designee, to Executive’s estate.
(e) Notices. Except as otherwise expressly provided herein, any notice, demand or payment required or permitted to be given or paid shall be deemed duly given or paid only if personally delivered or sent by United States mail and shall be deemed to have been given when personally delivered or three (3) days after having been deposited in the United States mail, certified mail, return receipt requested, properly addressed with postage prepaid. All notices or demands shall be effective only if given in writing. For the purpose hereof, the addresses of the parties hereto (until notice of a change thereof is given as provided in this Section 8(e), shall be as follows:
The Company: |
Marc A. Greenberg, Esq. General Counsel & Corporate Secretary Helios Technologies, Inc. 7456 16th Street East Sarasota, FL 34243
|
Executive: |
|
Page 13
(g) Entirety. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes any prior or contemporaneous agreement or understandings relating to the subject matter hereof.
(h) Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company (except for any severance or termination policies, plans, programs or practices) and for which Executive may qualify, nor shall anything in this Agreement limit or reduce such rights as Executive may qualify, nor shall anything in this Agreement limit or reduce such rights as Executive may have under any other agreements with the Company (except for any severance or termination agreement). In the event Executive qualifies for severance benefits under another policy, program or by local law/statute, such severance shall offset (and not paid in addition to) any amounts or benefits due herein. Amounts that are vested benefits or that Executive is otherwise entitled to receive under any plan or program of the Company shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement.
(i) Amendment. This Agreement may be amended only by a written instrument signed by the Company and Executive, which makes specific reference to this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.
HELIOS TECHNOLOGIES, INC. EXECUTIVE
By:
Josef Matosevic
Page 14
Exhibit 10.2
FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
President and Chief Executive Officer THIS FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (the "Amendment"), dated as of [___], 2023 (the "Fourth Amendment Effective Date"), is made by HELIOS TECHNOLOGIES, INC., a Florida corporation (the "Borrower"), the Guarantors (as defined in the Credit Agreement (as hereinafter defined)), each of the Lenders (as defined in the Credit Agreement), and PNC BANK, NATIONAL ASSOCIATION, as Administrative Agent for the Lenders (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Guarantors party thereto, the Lenders party thereto and the Administrative Agent are parties to that certain Second Amended and Restated Credit Agreement dated as of October 28, 2020 (as further amended, restated, modified or supplemented, the "Credit Agreement"; except as otherwise defined in this Amendment, defined terms used herein shall have the meanings given to them in the Credit Agreement);
WHEREAS, the Borrower has requested that, as of the Fourth Amendment Effective Date, the Lenders amend certain terms of the Credit Agreement as set forth herein; and the Lenders are willing to do so upon and subject to the terms and conditions of this Amendment.
NOW, THEREFORE, the parties hereto, in consideration of their mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, covenant and agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
(a) Upon the effectiveness of this Amendment:
(i) the Credit Agreement is amended in its entirety to read in the form attached hereto as Annex A; and
(ii) Exhibit 2.5.1 to the Credit Agreement [Loan Request] is amended in its entirety in the form attached hereto as Annex B.
(b) Notwithstanding the foregoing, the terms of the Credit Agreement (immediately prior to giving effect to this Amendment) applicable to Euro Rate Loans that are denominated in Dollars and Euros shall continue in full force and effect and shall continue to apply to each Euro Rate Loan that is denominated in Dollars or Euros with an Interest Period that commenced prior to the Fourth Amendment Effective Date until the expiration of the then current Interest Period for each such Euro Rate Loan following the Fourth Amendment Effective Date.
2. GENERAL.
(a) Conditions Precedent. The Loan Parties, the Administrative Agent and the Lenders acknowledge and agree that the amendments set forth herein shall only be effective upon the occurrence of all the following conditions precedent:
(i) Amendment. The Loan Parties, the Administrative Agent and the Required Lenders shall have executed and delivered this Amendment to the Administrative Agent.
(ii) USA Patriot Act Diligence. Administrative Agent and each Lender shall have received, in form and substance acceptable to Administrative Agent and each Lender, such documentation and other information requested in connection with applicable "know your customer" and anti-money laundering rules and regulations, including the USA Patriot Act. If the Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, the Borrower shall have delivered to Administrative Agent and each Lender that so requests, a Beneficial Ownership Certification in relation to the Borrower.
(iii) Fees and Expenses. The Borrower shall have paid to the Administrative Agent all fees due and payable on or before the date hereof and any documented out-of-pocket costs and expenses of the Administrative Agent, including without limitation, the reasonable and invoiced out-of-pocket fees of the Administrative Agent's outside counsel in connection with this Amendment.
(b) Representations, Warranties and Covenants. The Borrower and each Guarantor covenants and agrees with and represents and warrants to the Administrative Agent and the Lenders as follows:
(i) the Obligations under the Credit Agreement are and shall remain secured by the Collateral, pursuant to the terms of the Credit Agreement and the other Loan Documents;
(ii) the Borrower and each of the Guarantors possess all of the powers requisite to enter into and carry out the transactions of the Borrower and such Guarantor referred to herein and to execute, enter into and perform the terms and conditions of this Amendment, the Credit Agreement and the other Loan Documents to which it is a party and any other documents contemplated herein that are to be performed by the Borrower or such Guarantor; any and all actions required or necessary pursuant to the Borrower's or such Guarantor's organizational documents or otherwise have been taken to authorize the due execution, delivery and performance by the Borrower and such Guarantor of the terms and conditions of this Amendment; the officers of the Borrower and each Guarantor executing this Amendment are the duly elected, qualified, acting and incumbent officers of such Loan Party and hold the titles set forth below their names on the signature lines of this Amendment; and such execution, delivery and performance will not conflict with, constitute a default under or result in a breach of (A) any applicable law, (B) except as would not reasonably be expected to result in a Material Adverse Change, any material agreement or instrument or (C) any order, writ, judgment, injunction or decree to which the Borrower or such Guarantor is a party or by which the Borrower or such Guarantor or any of its properties is bound, and that all consents, authorizations and/or approvals required or necessary from any third parties in connection with the entry into, delivery and performance by the Borrower and such Guarantor of the terms and conditions of this Amendment, the Credit Agreement, the other Loan Documents and the transactions contemplated hereby have been obtained by the Borrower or such Guarantor, as applicable, and are full force and effect;
2
(iii) this Amendment, the Credit Agreement, and the other Loan Documents constitute valid and legally binding obligations of the Borrower and each Guarantor, enforceable against the Borrower and each Guarantor in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws and by general equitable principles, whether enforcement is sought by proceedings at law or in equity; (iv) all representations and warranties made by the Borrower and each Guarantor in the Credit Agreement and the other Loan Documents are true and correct in all material respects (or in the case of any such representation and warranty that is qualified by materiality or reference to Material Adverse Change, in all respects), except for representations and warranties which (A) specifically refer to an earlier date which shall have been true and correct in all material respects as of such earlier date referred to therein, and (B) are qualified by materiality which will be true and correct in all respects and the Borrower and each Guarantor has complied with all covenants and undertakings in the Credit Agreement and the other Loan Documents;
(v) this Amendment is not a substitution, novation, discharge or release of the Borrower's or any Guarantor's obligations under the Credit Agreement or any of the other Loan Documents, all of which shall and are intended to remain in full force and effect;
(vi) no Event of Default or Potential Default has occurred and is continuing under the Credit Agreement or the other Loan Documents; there exist no defenses, offsets, counterclaims or other claims with respect to the Borrower's or any Guarantor's obligations and liabilities under the Credit Agreement or any of the other Loan Documents;
(vii) no Material Adverse Change has occurred since January 1, 2022; and
(viii) the Borrower and each Guarantor hereby ratify and confirm in full its duties and obligations under the Credit Agreement and the other Loan Documents applicable to it, each as modified hereby.
(c) Incorporation into the Credit Agreement and other Loan Documents. This Amendment shall be incorporated into the Credit Agreement by this reference and each reference to the Credit Agreement that is made in the Credit Agreement or any other document executed or to be executed in connection therewith shall hereafter be construed as a reference to the Credit Agreement as amended hereby. The term "Loan Documents" as defined in the Credit Agreement shall include this Amendment.
(d) Severability. If any one or more of the provisions contained in this Amendment, the Credit Agreement, or the other Loan Documents shall be held invalid, illegal or unenforceable in any respect, the validity, legality or enforceability of the remaining provisions contained in this Amendment, the Credit Agreement or the other Loan Documents shall not in any way be affected or impaired thereby, and this Amendment shall otherwise remain in full force and effect.
(e) Successors and Assigns. This Amendment shall apply to and be binding upon the Borrower and each Guarantor in all respects and shall inure to the benefit of each of the Administrative Agent and the Lenders and their respective successors and assigns, provided that neither the Borrower nor any Guarantor may assign, transfer or delegate its duties and obligations hereunder. Nothing expressed or referred to in this Amendment is intended or shall be construed to give any person or entity other than the parties hereto a legal or equitable right, remedy or claim under or with respect to this Amendment, the Credit Agreement or any of the other Loan Documents, it being the intention of the parties hereto that this Amendment and all of its provisions and conditions are for the sole and exclusive benefit of the Borrower, the Guarantors, the Administrative Agent and the Lenders.
3
(f) Reimbursement of Expenses. The Borrower unconditionally agrees to pay and reimburse the Administrative Agent and save the Administrative Agent harmless against liability for the payment of reasonable out-of-pocket costs, expenses and disbursements, including without limitation, the reasonable fees and expenses of counsel actually incurred by the Administrative Agent in connection with the development, preparation, execution, administration, interpretation or performance of this Amendment and all other documents or instruments to be delivered in connection herewith.
(g) Counterparts. This Amendment may be executed by different parties hereto in any number of separate counterparts, each of which, when so executed and delivered shall be an original and all such counterparts shall together constitute one and the same instrument.
(h) Entire Agreement. This Amendment sets forth the entire agreement and understanding of the parties with respect to the transactions contemplated hereby and supersedes all prior understandings and agreements, whether written or oral, between the parties hereto relating to the subject matter hereof. No representation, promise, inducement or statement of intention has been made by any party which is not embodied in this Amendment, and no party shall be bound by or liable for any alleged representation, promise, inducement or statement of intention not set forth herein.
(i) Headings. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provisions hereof.
(j) No Novation. This Amendment amends the Credit Agreement, but is not intended to constitute, and does not constitute, a novation of the Obligations of the Borrower and/or the Guarantors under the Credit Agreement or any other Loan Document.
(k) Construction. The rules of construction set forth in Section 1.2 [Construction] of the Credit Agreement shall apply to this Amendment.
(l) Governing Law. This Amendment shall be deemed to be a contract under the laws of the State of New York and for all purposes shall be governed by and construed and enforced in accordance with the internal laws of the State of New York without regard to its conflict of laws principles.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGES FOLLOW]
4
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed this Amendment as of the day and year first above written.
BORROWER:
HELIOS TECHNOLOGIES, INC.
a Florida corporation
By: ________________________________
Name: Tricia Fulton
Title: Chief Financial Officer
GUARANTORS:
ENOVATION CONTROLS, LLC,
an Oklahoma limited liability company
By: Helios Technologies, Inc.,
its managing member
By: ________________________________
Name: Tricia Fulton
Title: Chief Financial Officer
SUN HYDRAULICS, LLC,
a Florida limited liability company
By: Helios Technologies, Inc.,
its sole manager
By: _______________________________
Name: Tricia Fulton
Title: Chief Financial Officer
FASTER, INC.,
an Ohio corporation
By:
Name: Tricia Fulton
Title: Vice President and Chief Financial Officer
SPA & BATH HOLDINGS, INC.,
a Delaware corporation
By:
Name: Tricia Fulton
Title: Chairwoman
BALBOA WATER GROUP, LLC,
a Delaware limited liability company
By: Name: Tricia Fulton Title: Vice President HELIOS CENTER OF ENGINEERING EXCELLENCE, LLC,
a Delaware limited liability company
By:
Name: Tricia Fulton
Title: President
HELIOS HYDRAULICS AMERICAS, LLC,
a Delaware limited liability company
By: Helios Technologies, Inc.,
its sole manager
By: ________________________________
Name: Tricia Fulton
Title: Chief Financial Officer
DAMAN PRODUCTS COMPANY, LLC,
a Delaware limited liability company
By: Helios Hydraulics Americas, LLC.,
its sole member
By: Helios Technologies, Inc., the sole manager of Helios Hydraulics Americas, LLC PNC BANK, NATIONAL ASSOCIATION, as the Administrative Agent, the Issuing Lender, the Swing Loan Lender and a Lender
By: ________________________________
Name: Tricia Fulton
Title: Chief Financial Officer
By: ________________________________
Name:
Title:
TRUIST BANK, as a Lender REGIONS BANK, as a Lender
By:
Name:
Title:
By:
Name:
Title:
BANK OF MONTREAL, as an Issuing Lender
By:
Name:
Title:
BMO HARRIS BANK, N.A., as a Lender KEYBANK NATIONAL ASSOCIATION, as a Lender
By:
Name:
Title:
By:
Name:
Title:
MUFG UNION BANK, N.A., as a Lender CITIBANK, N.A., as a Lender
By:
Name:
Title:
By:
Name:
Title:
WELLS FARGO BANK NATIONAL ASSOCIATION., as a Lender SYNOVUS BANK, as a Lender
By:
Name:
Title:
By:
Name:
Title:
M&T BANK, successor by merger to People’s United Bank, N.A., as a Lender Annex A to Fourth Amendment
By:
Name:
Title:
CUSIP NO. (REVOLVING CREDIT FACILITY) 42328JAB1
CUSIP NO. (TERM LOAN FACILITY) 42328JAC9
$600,000,000.00
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(as amended by the First Amendment to Second Amended and Restated Credit Agreement, dated as of July 1, 2021, the Second Amendment to Second Amended and Restated Credit Agreement, dated November 19, 2021, the Third Amendment to Second Amended and Restated Credit Agreement, dated as of July 29, 2022 and the Fourth Amendment to Second Amended and Restated Credit Agreement, dated as of [__], 2023)
by and among
HELIOS TECHNOLOGIES, INC., a Florida corporation
and
THE LENDERS PARTY HERETO
and
THE GUARANTORS PARTY HERETO
and
PNC CAPITAL MARKETS LLC,
as Joint Lead Arranger and Sole Bookrunner
and
TRUIST SECURITIES, INC.,
as Joint Lead Arranger
and
TRUIST BANK,
as Syndication Agent
and
BMO HARRIS BANK, N.A.
and
REGIONS BANK, as co-Documentation Agents
and
PNC BANK, NATIONAL ASSOCIATION, as Administrative Agent
Dated as of October 28, 2020
TABLE OF CONTENTS
Page
1. |
CERTAIN DEFINITIONS |
1 |
1.1 |
Certain Definitions |
1 |
1.2 |
Construction |
40 |
1.3 |
Accounting Principles; Changes in GAAP |
40 |
1.4 |
Currency Calculations |
41 |
1.5 |
Divisions |
41 |
1.6 |
Benchmark Replacement Notification |
41 |
2. |
REVOLVING CREDIT AND SWING LOAN FACILITIES |
42 |
2.1 |
Revolving Credit Commitments |
42 |
2.1.1 |
Revolving Credit Loans; Optional Currency Loans |
42 |
2.1.2 |
Swing Loan Commitment |
42 |
2.2 |
Nature of Lenders’ Obligations with Respect to Revolving Credit Loans |
42 |
2.3 |
Commitment Fees |
42 |
2.4 |
Termination or Reduction of Revolving Credit Commitments |
43 |
2.5 |
Loan Requests; Swing Loan Requests |
43 |
2.5.1 |
Loan Requests |
43 |
2.5.2 |
Swing Loan Requests |
44 |
2.6 |
Making Revolving Credit Loans and Swing Loans; Presumptions by the Administrative Agent; Repayment of Revolving Credit Loans; Borrowings to Repay Swing Loans |
44 |
2.6.1 |
Making Revolving Credit Loans |
44 |
2.6.2 |
Presumptions by the Administrative Agent |
45 |
2.6.3 |
Making Swing Loans |
45 |
2.6.4 |
Repayment of Revolving Credit Loans |
45 |
2.6.5 |
Borrowings to Repay Swing Loans |
45 |
2.6.6 |
Swing Loans Under Cash Management Agreements |
46 |
2.7 |
Notes |
46 |
2.8 |
Use of Proceeds |
46 |
2.9 |
Letter of Credit Subfacility |
46 |
2.9.1 |
Issuance of Letters of Credit |
47 |
i
2.9.2 |
Letter of Credit Fees |
48 |
2.9.3 |
Disbursements, Reimbursement |
48 |
2.9.4 |
Repayment of Participation Advances |
49 |
2.9.5 |
Documentation |
50 |
2.9.6 |
Determinations to Honor Drawing Requests |
50 |
2.9.7 |
Nature of Participation and Reimbursement Obligations |
50 |
2.9.8 |
Indemnity |
52 |
2.9.9 |
Liability for Acts and Omissions |
52 |
2.9.10 |
Issuing Lender Reporting Requirements |
53 |
2.9.11 |
Cash Collateral for Extended Letters of Credit |
54 |
2.10 |
Defaulting Lenders |
55 |
2.10.1 |
Defaulting Lender Adjustments |
55 |
2.10.2 |
Defaulting Lender Cure |
56 |
2.10.3 |
New Swing Loans/Letters of Credit |
57 |
2.11 |
Increase in Revolving Credit Commitments; Incremental Term Loans |
57 |
2.12 |
Utilization of Commitments in Optional Currencies |
60 |
2.12.1 |
Periodic Computations of Dollar Equivalent Amounts of Revolving Credit Loans that are Optional Currency Loans and Letters of Credit Outstanding; Repayment in Same Currency |
60 |
2.13 |
European Monetary Union |
60 |
3. |
INITIAL TERM LOAN |
61 |
3.1 |
Term Loan Commitments |
61 |
3.2 |
Nature of Lenders’ Obligations with Respect to Term Loans; Repayment Terms |
61 |
4. |
INTEREST RATES |
62 |
4.1 |
Interest Rate Options |
62 |
4.1.1 |
Revolving Credit Interest Rate Options; Swing Line Interest Rate |
63 |
4.1.2 |
Swing Loan Interest Rate |
64 |
4.1.3 |
Term Loan Interest Rate Options |
64 |
4.1.4 |
Interest Act (Canada) |
64 |
4.1.5 |
Rate Calculations; Rate Quotations |
64 |
4.2 |
Conforming Changes Relating to Term SOFR, the Eurocurrency Rate, Term RFR, or Daily Simple SOFR. |
64 |
4.3 |
Interest After Default |
65 |
ii
4.3.1 |
Letter of Credit Fees, Interest Rate |
65 |
4.3.2 |
Other Obligations |
65 |
4.3.3 |
Acknowledgment |
65 |
4.4 |
4.4 Rate Unascertainable; Increased Costs; Deposits Not Available; Illegality; Benchmark Replacement Setting |
65 |
4.4.1 |
Unascertainable; Increased Costs; Deposits Not Available |
65 |
4.4.2 |
Illegality |
66 |
4.4.3 |
Administrative Agent’s and Lender’s Rights |
66 |
4.4.4 |
Benchmark Replacement Setting |
67 |
4.5 |
Selection of Interest Rate Options |
72 |
5. |
PAYMENTS |
72 |
5.1 |
Payments |
72 |
5.2 |
Pro Rata Treatment of Lenders |
73 |
5.3 |
Sharing of Payments by Lenders |
74 |
5.4 |
Administrative Agent’s Clawback |
74 |
5.4.1 |
Funding by Lenders; Presumption by Administrative Agent |
74 |
5.4.2 |
Payments by Borrower; Presumptions by Administrative Agent |
75 |
5.5 |
Interest Payment Dates |
75 |
5.6 |
Voluntary Prepayments |
75 |
5.6.1 |
Right to Prepay |
75 |
5.6.2 |
Replacement of a Lender |
76 |
5.6.3 |
Designation of a Different Lending Office |
77 |
5.7 |
Mandatory Prepayments |
78 |
5.7.1 |
Sale of Assets and Recovery Events |
78 |
5.7.2 |
[Reserved] |
78 |
5.7.3 |
Debt Issuances |
78 |
5.7.4 |
Certain Foreign Subsidiary Debt Issuances |
78 |
5.7.5 |
Currency Fluctuations |
78 |
5.7.6 |
Application Among Interest Rate Options |
79 |
5.8 |
Increased Costs |
79 |
5.8.1 |
Increased Costs Generally |
79 |
5.8.2 |
Capital Requirements |
79 |
iii
5.8.3 |
Certificates for Reimbursement; Repayment of Outstanding Loans; Borrowing of New Loans |
80 |
5.8.4 |
Delay in Requests |
80 |
5.8.5 |
Additional Reserve Requirements |
80 |
5.9 |
Taxes |
80 |
5.9.1 |
Issuing Lender |
80 |
5.9.2 |
Payments Free of Taxes |
80 |
5.9.3 |
Payment of Other Taxes by the Loan Parties |
81 |
5.9.4 |
Indemnification by the Loan Parties |
81 |
5.9.5 |
Indemnification by the Lenders |
81 |
5.9.6 |
Evidence of Payments |
81 |
5.9.7 |
Status of Lenders |
81 |
5.9.8 |
Treatment of Certain Refunds |
84 |
5.9.9 |
Survival |
84 |
5.10 |
Indemnity |
84 |
5.11 |
Settlement Date Procedures |
85 |
5.12 |
Currency Conversion Procedures for Judgments |
85 |
5.13 |
Indemnity in Certain Events |
85 |
5.14 |
Cash Collateral |
86 |
5.14.1 |
Grant of Security Interest |
86 |
5.14.2 |
Application |
86 |
5.14.3 |
Termination of Requirement |
86 |
6. |
REPRESENTATIONS AND WARRANTIES |
86 |
6.1 |
Representations and Warranties |
87 |
6.1.1 |
Organization and Qualification; Power and Authority; Compliance With Laws; Title to Properties; Event of Default |
87 |
6.1.2 |
Subsidiaries; Investment Companies |
87 |
6.1.3 |
Validity and Binding Effect |
88 |
6.1.4 |
No Conflict; Material Agreements; Consents |
88 |
6.1.5 |
Litigation |
88 |
6.1.6 |
Financial Statements |
88 |
6.1.7 |
Margin Stock |
89 |
6.1.8 |
Full Disclosure |
89 |
iv
6.1.9 |
Taxes |
89 |
6.1.10 |
Patents, Trademarks, Copyrights, Licenses, Etc |
90 |
6.1.11 |
Liens in the Collateral |
90 |
6.1.12 |
Insurance |
90 |
6.1.13 |
ERISA Compliance |
90 |
6.1.14 |
Environmental Matters |
91 |
6.1.15 |
Solvency |
91 |
6.1.16 |
Sanctions and other Anti-Terrorism Laws |
91 |
6.1.17 |
Anti-Corruption Laws |
91 |
6.1.18 |
EEA Financial Institution |
91 |
6.1.19 |
Material Contracts; Burdensome Restrictions |
91 |
6.1.20 |
Employment Matters |
92 |
6.1.21 |
Beneficial Ownership |
92 |
7. |
CONDITIONS TO EFFECTIVENESS AND LENDING AND ISSUANCE OF LETTERS OF CREDIT |
92 |
7.1 |
Conditions to Effectiveness |
92 |
7.1.1 |
Deliveries |
92 |
7.1.2 |
Payment of Fees |
94 |
7.2 |
Each Loan or Letter of Credit |
94 |
8. |
COVENANTS |
95 |
8.1 |
Affirmative Covenants |
95 |
8.1.1 |
Preservation of Existence, Etc |
95 |
8.1.2 |
Payment of Taxes |
95 |
8.1.3 |
Maintenance of Insurance |
95 |
8.1.4 |
Maintenance of Properties and Leases |
95 |
8.1.5 |
Visitation Rights |
95 |
8.1.6 |
Keeping of Records and Books of Account |
96 |
8.1.7 |
Compliance with Laws; Use of Proceeds |
96 |
8.1.8 |
Pledged Assets, Further Assurances |
96 |
8.1.9 |
Additional Guarantors |
97 |
8.1.10 |
Sanctions and other Anti-Terrorism Laws; Anti-Corruption Laws |
98 |
8.1.11 |
Post-Closing Obligations |
98 |
v
8.2 |
Negative Covenants |
98 |
8.2.1 |
Indebtedness |
98 |
8.2.2 |
Liens; Lien Covenants |
99 |
8.2.3 |
Guaranties |
99 |
8.2.4 |
Investments |
100 |
8.2.5 |
Dividends and Related Distributions |
100 |
8.2.6 |
Liquidations, Mergers, Consolidations, Acquisitions |
101 |
8.2.7 |
Dispositions of Assets or Subsidiaries |
103 |
8.2.8 |
Affiliate Transactions |
103 |
8.2.9 |
Subsidiaries, Partnerships and Joint Ventures |
104 |
8.2.10 |
Continuation of or Change in Business |
104 |
8.2.11 |
Fiscal Year |
104 |
8.2.12 |
[Reserved] |
104 |
8.2.13 |
Changes in Organizational Documents |
104 |
8.2.14 |
Maximum Leverage Ratio |
104 |
8.2.15 |
Minimum Interest Coverage Ratio |
105 |
8.2.16 |
Sanctions and other Anti-Terrorism Laws |
105 |
8.2.17 |
Anti-Corruption Laws |
105 |
8.2.18 |
Limitation on Negative Pledges |
105 |
8.2.19 |
Use of Proceeds |
106 |
8.3 |
Reporting Requirements |
106 |
8.3.1 |
Quarterly Financial Statements |
106 |
8.3.2 |
Annual Financial Statements |
106 |
8.3.3 |
Certificate of the Borrower |
106 |
8.3.4 |
Notices |
106 |
8.3.5 |
Electronic Delivery |
108 |
9. |
DEFAULT |
108 |
9.1 |
Events of Default |
108 |
9.1.1 |
Payments Under Loan Documents |
108 |
9.1.2 |
Breach of Warranty |
108 |
9.1.3 |
[Reserved] |
109 |
9.1.4 |
Breach of Negative Covenants, Visitation Rights or Anti-Terrorism Laws |
109 |
vi
9.1.5 |
Breach of Other Covenants |
109 |
9.1.6 |
Defaults in Other Agreements or Indebtedness |
109 |
9.1.7 |
Final Judgments or Orders |
109 |
9.1.8 |
Loan Document Unenforceable |
109 |
9.1.9 |
Uninsured Losses; Proceedings Against Assets |
109 |
9.1.10 |
Events Relating to Pension Plans and Multiemployer Plans |
110 |
9.1.11 |
Change of Control |
110 |
9.1.12 |
Relief Proceedings |
110 |
9.2 |
Consequences of Event of Default |
110 |
9.2.1 |
Generally |
110 |
9.2.2 |
Set-off |
111 |
9.2.3 |
Enforcement of Rights and Remedies |
111 |
9.2.4 |
Application of Proceeds |
112 |
10. |
THE ADMINISTRATIVE AGENT |
113 |
10.1 |
Appointment and Authority |
113 |
10.2 |
Rights as a Lender |
113 |
10.3 |
Exculpatory Provisions |
113 |
10.4 |
Reliance by Administrative Agent |
114 |
10.5 |
Delegation of Duties |
115 |
10.6 |
Resignation of Administrative Agent |
115 |
10.7 |
Non-Reliance on Administrative Agent and Other Lenders |
116 |
10.8 |
No Other Duties, Etc |
116 |
10.9 |
Administrative Agent’s Fee |
116 |
10.10 |
Administrative Agent May File Proofs of Claim |
116 |
10.11 |
Authorization to Release Collateral and Guarantors |
117 |
10.12 |
No Reliance on Administrative Agent’s Customer Identification Program |
118 |
10.13 |
Lender Provided Interest Rate Hedges, Lender Provided Foreign Currency Hedges and Other Lender Provided Financial Service Products No Reliance on Administrative Agent’s Customer Identification Program |
118 |
11. |
MISCELLANEOUS |
118 |
11.1 |
Modifications, Amendments or Waivers |
118 |
11.1.1 |
Increase of Commitment |
118 |
vii
11.1.2 |
Extension of Payment; Reduction of Principal, Interest or Fees; Modification of Terms of Payment |
118 |
11.1.3 |
Release of Collateral or Guarantor |
119 |
11.1.4 |
Miscellaneous |
119 |
11.2 |
No Implied Waivers; Cumulative Remedies |
120 |
11.3 |
Expenses; Indemnity; Damage Waiver |
120 |
11.3.1 |
Costs and Expenses |
120 |
11.3.2 |
Indemnification by the Borrower |
120 |
11.3.3 |
Reimbursement by Lenders |
121 |
11.3.4 |
Waiver of Consequential Damages, Etc |
121 |
11.3.5 |
Payments |
122 |
11.3.6 |
Survival |
122 |
11.4 |
Holidays |
122 |
11.5 |
Notices; Effectiveness; Electronic Communication |
122 |
11.5.1 |
Notices Generally |
122 |
11.5.2 |
Electronic Communications |
122 |
11.5.3 |
Change of Address, Etc |
123 |
11.5.4 |
Platform |
123 |
11.6 |
Severability |
123 |
11.7 |
Duration; Survival |
124 |
11.8 |
Successors and Assigns |
124 |
11.8.1 |
Successors and Assigns Generally |
124 |
11.8.2 |
Assignments by Lenders |
124 |
11.8.3 |
Register |
126 |
11.8.4 |
Participations |
126 |
11.8.5 |
Cashless Settlement |
127 |
11.8.6 |
Arrangers/Bookrunners |
127 |
11.8.7 |
Certain Pledges; Successors and Assigns Generally |
127 |
11.9 |
Confidentiality |
127 |
11.9.1 |
General |
127 |
11.9.2 |
Sharing Information With Affiliates of the Lenders |
128 |
11.10 |
Counterparts; Integration; Effectiveness; Electronic Execution; Electronic Records |
128 |
viii
11.10.1 |
Counterparts; Integration; Effectiveness |
128 |
11.10.2 |
Electronic Execution |
128 |
11.10.2 |
Electronic Records |
129 |
11.11 |
CHOICE OF LAW; SUBMISSION TO JURISDICTION; WAIVER OF VENUE; SERVICE OF PROCESS; WAIVER OF JURY TRIAL |
129 |
11.11.1 |
Governing Law |
129 |
11.11.2 |
SUBMISSION TO JURISDICTION |
129 |
11.11.3 |
WAIVER OF VENUE |
130 |
11.11.4 |
SERVICE OF PROCESS |
130 |
11.11.5 |
WAIVER OF JURY TRIAL |
130 |
11.12 |
USA Patriot Act Notice |
131 |
11.13 |
Acknowledgment and Consent to Bail-In of Affected Financial Institutions |
131 |
11.14 |
Amended and Restated Credit Agreement |
131 |
11.15 |
Acknowledgement Regarding Any Supported QFCs |
131 |
11.16 |
Amendment and Restatement |
132 |
12. |
GUARANTY |
135 |
12.1 |
The Guaranty |
135 |
12.2 |
Obligations Unconditional |
135 |
12.3 |
Reinstatement |
136 |
12.4 |
Certain Additional Waivers |
137 |
12.5 |
Remedies |
137 |
12.6 |
Rights of Contribution |
137 |
12.7 |
Guarantee of Payment; Continuing Guarantee |
137 |
12.8 |
Keepwell |
137 |
12.9 |
Amendment and Restatement |
138 |
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
SCHEDULE 1.1(A) - COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES
SCHEDULE 1.1(B) - PERMITTED LIENS
SCHEDULE 1.1(C) - PERMITTED INVESTMENTS SCHEDULE 1.1(D) - PROJECT VITALITY CONSOLIDATED EBITDA
ix
SCHEDULE 1.1(E) - EXISTING LETTERS OF CREDIT
SCHEDULE 6.1.2(i) - SUBSIDIARIES
SCHEDULE 6.1.2(ii) - REAL PROPERTY
SCHEDULE 8.1.3 - INSURANCE REQUIREMENTS RELATING TO COLLATERAL
SCHEDULE 8.1.11 POST-CLOSING OBLIGATIONS
SCHEDULE 8.2.1 - PERMITTED INDEBTEDNESS
EXHIBITS
EXHIBIT 1.1(A) - ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1(B) - JOINDER AGREEMENT
EXHIBIT 1.1(C) - [RESERVED]
EXHIBIT 1.1(D) - REVOLVING CREDIT NOTE
EXHIBIT 1.1(E) - SWING LOAN NOTE
EXHIBIT 1.1(F) - TERM NOTE
EXHIBIT 2.5.1 - LOAN REQUEST
EXHIBIT 2.5.2 - SWING LOAN REQUEST
EXHIBIT 5.9.7(A) - U.S. TAX COMPLIANCE CERTIFICATE (For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
EXHIBIT 5.9.7(B) - U.S. TAX COMPLIANCE CERTIFICATE (For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
EXHIBIT 5.9.7(C) - U.S. TAX COMPLIANCE CERTIFICATE (For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
EXHIBIT 5.9.7(D) - U.S. TAX COMPLIANCE CERTIFICATE (For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
EXHIBIT 8.2.6 - ACQUISITION COMPLIANCE CERTIFICATE
x
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
EXHIBIT 8.3.3 - COMPLIANCE CERTIFICATE THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT (as hereafter amended, the “Agreement”) is dated as of October 28, 2020 and is made by and among HELIOS TECHNOLOGIES, INC., a Florida corporation (the “Borrower”), each of the GUARANTORS (as hereinafter defined), the LENDERS (as hereinafter defined) and PNC BANK, NATIONAL ASSOCIATION, in its capacity as administrative agent for the Lenders under this Agreement.
The Borrower (formerly known as Sun Hydraulics Corporation), the Guarantors, the Lenders party thereto and the Administrative Agent are parties to that certain Amended and Restated Credit Agreement dated as of November 22, 2016 (as amended, restated, modified or supplemented, the “Existing Credit Agreement”). The Borrower (i) requests the Lenders to provide a revolving credit facility in the aggregate principal amount of $400,000,000 as of the Closing Date and (ii) further requests the Lenders to provide a term loan facility in the aggregate principal amount of $200,000,000 as of the Closing Date, collectively, as evidenced by this Agreement which amends, restates and supersedes the Existing Credit Agreement in its entirety. In consideration of their mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the parties hereto covenant and agree as follows:
1.CERTAIN DEFINITIONS
1.1 Certain Definitions. In addition to words and terms defined elsewhere in this Agreement, the following words and terms shall have the following meanings, respectively, unless the context hereof clearly requires otherwise:
“Adjustment Period” shall have the meaning specified in Section 8.2.14 [Maximum Leverage Ratio].
“Administrative Agent” shall mean PNC Bank, National Association, and its successors and assigns, in its capacity as administrative agent hereunder.
“Administrative Agent’s Fee” shall have the meaning specified in Section 10.9 [Administrative Agent’s Fee].
“Administrative Agent’s Letter” shall have the meaning specified in Section 10.9 [Administrative Agent’s Fee].
“Affected Financial Institution” shall mean (a) any EEA Financial Institution, or (b) any UK Financial Institution.
“Affiliate” as to any Person shall mean any other Person (i) which directly or indirectly controls, is controlled by, or is under common control with such Person, (ii) which beneficially owns or holds 10% or more of any class of the voting or other equity interests of such Person, or (iii) 10% or more of any class of voting interests or other equity interests of which is beneficially owned or held, directly or indirectly, by such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.
1
“Anti-Corruption Laws” shall mean the United States Foreign Corrupt Practices Act of 1977, as amended, the UK Bribery Act 2010, and any other similar anti-corruption laws or regulations administered or enforced in any jurisdiction in which the Borrower or any of its Subsidiaries conduct business.
“Anti-Terrorism Law” shall mean any Law in force or hereinafter enacted related to terrorism, money laundering or Sanctioned Persons, including Executive Order No. 13224, the USA PATRIOT Act, the International Emergency Economic Powers Act, 50 U.S.C. 1701, et. seq., the Trading with the Enemy Act, 50 U.S.C. App. 1, et. seq., 18 U.S.C. § 2332d, and 18 U.S.C. § 2339B and any regulations or directives promulgated under these provisions.
“Applicable Commitment Fee Rate” shall mean the percentage rate per annum based on the Leverage Ratio then in effect according to the pricing grid in the definition of “Applicable Margin” below the heading “Commitment Fee.”
“Applicable Letter of Credit Fee Rate” shall mean the percentage rate per annum based on the Leverage Ratio then in effect according to the pricing grid in the definition of “Applicable Margin” below the heading “Letter of Credit Fee.”
“Applicable Margin” shall mean the corresponding percentages per annum as specified below based on the Leverage Ratio:
Pricing Level |
Leverage Ratio |
Commitment Fee |
Letter of Credit Fee |
Term Rate Loans denominated in Dollars, Canadian Dollars, Australian Dollars, British Pounds Sterling and Euros; and Swing Loans |
Base Rate Loans denominated in Dollars |
I |
Less than 1.00 to 1.00 |
0.175% |
1.50% |
1.50% |
0.50% |
II |
Greater than or equal to 1.00 to 1.00, but less than 1.75 to 1.00 |
0.20% |
1.75% |
1.75% |
0.75% |
III |
Greater than or equal to 1.75 to 1.00, but less than 2.50 to 1.00 |
0.25% |
2.00% |
2.00% |
1.00% |
IV |
Greater than or equal to 2.50 to 1.00, but less than 3.25 to 1.00 |
0.25% |
2.25% |
2.25% |
1.25% |
V |
Greater than or equal to 3.25 to 1.00 |
0.30% |
2.75% |
2.75% |
1.75% |
2
The Applicable Margin shall be determined and adjusted quarterly on the date on which the Borrower is required to provide a Compliance Certificate pursuant to Section 8.3.3 [Certificate of the Borrower] for the most recently ended fiscal quarter of the Borrower (each such date, a “Calculation Date”); provided that (a) the Applicable Margin shall be based on Pricing Level V until the Calculation Date related to the Compliance Certificate delivered for the first full fiscal quarter after the fiscal quarter in which the Closing Date occurs, and, thereafter the Pricing Level shall be determined by reference to the Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Borrower preceding the applicable Calculation Date, and (b) if the Borrower fails to provide any Compliance Certificate when due as required by Section 8.3.3 [Certificate of the Borrower], the Applicable Margin from the date on which such Compliance Certificate was required to have been delivered shall be based on Pricing Level V until such time as such Compliance Certificate is delivered, at which time the Pricing Level shall be determined by reference to the Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Borrower preceding such Calculation Date. The applicable Pricing Level shall be effective from one Calculation Date until the next Calculation Date, except as provided in the preceding sentence. Any adjustment in the Pricing Level shall be applicable to all extensions of credit then existing or subsequently made or issued.
Notwithstanding the foregoing, in the event that any financial statement or Compliance Certificate delivered pursuant to Section 8.3.1 [Quarterly Financial Statements], Section 8.3.2 [Annual Financial Statements] or Section 8.3.3 [Certificate of the Borrower], respectively, is shown to be inaccurate (regardless of whether (i) this Agreement is in effect, (ii) any Commitments are in effect, or (iii) any Loan or Letter of Credit Obligation is outstanding when such inaccuracy is discovered or such financial statement or Compliance Certificate was delivered), and such inaccuracy, if corrected, would have led to the application of a higher Applicable Margin for any period (an “Applicable Period”) than the actual Applicable Margin applied for such Applicable Period, then (A) the Borrower shall immediately deliver to the Administrative Agent a corrected Compliance Certificate for such Applicable Period, (B) the Applicable Margin for such Applicable Period shall be determined as if the Leverage Ratio in the corrected Compliance Certificate were applicable for such Applicable Period, and (C) the Borrower shall immediately and retroactively be obligated to pay to the Administrative Agent (for the benefit of the applicable Lenders) the accrued additional interest and fees owing as a result of such increased Applicable Margin for such Applicable Period, which payment shall be promptly applied by the Administrative Agent in accordance with Section 5.4 [Administrative Agent’s Clawback]. Nothing in this paragraph shall limit the rights of the Administrative Agent and Lenders with respect to Sections 5.1 [Payments] and 9.2 [Consequences of Event of Default] nor any of their other rights under this Agreement or any other Loan Document. The Borrower’s obligations under this paragraph shall survive the termination of the Commitments and the repayment of all other Obligations hereunder.
“Applicable Time” means, with respect to any Loans and payments in any Optional Currency, the local time in the place of settlement for such Optional Currency as may be determined by the Administrative Agent or the Issuing Lender, as the case may be, to be necessary for timely settlement on the relevant date in accordance with normal banking procedures in the place of payment.
“Approved Fund” shall mean any fund that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of business and that is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that administers or manages a Lender.
3
“Asset Sale” shall mean any disposition or series of dispositions by the Borrower or any of its Subsidiaries after the date hereof of the type described in clause (iv) of Section 8.2.7 [Dispositions of Assets or Subsidiaries].
“Assignment and Assumption Agreement” shall mean an assignment and assumption agreement entered into by a Lender and an assignee permitted under Section 11.8.2 [Assignments by Lenders], in substantially the form of Exhibit 1.1(A).
“Australian Dollar” shall mean the lawful currency of Australia.
“Australian Rate Lookback Day” shall have the meaning specified in the definition of “Eurocurrency Rate”
“Authorized Officer” shall mean, with respect to any Loan Party, the Chief Executive Officer, President, Chief Financial Officer, Treasurer, Chief Operating Officer, Chief Legal and Compliance Officer, Secretary or Assistant Secretary of such Loan Party, any manager or the members (if member managed) in the case of any Loan Party which is a limited liability company, or such other individuals, designated by written notice to the Administrative Agent from the Borrower, authorized to execute notices, reports and other documents on behalf of such Loan Party required hereunder. The Borrower may amend such list of individuals from time to time by giving written notice of such amendment to the Administrative Agent.
“Bail-In Action” shall mean, the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” shall mean, (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, rule, regulation or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Base Rate” shall mean, for any day, a fluctuating per annum rate of interest equal to the highest of (i) the Overnight Bank Funding Rate, plus 0.5%, (ii) the Prime Rate, and (iii) Daily Simple SOFR, plus the SOFR Adjustment, plus 1.00%, so long as Daily Simple SOFR is offered, ascertainable and not unlawful; provided, however, if the Base Rate as determined above would be less than zero, then such rate shall be deemed to be zero. Any change in the Base Rate (or any component thereof) shall take effect at the opening of business on the day such change occurs. Notwithstanding anything to the contrary contained herein, in the case of any event specified in Section 4.4.1 [Unascertainable; Increased Costs; Deposits Not Available] or Section 4.4.2[Illegality], to the extent any such determination affects the calculation of the Base Rate, the definition hereof shall be calculated without reference to clause (iii) until the circumstances giving rise to such event no longer exist.
4
“Base Rate Loan” shall mean a Loan that bears interest at a rate based on the Base Rate.
“Base Rate Option” shall mean the option of the Borrower to have Loans bear interest at the rate and under the terms set forth in Section 4.1.1(i)(A) [Revolving Credit Base Rate Option] or Section 4.1.3(i) [Term Loan Base Rate Option], as applicable. The Base Rate Option shall only be available for Loans denominated in Dollars.
“Beneficial Ownership Certification” shall mean a certification regarding beneficial ownership required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” shall mean 31 C.F.R. § 1010.230.
“BHC Act Affiliate” of a party shall mean an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
“BMO Harris Bank” shall mean BMO Harris Bank, N.A.
“Borrower” shall have the meaning specified in the introductory paragraph.
“Borrowing Date” shall mean, with respect to any Loan, the date for the making thereof or the renewal or conversion thereof at or to the same or a different Interest Rate Option, which date shall be a Business Day.
“Borrowing Tranche” shall mean specified portions of Term Loans, Revolving Credit Loans, or Swing Loans, as the context may require, consisting of simultaneous loans of the same Type in the same Currency, and in the case of Term Rate Loans, having the same Interest Period. For the avoidance of doubt, Base Rate Loans shall be considered one Borrowing Tranche.
“British Pounds Sterling” shall mean the lawful currency of the United Kingdom.
“Business Day” shall mean any day other than a Saturday or Sunday or a legal holiday on which commercial banks are authorized or required to be closed, or are in fact closed, for business in Pittsburgh, Pennsylvania; provided that for purposes of any direct or indirect calculation or determination of, or when used in connection with any interest rate settings, fundings, disbursements, settlements, payments, or other dealings with respect to any (i) Term SOFR Rate Loan or Daily SOFR Loan, the term “Business Day” shall mean any such day that is also a U.S. Government Securities Business Day, (ii) Eurocurrency Rate Loan, the term “Business Day” shall mean any such day that is also a Eurocurrency Banking Day; and (iii) Term RFR Loan, the term “Business Day” shall mean any such day that is also a Term RFR Business Day.
“Canadian Dollar” shall mean the lawful currency of Canada.
“Capital Stock” shall mean any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing, but in no event will Capital Stock include any debt securities convertible or exchangeable into equity unless and until actually converted or exchanged.
5
“Cash Collateralize” shall mean, to pledge and deposit with or deliver to the Administrative Agent, for the benefit of one or more of the Issuing Lender or the Lenders, as collateral for Letter of Credit Obligations or obligations of Lenders to fund participations in respect of Letter of Credit Obligations, cash or deposit account balances or, if the Administrative Agent and each applicable Issuing Lender shall agree in their sole discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to the Administrative Agent and each applicable Issuing Lender. “Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.
“Cash Management Agreements” shall have the meaning specified in Section 2.6.6 [Swing Loans Under Cash Management Agreements].
“Cash Management Bank” shall mean any Person in its capacity as a party to such Other Lender Provided Financial Service Product that (i) at the time it enters into an Other Lender Provided Financial Service Product, is a Lender or an Affiliate of a Lender, or (ii) on the Closing Date, it (or its Affiliate), or the at the time it (or its Affiliate) becomes a Lender, is party to an Other Lender Provided Financial Service Product.
“CDOR Rate” shall have the meaning specified in the definition of “Eurocurrency Rate”
“CDOR Lookback Day” shall have the meaning specified in the definition of “Eurocurrency Rate”
“CEA” shall mean the Commodity Exchange Act (7 U.S.C.§1 et seq.), as amended from time to time, and any successor statute.
“CFTC” shall mean the Commodity Futures Trading Commission or any successor agency.
“Change in Law” shall mean the occurrence, after the date of this Agreement, of any of the following: (i) the adoption or taking effect of any new Law, (ii) any change in any Law or in the administration, interpretation, implementation or application thereof by any Official Body or (iii) the making or issuance of any request, rule, guideline or directive (whether or not having the force of Law) by any Official Body; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, regulations, guidelines, interpretations or directives thereunder or issued in connection therewith (whether or not having the force of Law) and (y) all requests, rules, regulations, guidelines, interpretations or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities (whether or not having the force of Law), in each case pursuant to Basel III, shall in each case be deemed to be a Change in Law regardless of the date enacted, adopted, issued, promulgated or implemented.
“Change of Control” shall mean (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), shall become, or obtain rights (whether by means or warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 35% of the Capital Stock of the Borrower entitled to vote in the election of the board of directors or other equivalent governing body of the Borrower, or (b) in any twelve (12) month period, occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the board of directors of the Borrower nor (ii) appointed by directors so nominated.
6
“CIP Regulations” shall have the meaning specified in Section 10.12 [No Reliance on Administrative Agent’s Customer Identification Program].
“Closing Date” shall mean the Business Day on which the first Loan shall be made, which shall be October 28, 2020.
“Code” shall mean the Internal Revenue Code of 1986, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect.
“Collateral” shall mean the collateral under the Collateral Documents.
“Collateral Documents” shall mean, collectively, (i) the Security and Pledge Agreement, and (ii) any other security documents executed and delivered by any Loan Party pursuant to Section 8.1.8 [Further Assurances].
“Commitment” shall mean as to any Lender the aggregate of its Revolving Credit Commitment, Term Loan Commitment and, in the case of PNC, its Swing Loan Commitment, and Commitments shall mean the aggregate of the Revolving Credit Commitments, Term Loan Commitments and Swing Loan Commitment of all of the Lenders.
“Commitment Fee” shall have the meaning specified in Section 2.3 [Commitment Fees].
“Commodity Exchange Act” shall mean the Commodity Exchange Act (7 U.S.C. § 1 et seq.).
“Communications” shall mean as is specified in Section 11.5.4 [Platform].
“Compliance Certificate” shall have the meaning specified in Section 8.3.3 [Certificate of the Borrower].
“Computation Date” shall have the meaning specified in Section 2.12.1 [Periodic Computations of Dollar Equivalent Amounts of Revolving Credit Loans that are Optional Currency Loans and Letters of Credit Outstanding; Repayment in Same Currency].
“Conforming Changes” means, with respect to the Term SOFR Rate, Daily Simple SOFR, the Eurocurrency Rate, Term RFR or any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Business Day,” the definition of “Interest Period,” the definition of “U.S.
7
Government Securities Business Day,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of the Term SOFR Rate, Daily Simple SOFR, the Eurocurrency Rate, Term RFR or such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of the Term SOFR Rate, Daily Simple SOFR, the Eurocurrency Rate, Term RFR or the Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Connection Income Taxes” shall mean Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“Consideration” shall mean, with respect to any Permitted Acquisition, the aggregate, without duplication, of: (a) the cash paid by any of the Loan Parties, directly or indirectly, to the seller in connection therewith, (b) the Indebtedness incurred or assumed by any of the Loan Parties, whether in favor of the seller or otherwise and whether fixed or contingent, (c) any guaranty given or incurred by any Loan Party in connection therewith, and (d) any other consideration given or obligation incurred by any of the Loan Parties in connection therewith.
“Consolidated EBITDA” for any period of determination shall mean (i) the sum of (a) net income, (b) depreciation, (c) amortization, (d) other non-cash charges to net income (excluding non-cash charges that are expected to become cash charges in a future period or that are reserves for future cash charges), (e) interest expense, (f) income tax expense, (g) one-time fees and expenses relating to this Agreement and any Permitted Acquisition to the extent reducing net income in such period of determination not to exceed $15,000,000 in the aggregate in any period of determination, (h) 100% of any contingent consideration expense related to future acquisitions to the extent reducing net income in such period, and (i) other one-time operating and restructuring charges not to exceed $10,000,000 in the aggregate in any period of determination, minus (ii) non-cash credits to net income (excluding non-cash credits that represent an accrual or reserve for a future or potential future cash payment), in each case of the Borrower and its Subsidiaries for such period determined and consolidated in accordance with GAAP (as applicable). For any period of determination in which a Loan Party has completed a Permitted Acquisition or any sale or other disposition of all or substantially all of a line of business, Consolidated EBITDA shall be calculated on a pro forma basis for such period as if such Permitted Acquisition or disposition had occurred on the first (1st) day of such period, as evidenced by pro forma financial statements in form and substance satisfactory to the Administrative Agent, in each case determined and consolidated for the Borrower and its Subsidiaries in accordance with GAAP (as applicable); provided that, in preparing such pro forma financial statements, (a) with respect to any such disposition or (i) income statement and cash flow statement items attributable to the Person or property disposed of shall be excluded to the extent relating to any period occurring prior to the date of such transaction and (ii) Indebtedness which is retired shall be excluded and deemed to have been retired as of the first day of the applicable period, and (b) with respect to any such acquisition, (i) income statement and cash flow statement items attributable to the Person or property acquired shall only be included to the extent (A) such items are not otherwise included in such income statement and cash flow statement items for the Borrower and its Subsidiaries in accordance with GAAP or in accordance with any defined terms set forth in this Section 1.1 [Certain Definitions] and (B) such items are supported by financial statements of, or other information related to, the Person or property acquired, in each case reasonably satisfactory to the Administrative Agent, and (ii) any Indebtedness incurred or assumed by any Loan Party or any Subsidiary (including the Person or property acquired) in connection with such transaction and any Indebtedness of the Person or property acquired which is not retired in connection with such transaction shall be deemed to have been incurred as of the first day of the applicable period; provided that, notwithstanding the foregoing, following the closing of the Project Vitality Acquisition, the pro forma amounts to be included in the calculation of Consolidated EBITDA hereunder for the last fiscal quarter of the 2019 fiscal year and the first, second, third and stub (through the Closing Date) fourth fiscal quarters of the 2020 fiscal year, attributable to the Project Vitality Acquisition, shall be as set forth on Schedule 1.1(D).
8
“Covered Entity” shall mean (a) the Borrower, each of Borrower’s Subsidiaries, all Guarantors and all pledgors of Collateral, and (b) each Person that, directly or indirectly, is controlled by or is in control of a Person described in clause (a) above. For purposes of this definition, control of a Person shall mean the direct or indirect (x) ownership of, or power to vote, 25% or more of the issued and outstanding equity interests having ordinary voting power for the election of directors of such Person or other Persons performing similar functions for such Person, or (y) power to direct or cause the direction of the management and policies of such Person whether by ownership of equity interests, contract or otherwise.
“Currency” means Dollars or any Optional Currency and “Currencies” shall mean, collectively, Dollars and each Optional Currency.
“Daily Simple SOFR” means, for any day (a “SOFR Rate Day”), the interest rate per annum determined by the Administrative Agent by dividing (the resulting quotient rounded upwards, at the Administrative Agent’s discretion, to the nearest 1/100th of 1%) (A) SOFR for the day (the “SOFR Determination Date”) that is 2 Business Days prior to (i) such SOFR Rate Day if such SOFR Rate Day is a Business Day or (ii) the Business Day immediately preceding such SOFR Rate Day if such SOFR Rate Day is not a Business Day, by (B) a number equal to 1.00 minus the SOFR Reserve Percentage, in each case, as such SOFR is published by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate) on the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org, or any successor source identified by the Federal Reserve Bank of New York or its successor administrator for the secured overnight financing rate from time to time. If Daily Simple SOFR as determined above would be less than the SOFR Floor, then Daily Simple SOFR shall be deemed to be the SOFR Floor. If SOFR for any SOFR Determination Date has not been published or replaced with a Benchmark Replacement by 5:00 p.m. (Pittsburgh, Pennsylvania time) on the second Business Day immediately following such SOFR Determination Date, then SOFR for such SOFR Determination Date will be SOFR for the first Business Day preceding such SOFR Determination Date for which SOFR was published in accordance with the definition of “SOFR”; provided that SOFR determined pursuant to this sentence shall be used for purposes of calculating Daily Simple SOFR for no more than 3 consecutive SOFR Rate Days. If and when Daily Simple SOFR as determined above changes, any applicable rate of interest based on Daily Simple SOFR will change automatically without notice to the Borrower, effective on the date of any such change.
9
“Daily SOFR Loan” means a Loan that bears interest based on Daily Simple SOFR.
“Daily SOFR Option” means the option of the Borrower to have Swing Loans bear interest at the rate and under the terms specified in Section 4.1.2 [Swing Loan Interest Rate].
“Debtor Relief Laws” shall mean the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“Defaulting Lender” shall mean subject to Section 2.10.2 [Defaulting Lender Cure], any Lender that (a) has failed to (i) fund all or any portion of its Loans within two Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent, the Issuing Lender, the Swing Loan Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swing Loans) within two Business Days of the date when due, (b) has notified the Borrower, the Administrative Agent, the Issuing Lender or the Swing Loan Lender in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity, or (iii) become the subject of a Bail-in Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by an Official Body so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Official Body) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.10.2 [Defaulting Lender Cure]) upon delivery of written notice of such determination to the Borrower, the Issuing Lender, the Swing Loan Lender and each Lender.
10
“Designated Jurisdiction” shall mean any country or territory that itself is specifically targeted by a sanctions program identified on the list maintained by OFAC and available at http://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx, or any successor list maintained by, or as otherwise published from time to time by, OFAC.
“Dollar, Dollars, U.S. Dollars” and the symbol $ shall mean lawful money of the United States of America.
“Dollar Equivalent” shall mean, with respect to any amount of any currency, as of any Computation Date, the Equivalent Amount of such currency expressed in Dollars.
“Domestic Subsidiary” shall mean each Subsidiary of Borrower or any other U.S. domestic Loan Party domiciled in the United States which may now exist or which may hereafter be acquired, formed or created.
“Drawing Date” shall have the meaning specified in Section 2.9.3.1.
“EEA Financial Institution” shall mean (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” shall mean any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” shall mean any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Effective Date” shall mean the date indicated in a document or agreement to be the date on which such document or agreement becomes effective, or, if there is no such indication, the date of execution of such document or agreement.
“Effective Federal Funds Rate” shall mean for any day the rate per annum (based on a year of 360 days and actual days elapsed and rounded upward to the nearest 1/100 of 1% announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the “Effective Federal Funds Rate” as of the date of this Agreement; provided that if such Federal Reserve Bank (or its successor) does not announce such rate on any day, the “Effective Federal Funds Rate” for such day shall be the Effective Federal Funds Rate for the last day on which such rate was announced. Notwithstanding the foregoing, if the Effective Federal Funds Rate as determined under any method above would be less than zero percent (0.00%), such rate shall be deemed to be zero percent (0.00%) for purposes of this Agreement.
11
“Eligible Contract Participant” shall mean an “eligible contract participant” as defined in the CEA and regulations thereunder.
“Eligibility Date” shall mean, with respect to each Loan Party and each Swap, the date on which this Agreement or any other Loan Document becomes effective with respect to such Swap (for the avoidance of doubt, the Eligibility Date shall be the Effective Date of such Swap if this Agreement or any other Loan Document is then in effect with respect to such Loan Party, and otherwise it shall be the Effective Date of this Agreement and/or such other Loan Document(s) to which such Loan Party is a party).
“Environmental Laws” shall mean all applicable federal, state, local, tribal, territorial and foreign Laws (including common law), constitutions, statutes, treaties, regulations, rules, ordinances and codes and any consent decrees, settlement agreements, judgments, orders, directives, policies or programs issued by or entered into with an Official Body pertaining or relating to: (i) pollution or pollution control; (ii) protection of human health from exposure to regulated substances; (iii) protection of the environment and/or natural resources; (iv) employee safety in the workplace; (v) the presence, use, management, generation, manufacture, processing, extraction, treatment, recycling, refining, reclamation, labeling, packaging, sale, transport, storage, collection, distribution, disposal or release or threat of release of regulated substances; (vi) the presence of contamination; (vii) the protection of endangered or threatened species; and (viii) the protection of environmentally sensitive areas.
“Equivalent Amount” shall mean, at any time, as determined by Administrative Agent (which determination shall be conclusive absent manifest error), with respect to an amount of any currency (the “Reference Currency”) which is to be computed as an equivalent amount of another currency (the “Equivalent Currency”), the amount of such Equivalent Currency converted from such Reference Currency at Administrative Agent’s rate (based on the market rates then prevailing and available to Administrative Agent) for such Equivalent Currency in exchange for such Reference Currency at a time determined by Administrative Agent on the date that is the applicable Eurocurrency Rate Lookback Day (for amounts relating to Eurocurrency Rate Loans and Letters of Credit denominated in an Optional Currency to which the Eurocurrency Rate would apply), the applicable Term RFR Lookback Day (for amounts relating to Term RFR Loans and Letters of Credit denominated in an Optional Currency to which a Term RFR would apply) immediately preceding the date of determination, or otherwise on the date which is two (2) Business Days immediately preceding the date of determination or otherwise with respect to Loans to which any other Interest Rate Option applies, the lookback date applicable thereto (or if such service ceases to be available or ceases to provide such rate of exchange, the equivalent of such amount in Dollars as determined by the Administrative Agent or the Issuing Lender, as applicable using any method of determination it deems appropriate in its sole discretion).
“Equivalent Currency” shall have the meaning specified in the definition of “Equivalent Amount”.
12
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect.
“ERISA Event” shall mean (a) with respect to a Pension Plan, a reportable event under Section 4043 of ERISA as to which event (after taking into account notice waivers provided for in the regulations) there is a duty to give notice to the PBGC; (b) a withdrawal by Borrower or any member of the ERISA Group from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by Borrower or any member of the ERISA Group from a Multiemployer Plan, or occurrence of an event described in Section 4041A(a) of ERISA that results in the termination of a Multiemployer Plan; (d) the filing of a notice of intent to terminate a Pension Plan, the treatment of a Pension Plan amendment as a termination under Section 4041(e) of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; (f) the determination that any Pension Plan or Multiemployer Plan is considered an at-risk plan or a plan in endangered or critical status within the meaning of Sections 430.431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; or (g) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon Borrower or any member of the ERISA Group.
“ERISA Group” shall mean, at any time, the Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control and all other entities which, together with the Borrower, are treated as a single employer under Section 414 of the Code or Section 4001(b)(1) of ERISA.
“Erroneous Payment” shall have the meaning assigned to it in Section 11.17.1.
“Erroneous Payment Deficiency Assignment” shall have the meaning assigned to it in Section 11.17.4.
“Erroneous Payment Impacted Class” shall have the meaning assigned to it in Section 11.17.4.
“Erroneous Payment Return Deficiency” shall have the meaning assigned to it in Section 11.17.4.
“Erroneous Payment Subrogation Rights” shall have the meaning assigned to it in Section 11.17.4.
“EURIBOR” has the meaning specified in the definition of “Eurocurrency Rate”.
“Euro” shall refer to the lawful currency of the Participating Member States.
“Eurocurrency Rate” shall mean the following:
13
(a) for Eurocurrency Rate Borrowings denominated in Canadian Dollars, the rate per annum (the “CDOR Rate”) as determined by the Administrative Agent, equal to the arithmetic average rate applicable to Canadian Dollar bankers’ acceptances (C$BAs) for the applicable Interest Period appearing on the Bloomberg page BTMM CA, rounded upwards, at the Administrative Agent’s discretion, to the nearest 1/100 of 1% per annum, at approximately 11:00 a.m. Eastern Time, two (2) Eurocurrency Banking Days prior to the commencement of such Interest Period; provided that if by such time such rate does not appear on the Bloomberg page BTMM CA, the CDOR Rate on such day shall be the rate for such period applicable to Canadian Dollar bankers’ acceptances quoted by a bank listed in Schedule I of the Bank Act (Canada), as selected by the Administrative Agent, as of 11:00 a.m. Eastern Time on such day or, if such day is not a Business Day, then on the immediately preceding Business Day; provided further that any CDOR Rate so determined based on the immediately preceding Business Day shall be utilized for purposes of calculation of the Eurocurrency Rate for no more than three (3) consecutive Business Days (any such day, collectively, the “CDOR Lookback Day”);
(b) for Eurocurrency Rate Borrowings denominated in Australian Dollars, the rate per annum equal to the Australian Bank Bill Swap Bid Rate or the successor thereto as approved by the Administrative Agent as published by Bloomberg (or on any successor or substitute service providing rate quotations comparable to those currently provided by such service, as determined by the Administrative Agent from time to time) for the applicable Interest Period, rounded upwards, at the Administrative Agent’s discretion, to the nearest 1/100th of 1% per annum at approximately 10:00 a.m. (Sydney, Australia time), two (2) Eurocurrency Banking Days prior to the commencement of such Interest Period, as the rate for deposits in Australian Dollars with a maturity comparable to such Interest Period; provided, that if by such time the Australian Bank Bill Swap Bid Rate in respect of such day has not been so published, or such day is not a Business Day, then the Australian Bank Bill Swap Bid Rate for such day will be the Australian Bank Bill Swap Bid Rate as published in respect of the first preceding Business Day for which such Australian Bank Bill Swap Bid Rate was published thereon; provided further that any Australian Bank Bill Swap Bid Rate so determined based on the first preceding Business Day shall be utilized for purposes of calculation of the Eurocurrency Rate for no more than three (3) consecutive Business Days (any such day, collectively, the “Australian Rate Lookback Day”); and
(c) for Eurocurrency Rate Borrowings denominated in Euros, the rate per annum equal to the Euro Interbank Offered Rate (“EURIBOR”) as administered by the European Money Markets Institute (or any other Person that takes over the administration of such rate) for a period equal in length to such Interest Period, as displayed on the applicable Bloomberg page (or on any successor or substitute page or service providing such quotations as determined by the Administrative Agent from time to time) at approximately 11:00 a.m. (Brussels time) two (2) Eurocurrency Banking Days prior to the commencement of such Interest Period; provided, that if by such time the EURIBOR in respect of such day has not been so published, or if such day is not a Business Day, then the EURIBOR for such day will be the EURIBOR as published in respect of the first preceding Business Day for which such EURIBOR Rate was published thereon; provided further that any EURIBOR so determined based on the first preceding Business Day shall be utilized for purposes of calculation of the Eurocurrency Rate for no more than three (3) consecutive Business Days (any such day, collectively, the “EURIBOR Lookback Day”);
14
provided that if the adjusted Eurocurrency Rate as determined above would be less than the Floor, such rate shall be deemed to be the Floor for purposes of this Agreement. The Eurocurrency Rate for any Loans shall be based upon the Eurocurrency Rate for the Currency in which such Loans are requested. The Eurocurrency Rate for each outstanding Eurocurrency Rate Loan shall be adjusted automatically as of the effective date of any change in the Eurocurrency Reserve Percentage. The Administrative Agent shall give prompt notice to the Borrower of the Eurocurrency Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.
“Eurocurrency Rate Borrowing” means, as to any Borrowing Tranche, a Eurocurrency Rate Loan comprising such Borrowing Tranche.
“Eurocurrency Rate Lookback Days” means, collectively, a CDOR Lookback Day, an Australian Rate Lookback Day and an EURIBOR Lookback Day, and each such day is a “Eurocurrency Rate Lookback Day”
“Eurocurrency Reserve Percentage” means, for any day during any Interest Period, the reserve percentage in effect on such day, whether or not applicable to any Lender, under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, special, supplemental or other marginal reserve requirement) with respect to eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D) or any other reserve ratio or analogous requirement of any central banking or financial regulatory authority imposed in respect of the maintenance of the Commitments or the funding of the Loans.
“Eurocurrency Rate Loan” shall mean a Loan that bears interest at a rate based on the Eurocurrency Rate.
“Eurocurrency Rate Option” shall mean the option of the Borrower to have Loans bear interest at the rate and under the terms set forth in Section 4.1.1(ii)(A) [Revolving Credit Term Rate Loan Option] or Section 4.1.3(ii) [Term Loan Eurocurrency Rate Option], as applicable.
“Eurocurrency Banking Day” means any day which is, as applicable, for Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to (i) Canadian Dollars, any day on which banks are open for business in Canada; and (ii) Australian Dollars, any day on which banks are open for business in Australia.
“Event of Default” shall mean any of the events described in Section 9.1 [Events of Default] and referred to therein as an “Event of Default.”
“Exchange Act” shall have the meaning specified in the definition of Change of Control.
“Excluded Account” shall mean (a) any deposit account used solely for funding payroll or segregating payroll taxes or funding other employee wage or benefit payments in the ordinary course of business, (b) any fiduciary or trust account, (c) any other zero balance account or disbursement only account and (d) any other deposit account with an average monthly balance of not more than $100,000; provided, that the aggregate average monthly balance of all deposit accounts and securities accounts constituting Excluded Accounts under this clause (d) shall not exceed $500,000.
15
“Excluded Hedge Liability or Liabilities” shall mean, with respect to each Loan Party, each of its Swap Obligations if, and only to the extent that, all or any portion of this Agreement or any other Loan Document that relates to such Swap Obligation is or becomes illegal under the CEA, or any rule, regulation or order of the CFTC, solely by virtue of such Loan Party’s failure to qualify as an Eligible Contract Participant on the Eligibility Date for such Swap. Notwithstanding anything to the contrary contained in the foregoing or in any other provision of this Agreement or any other Loan Document, the foregoing is subject to the following provisos: (a) if a Swap Obligation arises under a master agreement governing more than one Swap, this definition shall apply only to the portion of such Swap Obligation that is attributable to Swaps for which such guaranty or security interest is or becomes illegal under the CEA, or any rule, regulations or order of the CFTC, solely as a result of the failure by such Loan Party for any reason to qualify as an Eligible Contract Participant on the Eligibility Date for such Swap, (b) if a guarantee of a Swap Obligation would cause such obligation to be an Excluded Hedge Liability but the grant of a security interest would not cause such obligation to be an Excluded Hedge Liability, such Swap Obligation shall constitute an Excluded Hedge Liability for purposes of the guaranty but not for purposes of the grant of the security interest, and (c) if there is more than one Loan Party executing this Agreement or the other Loan Documents and a Swap Obligation would be an Excluded Hedge Liability with respect to one or more of such Persons, but not all of them, the definition of Excluded Hedge Liability or Liabilities with respect to each such Person shall only be deemed applicable to (i) the particular Swap Obligations that constitute Excluded Hedge Liabilities with respect to such Person, and (ii) the particular Person with respect to which such Swap Obligations constitute Excluded Hedge Liabilities.
“Excluded Property” shall mean, with respect to any Loan Party, (a) any owned real property, (b) any leased real property, (c) unless requested by the Administrative Agent or the Required Lenders, any trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights for which a perfected Lien thereon is not effected either by filing of a Uniform Commercial Code financing statement or by appropriate evidence of such Lien being filed in either the United States Copyright Office or the United States Patent and Trademark Office, (d) the equity interests of any Foreign Subsidiary to the extent not required to be pledged to secure the Obligations pursuant to Section 8.1.8(a) [Equity Interests], (e) any trucks, trailers, tractors, service vehicles, automobiles, rolling stock or other registered mobile equipment or assets covered by certificates of title or ownership of any Loan Party, (f) any General Intangible (as defined in the Security and Pledge Agreement), permit, lease, license, contract or other Instrument (as defined in the Security and Pledge Agreement) of a Loan Party to the extent the grant of a security interest in such General Intangible, permit, lease, license, contract or other Instrument in the manner contemplated by the Collateral Documents, under the terms thereof or under applicable Law, is prohibited and would result in the termination thereof or give the other parties thereto the right to terminate, accelerate or otherwise alter such Loan Party’s rights, titles and interests thereunder (including upon the giving of notice or the lapse of time or both); provided that (x) any such limitation described in this clause (f) shall only apply to the extent that any such prohibition or right to terminate or accelerate or alter the Loan Party’s rights could not be rendered ineffective pursuant to the UCC (as defined in the Security and Pledge Agreement) or any other applicable Law (including Debtor Relief Laws) or principles of equity and (y) in the event of the termination or elimination of any such prohibition or right or the requirement for any consent contained in any applicable Law, General Intangible, permit, lease, license, contract or other Instrument, to the extent sufficient to permit any such item to no longer constitute Excluded Property hereunder, or upon the granting of any such consent, or waiving or terminating any requirement for such consent, such General Intangible, permit, lease, license, contract or other Instrument shall automatically and simultaneously no longer constitute Excluded Property hereunder, (g) any United States intent-to-use trademark applications to the extent that, and solely during the period in which the grant of a security interest therein would impair the validity or enforceability of or render void or result in the cancellation of, any registration issued as a result of such intent-to-use trademark applications under applicable Law; provided that upon submission and acceptance by the United States Patent and Trademark Office of an amendment to allege pursuant to 15 U.S.C.
16
Section 1060(a) (or any successor provision), such intent-to-use trademark application shall no longer constitute Excluded Property, (h) Excluded Accounts, (i) equipment owned by any Loan Party that is subject to a purchase money Lien or a capital lease obligation to the extent that the Indebtedness secured by such purchase money security interest or capital lease obligation and such Lien is permitted under this Agreement and to the extent that the contractual agreement pursuant to which such Lien is granted (or in the document providing for such capital lease obligation) prohibits or requires the consent of any Person other than a Loan Party and its Affiliates as a condition to the creation of any other Lien on such equipment and (j) those assets as to which the Administrative Agent determines (in its sole discretion) that the burden or cost of obtaining a security interest in or perfection thereof are excessive in relation to the benefit to the Lenders and other Secured Parties of the security to be afforded thereby.
“Excluded Taxes” shall mean any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (i) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (a) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (b) that are Other Connection Taxes, (ii) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (a) such Lender acquires such interest in such Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 5.6.2 [Replacement of a Lender]) or (b) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 5.9.7 [Status of Lenders], amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (iii) Taxes attributable to such Recipient’s failure to comply with Section 5.9.7 [Status of Lenders], and (iv) any U.S. federal withholding Taxes imposed under FATCA (except to the extent imposed due to the failure of the Borrower to provide documentation or information to the IRS).
“Executive Order No. 13224” shall mean the Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.
17
“Existing Letters of Credit” shall mean those letters of credit existing on the Closing Date and identified on Schedule 1.1(E).
“Expiration Date” shall mean, with respect to the Revolving Credit Commitments, October 28, 2025.
“Extended Letter of Credit” shall have the meaning specified in Section 2.9.1.1.
“FATCA” shall mean Sections 1471 through 1474 of the Code (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.
“Floor” shall mean a rate of interest equal to 0%.
“Foreign Currency Hedge” shall mean any foreign exchange transaction, including spot and forward foreign currency purchases and sales, listed or over-the-counter options on foreign currencies, non-deliverable forwards and options, foreign currency swap agreements, currency exchange rate price hedging arrangements, and any other similar transaction providing for the purchase of one currency in exchange for the sale of another currency.
“Foreign Currency Hedge Liabilities” shall have the meaning specified in the definition of Lender Provided Foreign Currency Hedge.
“Foreign Direct Subsidiary” shall mean each first tier, direct Foreign Subsidiary of Borrower or any other U.S. domestic Loan Party which may now exist or which may hereafter be acquired, formed or created.
“Foreign Subsidiary” shall mean any Subsidiary of the Borrower that is organized under the laws of a jurisdiction other than the United States, a State thereof or the District of Columbia.
“Foreign Lender” shall mean (i) if the Borrower is a U.S. Person, a Lender that is not a U.S. Person, and (ii) if the Borrower is not a U.S. Person, a Lender that is resident or organized under the Laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.
“Fronting Exposure” shall mean, at any time there is a Defaulting Lender, (a) with respect to the Issuing Lender, such Defaulting Lender’s Ratable Share of the outstanding Letter of Credit Obligations with respect to Letters of Credit issued by such Issuing Lender other than Letter of Credit Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to any Swing Loan Lender, such Defaulting Lender’s Ratable Share of outstanding Swing Loans made by such Swing Loan Lender other than Swing Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders.
“GAAP” shall mean generally accepted accounting principles as are in effect from time to time, subject to the provisions of Section 1.3 [Accounting Principles; Changes in GAAP], and applied on a consistent basis both as to classification of items and amounts.
18
“Guaranteed Obligations” shall have the meaning specified in Section 12.1 [The Guaranty].
“Guarantor” shall mean (a) with respect to all Obligations, (i) each of the parties to this Agreement which is designated as a “Guarantor” on the signature page hereof, and (ii) each other Person which joins this Agreement as a Guarantor after the date hereof, (b) with respect to (i) any Lender Provided Interest Rate Hedge with any Loan Party (other than the Borrower) or any Subsidiary that is permitted to be incurred pursuant to this Agreement and any Other Lender Provided Financial Service Product owing by any Loan Party (other than the Borrower) or any Subsidiary and (ii) the payment and performance by each Specified Loan Party of its obligations under its Guaranty with respect to all Swap Obligations, the Borrower, and (c) the successors and permitted assigns of the foregoing.
“Guaranty” of any Person shall mean any obligation of such Person guaranteeing or in effect guaranteeing any liability or obligation of any other Person in any manner, whether directly or indirectly, including any agreement to indemnify or hold harmless any other Person, any performance bond or other suretyship arrangement and any other form of assurance against loss, except endorsement of negotiable or other instruments for deposit or collection in the ordinary course of business.
“Guaranty Agreement” shall mean the Guaranty made by the Guarantors in favor of the Administrative Agent, for the benefit of the holders of the Obligations, pursuant to Section 12 [Guaranty].
“Hedge Bank” shall mean any Person in its capacity as a party to such Lender Provided Foreign Currency Hedge or Lender Provided Interest Rate Hedge that (i) at the time it enters into a Lender Provided Foreign Currency Hedge or Lender Provided Interest Rate Hedge, is a Lender or an Affiliate of a Lender, or (ii) on the Closing Date, it (or its Affiliate), or the at the time it (or its Affiliate) becomes a Lender, is party to a Lender Provided Foreign Currency Hedge or Lender Provided Interest Rate Hedge.
“Hedge Liabilities” shall mean collectively, the Foreign Currency Hedge Liabilities and the Interest Rate Hedge Liabilities.
“Hostile Acquisition” shall mean the acquisition of the capital stock or other equity interests of a Person through a tender offer or similar solicitation of the owners of such capital stock or other equity interests which has not been approved (prior to such acquisition) by resolutions of the board of directors of such Person, or by similar action if such Person is not a corporation, or as to which such prior approval by resolutions of the board of directors of such Person has not been withdrawn.
“ICC” shall have the meaning specified in Section 11.11.1 [Governing Law].
“Increasing Lender” shall have the meaning specified in Section 2.11 [Increase in Revolving Credit Commitments; Incremental Term Loans].
“Incremental Term Loan” shall have the meaning specified in Section 2.11 [Increase in Revolving Credit Commitments; Incremental Term Loans]; Incremental Term Loans shall mean collectively all of the Incremental Term Loans.
19
“Indebtedness” shall mean, as to any Person at any time, any and all indebtedness, obligations or liabilities (whether matured or unmatured, liquidated or unliquidated, direct or indirect, absolute or contingent, or joint or several) of such Person for or in respect of: (i) borrowed money, (ii) amounts raised under or liabilities in respect of any note purchase or acceptance credit facility, (iii) reimbursement obligations (contingent or otherwise) under any letter of credit agreement, (iv) obligations under any currency swap agreement, interest rate swap, cap, collar or floor agreement or other interest rate management device, (v) any other transaction (including forward sale or purchase agreements, capitalized and/or synthetic leases and conditional sales agreements) having the commercial effect of a borrowing of money entered into by such Person to finance its operations or capital requirements (but not including trade payables and accrued expenses incurred in the ordinary course of business which are not represented by a promissory note or other evidence of indebtedness), (vi) any Guaranty of Indebtedness for borrowed money, or (vii) joint venture and/or partnership debt but only to the extent there is recourse to such Person for payment thereof. The amount of any net obligations under any Indebtedness of the type described in clause (iv) above on any date shall be deemed to be the swap termination value thereof as of such date.
“Indemnified Taxes” shall mean (i) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document, and (ii) to the extent not otherwise described in the preceding clause (i), Other Taxes.
“Indemnitee” shall have the meaning specified in Section 11.3.2 [Indemnification by the Borrower].
“Information” shall mean all written information received from the Loan Parties or any of their Subsidiaries relating to the Loan Parties or any of such Subsidiaries or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the Issuing Lender on a non-confidential basis prior to disclosure by the Loan Parties or any of their Subsidiaries.
“Initial Term Loan” shall have the meaning specified in Section 3.1 [Term Loan Commitments].
“Insolvency Proceeding” shall mean, with respect to any Person, (a) a case, action or proceeding with respect to such Person (i) before any court or any other Official Body under any bankruptcy, insolvency, reorganization or other similar Law now or hereafter in effect, or (ii) for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator (or similar official) of any Loan Party or otherwise relating to the liquidation, dissolution, winding-up or relief of such Person, or (b) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other, similar arrangement in respect of such Person’s creditors generally or any substantial portion of its creditors; undertaken under any Law.
“Interest Coverage Ratio” shall mean, as of any date of determination, the ratio of (x) Consolidated EBITDA of the Borrower and its Subsidiaries to (y) consolidated interest expense of the Borrower and its Subsidiaries (determined in accordance with GAAP), in each case of clauses (x) and (y) for the period of four consecutive fiscal quarters ended on such date.
20
“Interest Period” shall mean the period of time selected by the Borrower in connection with (and to apply to) any election permitted hereunder by the Borrower to have Revolving Credit Loans or Term Loans bear interest under a Term Rate Loan Option. Subject to the last sentence of this definition and subject to availability for the interest rate applicable to the relevant Currency, such period shall be one, three or six months (or with respect to Interest Periods applicable to TSRR, one or three months). Such Interest Period shall commence on the effective date of such Term Rate Loan Option, which shall be (i) the Borrowing Date if the Borrower is requesting new Loans, or (ii) the date of renewal of or conversion to a Term Rate Loan Option if the Borrower is renewing or converting to a Term Rate Loan Option applicable to outstanding Loans. Notwithstanding the second sentence hereof: (A) any Interest Period which would otherwise end on a date which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (B) with respect to Revolving Credit Loans, the Borrower shall not select, convert to or renew an Interest Period for any portion of the Revolving Credit Loans that would end after the Expiration Date, (C) with respect to Term Loans, the Borrower shall not select, convert to or renew an Interest Period for any portion of the Term Loans that would end after the applicable Term Loan Maturity Date, and (D) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period.
“Interest Rate Hedge” shall mean an interest rate exchange, collar, cap, swap, floor, adjustable strike cap, adjustable strike corridor, cross-currency swap or similar agreements entered into by any Loan Party in order to provide protection to, or minimize the impact upon, such Loan Party of increasing floating rates of interest applicable to Indebtedness.
“Interest Rate Hedge Liabilities” shall have the meaning specified in the definition of “Lender Provided Interest Rate Hedge” in Section 1.1 [Certain Definitions].
“Interest Rate Option” shall mean any Term Rate Loan Option or the Base Rate Option.
“Investment” shall mean, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of equity interests of another Person, (b) a loan, advance or capital contribution to, Guaranty or assumption of debt or other obligation of, or purchase or other acquisition of any other debt or interest in, another Person (including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor guaranties Indebtedness of such other Person), or (c) an acquisition, whether by purchase or by merger, of (i) a majority of the voting equity interests or economic interests of another Person, or (ii) all or substantially all of the assets of another Person or of a division, line of business or other business unit of another Person. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.
“IOSCO Principles” means the International Organization of Securities Commissions’ (IOSCO) Principles for Financial Benchmarks, as the same may be amended or supplemented from time to time.
21
“IRS” shall mean the United States Internal Revenue Service or any successor thereto.
“ISP98” shall have the meaning specified in Section 11.11.1 [Governing Law].
“Issuing Lender” shall mean (i) PNC, in its individual capacity as issuer of Letters of Credit hereunder, (ii) with respect to the Project Vitality Letters of Credit only (but not any increase, extension or renewal thereof), Bank of Montreal and (iii) any other Lender that Borrower, Administrative Agent and such other Lender may agree may from time to time to issue Letters of Credit hereunder.
“Japanese Yen” shall mean the lawful currency of Japan.
“Joint Venture” shall mean a corporation, partnership, limited liability company or other entity in which any Person other than the Loan Parties and their Subsidiaries holds, directly or indirectly, an equity interest.
“Law” shall mean any law(s) (including common law), constitution, statute, treaty, regulation, rule, ordinance, opinion, issued guidance, release, ruling, order, executive order, injunction, writ, decree, bond, judgment, authorization or approval, lien or award of or any settlement arrangement, by agreement, consent or otherwise, with any Official Body, foreign or domestic.
“Lender Provided Foreign Currency Hedge” shall mean a Foreign Currency Hedge which is entered into between any Loan Party or a Subsidiary of a Loan Party and any Hedge Bank that it: (a) is documented in a standard International Swaps and Derivatives Association Master Agreement or another reasonable and customary manner, (b) provides for the method of calculating the reimbursable amount of the provider’s credit exposure in a reasonable and customary manner, and (c) is entered into for hedging (rather than speculative) purposes. The liabilities owing to the Hedge Bank providing any Lender Provided Foreign Currency Hedge (the “Foreign Currency Hedge Liabilities”) by any Loan Party or a Subsidiary of a Loan Party that is party to such Lender Provided Foreign Currency Hedge shall, for purposes of this Agreement and all other Loan Documents be “Obligations” of such Person and of each Loan Party, be guaranteed obligations under the Guaranty Agreement and secured obligations under any other Loan Document, as applicable, and otherwise treated as Obligations for purposes of the other Loan Documents, except to the extent constituting Excluded Hedge Liabilities of such Person. The Liens securing the Foreign Currency Hedge Liabilities shall be pari passu with the Liens securing all other Obligations under this Agreement and the other Loan Documents, subject to the express provisions of Section 9.2.4 [Application of Proceeds].
“Lender Provided Interest Rate Hedge” shall mean an Interest Rate Hedge which is entered into between a Loan Party or a Subsidiary of a Loan Party and any Hedge Bank that it: (a) is documented in a standard International Swaps and Derivatives Association Master Agreement or another reasonable and customary manner, (b) provides for the method of calculating the reimbursable amount of the provider’s credit exposure in a reasonable and customary manner, and (c) is entered into for hedging (rather than speculative) purposes. The liabilities owing to the Hedge Bank providing any Lender Provided Interest Rate Hedge (the “Interest Rate Hedge Liabilities”) by any Loan Party or a Subsidiary of a Loan Party that is party to such Lender Provided Interest Rate Hedge shall, for purposes of this Agreement and all other Loan Documents be “Obligations” of such Person and of each Loan Party, be guaranteed obligations under any Guaranty Agreement and secured obligations under any other Loan Document, as applicable, and otherwise treated as Obligations for purposes of the other Loan Documents, except to the extent constituting Excluded Hedge Liabilities of such Person.
22
The Liens securing the Interest Rate Hedge Liabilities shall be pari passu with the Liens securing all other Obligations under this Agreement and the other Loan Documents, subject to the express provisions of Section 9.2.4 [Application of Proceeds].
“Lenders” shall mean the financial institutions named on Schedule 1.1(A) and their respective successors and assigns as permitted hereunder, each of which is referred to herein as a Lender. For the purpose of any Loan Document which provides for the granting of a security interest or other Lien to the Lenders or to the Administrative Agent for the benefit of the Lenders as security for the Obligations, “Lenders” shall include any Affiliate of a Lender to which such Obligation is owed.
“Letter of Credit” shall have the meaning specified in Section 2.9.1 [Issuance of Letters of Credit]. As of the Closing Date, each of the Existing Letters of Credit shall constitute, for all purposes of this Agreement and the other Loan Documents, a Letter of Credit issued and outstanding hereunder. As of the Project Vitality Closing Date, each of the Project Vitality Letters of Credit shall constitute, for all purposes of this Agreement and the other Loan Documents, a Letter of Credit issued and outstanding hereunder.
“Letter of Credit Borrowing” shall have the meaning specified in Section 2.9.3.3.
“Letter of Credit Fee” shall have the meaning specified in Section 2.9.2 [Letter of Credit Fees].
“Letter of Credit Obligation” shall mean, as of any date of determination, the aggregate Dollar Equivalent amount available to be drawn under all outstanding Letters of Credit on such date (if any Letter of Credit shall increase in amount automatically in the future, such aggregate Dollar Equivalent amount available to be drawn shall currently give effect to any such future increase) plus the aggregate Dollar Equivalent amount of Reimbursement Obligations and Letter of Credit Borrowings on such date.
“Letter of Credit Sublimit” shall have the meaning specified in Section 2.9.1.1.
“Leverage Ratio” shall mean, as of any date of determination, the ratio of (A) consolidated Indebtedness of Borrower and its Subsidiaries on such date to (B) Consolidated EBITDA of the Borrower and its Subsidiaries for the period of four consecutive fiscal quarters ended on such date.
“Lien’ shall mean any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, whether voluntarily or involuntarily given, including any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security and any filed financing statement or other notice of any of the foregoing (whether or not a lien or other encumbrance is created or exists at the time of the filing).
23
“LLC Division” shall mean, in the event a Borrower or Guarantor is a limited liability company, (a) the division of any such Borrower or Guarantor into two or more newly formed limited liability companies (whether or not such Borrower or Guarantor is a surviving entity following any such division) pursuant to Section 18-217 of the Delaware Limited Liability Company Act or any similar provision under any similar act governing limited liability companies organized under the laws of any other State or Commonwealth or of the District of Columbia, or (b) the adoption of a plan contemplating, or the filing of any certificate with any applicable Official Body that results or may result in, any such division.
“Loan Documents” shall mean this Agreement, the Administrative Agent’s Letter, the Notes, the Collateral Documents and any other instruments, certificates or documents delivered in connection herewith or therewith.
“Loan Parties” shall mean the Borrower and the Guarantors.
“Loan Request” shall have the meaning specified in Section 2.5.1 [Loan Requests].
“Loans” shall mean collectively, and Loan shall mean individually, all Revolving Credit Loans, Swing Loans and Term Loans or any Revolving Credit Loan, Swing Loan or Term Loan, as applicable.
“Material Adverse Change” shall mean any set of circumstances or events which (a) has or would reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of this Agreement or any other Loan Document, (b) is or would reasonably be expected to be material and adverse to the business, properties, assets, financial condition or results of operations of the Loan Parties taken as a whole, (c) impairs materially or would reasonably be expected to impair materially the ability of the Loan Parties taken as a whole to duly and punctually perform any of the payment or material other Obligations, or (d) impairs materially or would reasonably be expected to impair materially the ability of the Administrative Agent or any of the Lenders, to the extent permitted, to enforce their legal remedies pursuant to this Agreement or any other Loan Document.
“Material Permitted Acquisition” shall have the meaning specified in Section 8.2.6 [Liquidations, Mergers, Consolidations, Acquisitions].
“Multiemployer Plan” shall mean any employee pension benefit plan which is a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA and to which the Borrower or any member of the ERISA Group is then making or accruing an obligation to make contributions or, within the preceding five plan years, has made or had an obligation to make such contributions.
“Net Cash Proceeds” shall mean in connection with any Asset Sale, any Recovery Event or the issuance of any Indebtedness by a Loan Party, the proceeds thereof in the form of cash and cash equivalents (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but only as and when received), net of attorneys’ fees, accountants’ fees, investment banking and other customary advisor fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset that is the subject of an Asset Sale or Recovery Event (other than any Lien pursuant to a Collateral Document) and other customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements).
24
“New Lender” shall have the meaning specified in Section 2.11(a) [Increasing Lenders and New Lenders].
“Non-Consenting Lender” shall have the meaning specified in Section 11.1 [Modifications, Amendments or Waivers].
“Non-Qualifying Party” shall mean any Loan Party that fails for any reason to qualify as an Eligible Contract Participant on the Effective Date of the applicable Swap.
“Notes” shall mean collectively, and Note shall mean separately, the promissory notes in the form of Exhibit 1.1(D) evidencing the Revolving Credit Loans, in the form of Exhibit 1.1(E) evidencing the Swing Loan, and in the form of Exhibit 1.1(F) evidencing the applicable Term Loan.
“NYFRB” shall have the meaning specified in the definition of “Overnight Bank Funding Rate”.
“Obligation” shall mean any obligation or liability of any of the Loan Parties, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, under or in connection with (i) this Agreement, the Notes, the Letters of Credit, the Administrative Agent’s Letter or any other Loan Document whether to the Administrative Agent, any of the Lenders or their Affiliates or other persons provided for under such Loan Documents, (ii) any Lender Provided Interest Rate Hedge, (iii) any Lender Provided Foreign Currency Hedge and (iv) any Other Lender Provided Financial Service Product. Notwithstanding anything to the contrary contained in the foregoing, the Obligations shall not include any Excluded Hedge Liabilities.
“OFAC” shall mean the Office of Foreign Assets Control of the United States Department of the Treasury.
“Official Body” shall mean 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) and any group or body charged with setting financial accounting or regulatory capital rules or standards (including the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing).
“Optional Currency” shall mean the following lawful currencies: Australian Dollars, British Pounds Sterling, Canadian Dollars, Euros and any other currency approved by Administrative Agent and all of the Lenders pursuant to Section 2.13(iii) [European Monetary Union; Requests for Additional Optional Currencies], in each case so long as there is a published Term RFR or Eurocurrency Rate, as applicable, or a Benchmark Replacement effected pursuant to Section 4.4.4 [Benchmark Replacement Setting] with respect thereto.
25
Subject to Section 2.13 [European Monetary Union], each Optional Currency must be the lawful currency of the specified country.
“Optional Currency Loans” shall have the meaning specified in Section 2.1.1 [Revolving Credit Loans; Optional Currency Loans].
“Order” shall have the meaning specified in Section 2.9.9 [Liability for Acts and Omissions].
“Original Currency” shall have the meaning specified in Section 5.12 [Currency Conversion Procedures for Judgments].
“Other Currency” shall have the meaning specified in Section 5.12 [Currency Conversion Procedures for Judgments].
“Other Connection Taxes” shall mean, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient (or an agent or Affiliate thereof) and the jurisdiction imposing such Tax (other than connections arising solely from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“Other Lender Provided Financial Service Product” shall mean agreements or other arrangements entered into between any Loan Party or any Subsidiary of a Loan Party and any Cash Management Bank that provides any of the following products or services to any of the Loan Parties and their Subsidiaries: (a) credit cards, (b) credit card processing services, (c) debit cards, (d) purchase cards, (e) ACH transactions, (f) cash management, including controlled disbursement, overdraft lines, accounts or services, or (g) foreign currency exchange.
“Other Taxes” shall mean all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 5.6.2 [Replacement of a Lender]).
“Overnight Bank Funding Rate” shall mean, for any day, the rate comprised of both overnight federal funds and overnight eurocurrency borrowings by U.S.-managed banking offices of depository institutions, as such composite rate shall be determined by the Federal Reserve Bank of New York (“NYFRB”), as set forth on its public website from time to time, and as published on the next succeeding Business Day as the overnight bank funding rate by the NYFRB (or by such other recognized electronic source (such as Bloomberg) selected by the Administrative Agent for the purpose of displaying such rate); provided, that if such day is not a Business Day, the Overnight Bank Funding Rate for such day shall be such rate on the immediately preceding Business Day; provided, further, that if such rate shall at any time, for any reason, no longer exist, a comparable replacement rate determined by PNC at such time (which determination shall be conclusive absent manifest error).
26
If the Overnight Bank Funding Rate determined as above would be less than zero, then such rate shall be deemed to be zero. The rate of interest charged shall be adjusted as of each Business Day based on changes in the Overnight Bank Funding Rate without notice to the Borrower.
“Overnight Rate” shall mean for any day with respect to any Loans in an Optional Currency, an overnight rate determined by the Administrative Agent or the Issuing Lender, as the case may be, in accordance with banking industry rules on interbank compensation (which determination shall be conclusive absent manifest error).
“Participant” has the meaning specified in Section 11.8.4 [Participations].
“Participant Register” shall have the meaning specified in Section 11.8.4 [Participations].
“Participating Member State” shall mean any member State of the European Community that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Community relating to Economic and Monetary Union.
“Participation Advance” shall have the meaning specified in Section 2.9.3.3.
“Payment Date” shall mean the first Business Day of each calendar quarter after the date hereof and on the Expiration Date or Term Loan Maturity Date, as applicable, or upon acceleration of the Notes.
“Payment In Full” and “Paid in Full” shall mean the indefeasible payment in full in cash of the Loans and other Obligations hereunder (other than (i) contingent indemnity and expense reimbursement obligations for which no claim has been made, (ii) other obligations in respect of Letters of Credit that have been Cash Collateralized and (iii) obligations and liabilities under any Lender Provided Interest Rate Hedge, any Lender Provided Foreign Currency Hedge and any Other Lender Provided Financial Service Product (other than any such obligations for which written notice has been received by the Administrative Agent that either (x) amounts are currently due and payable under such Lender Provided Interest Rate Hedge, any Lender Provided Foreign Currency Hedge and any Other Lender Provided Financial Service Product, as applicable, or (y) no arrangements reasonably satisfactory to the applicable Hedge Bank or Cash Management Bank party thereto have been made)), the termination of the Commitments and the expiration or termination of all Letters of Credit (other than Letters of Credit that have been Cash Collateralized).
“Payment Recipient” shall have the meaning assigned to it in Section 11.17.1.
“PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor.
27
“Pension Plan” shall mean at any time an “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA) (including a “multiple employer plan” as described in Sections 4063 and 4064 of ERISA, but not a Multiemployer Plan) which is covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 or Section 430 of the Code and either (i) is sponsored, maintained or contributed to by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been sponsored, maintained or contributed to by any entity which was at such time a member of the ERISA Group for employees of any entity which was at such time a member of the ERISA Group, or in the case of a “multiple employer” or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.
“Permitted Acquisition” shall have the meaning specified in Section 8.2.6 [Liquidations, Mergers, Consolidations, Acquisitions].
“Permitted Intercompany Investments” shall mean (A) Investments in any Loan Party, (B) Investments by any Subsidiary that is not a Loan Party in any other Subsidiary that is not a Loan Party and (C) Permitted Non-Loan Party Investments.
“Permitted Investments” shall mean:
(i) direct obligations of the United States of America or any agency or instrumentality thereof or obligations backed by the full faith and credit of the United States of America, and similar direct obligations of, or obligations backed by the full faith and credit of, Australia, Canada, any Participating Member State with a credit rating of not less than A by Standard & Poor’s, the United Kingdom, and any other nation approved by the Administrative Agent;
(ii) commercial paper maturing in 180 days or less rated not lower than A-1, by Standard & Poor’s or P-1 by Moody’s Investors Service, Inc. on the date of acquisition;
(iii) demand deposits, time deposits or certificates of deposit maturing within one year in commercial banks whose obligations are rated A-1, A or the equivalent or better by Standard & Poor’s or P-1, P-2 or the equivalent or better by Moody’s Investors Service, Inc. on the date of acquisition;
(iv) money market or mutual funds whose investments are limited to those types of investments described in clauses (i)-(iii) above;
(v) corporate bonds that are rated BBB or better by Standard & Poor’s or Baa3 or higher by Moody’s Investors Service, Inc. on the date of acquisition; and
(vi) the securities or other investments existing on the date of this Agreement set forth on Schedule 1.1(C) and not defined in any other clause of this definition; provided that no additional securities or other investments shall be added to Schedule 1.1(C) after the date of this Agreement; and
(vii) investments made under the Cash Management Agreements or under cash management agreements with any other Lenders.
28
“Permitted Joint Venture” shall mean (i) any joint venture (x) in which the Borrower or any Subsidiary of Borrower holds not less than twenty percent (20.0%) of the Capital Stock in such joint venture and retains an equivalent amount of the voting control thereof, (y) for which the Borrower or such Subsidiary of Borrower, as applicable, invested not more than $15,000,000 individually or $45,000,000 in the aggregate, and (z) with respect to which the Borrower or such Subsidiary of Borrower, as applicable, has pledged such Capital Stock in favor of the Administrative Agent for the benefit of the Lenders, and (ii) any other joint venture the acquisition of which has been approved in advance in writing by the Required Lenders.
“Permitted Liens” shall mean:
(i) Liens for Taxes that (a) are not yet due and payable or which are not overdue for a period of more than thirty (30) days or (b) are being contested in good faith and by appropriate proceedings for which adequate reserves in accordance with GAAP have been established;
(ii) Pledges or deposits made in the ordinary course of business to secure payment of workmen’s compensation, or to participate in any fund in connection with workmen’s compensation, unemployment insurance, old-age pensions, or other social security programs or ERISA;
(iii) Liens of mechanics, materialmen, warehousemen, carriers, or other like Liens, securing obligations incurred in the ordinary course of business that are not yet due and payable and Liens of landlords securing obligations to pay lease payments that are not overdue for more than thirty (30) days;
(iv) Good-faith pledges or deposits made in the ordinary course of business to secure performance of bids, tenders, contracts (other than for the repayment of borrowed money or as security for Hedge Liabilities or margining related to commodities hedges) or leases, not in excess of the aggregate amount due thereunder, or to secure statutory obligations, or surety, appeal, indemnity, performance or other similar bonds required in the ordinary course of business;
(v) Encumbrances consisting of zoning restrictions, easements or other restrictions on the use of real property, none of which materially impairs the use of such property or the value thereof, and none of which is violated in any material respect by existing or proposed structures or land use;
(vi) Liens, security interests and mortgages in favor of the Administrative Agent for the benefit of the Secured Parties securing the Obligations (including Lender Provided Interest Rate Hedges, Lender Provided Foreign Currency Hedges and Other Lender Provided Financial Service Product Obligations);
(vii) Any Lien existing on the date of this Agreement and described on Schedule 1.1(B), and in each case, any renewals or extensions thereof;, provided that (i) the Lien does not extend to any additional property other than (A)
29
after-acquired property that is affixed or incorporated into the property covered by such Lien, and (B) proceeds and products thereof, and (ii) such Lien shall secure only those obligations which it secures on the Closing Date and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;
(viii) Purchase Money Security Interests and Liens securing capitalized leases securing Indebtedness permitted pursuant to Section 8.2.1(iv); provided that such Liens shall be limited to the assets acquired with such purchase money financing or leased pursuant to such capital lease (and any replacements thereof, additions and accessions thereto and the proceeds and products thereof and customary security deposits); provided financings of the type permitted by Section 8.2.1(iv) provided by a lender may be cross-collateralized to other financings of such type provided by such lender or its affiliates; and
(ix) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of any Loan Party or any of its Subsidiaries;
(x) any attachment or judgment Lien not constituting an Event of Default under Section 9.1.7 [Final Judgments and Orders];
(xi) Liens on the assets of Foreign Subsidiaries securing Indebtedness of such Foreign Subsidiaries incurred under Section 8.2.1(vii); and
(xii) Liens on the assets of the Borrower and its Subsidiaries securing Indebtedness and other obligations of the Borrower and its Subsidiaries in an aggregate amount not to exceed $15,000,000 at any time outstanding.
provided that no “Permitted Liens” (other than liens described in clauses (v), (vi) and (ix) above) shall be permitted to encumber real property owned by the Loan Parties.
“Permitted Non-Loan Party Investments” shall mean Investments by any Loan Party in any Subsidiary that is not a Loan Party; provided that, the aggregate outstanding amount of such Investments shall not exceed $50,000,000.00 at any time.
“Permitted Project Cardinal Intercompany Investments” shall mean Investments by any Loan Party in any Subsidiary that is not a Loan Party used solely and exclusively for the purposes of consummating the Project Cardinal Acquisition and to pay fees and expenses in connection therewith in an aggregate amount of all such Investments not to exceed $50,000,000 plus the fair market value of any such Investments consisting solely of the contribution of the Capital Stock of the Borrower to any such Subsidiary that is not a Loan Party.
“Person” shall mean any individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, joint venture, government or political subdivision or agency thereof, or any other entity.
30
“Plan” shall mean any employee benefit plan within the meaning of Section 3(3) of ERISA (including a Pension Plan), maintained for employees of the Borrower or any member of the ERISA Group or any such Plan to which the Borrower or any member of the ERISA Group is required to contribute on behalf of any of its employees.
“Platform” shall mean Debt Domain, Intralinks, Syndtrak or a substantially similar electronic transmission system.
“PNC” shall mean PNC Bank, National Association, its successors and assigns.
“Potential Default” shall mean any event or condition which with notice or passage of time, or both, would constitute an Event of Default.
“Prime Rate” shall mean the interest rate per annum announced from time to time by the Administrative Agent at its Principal Office as its then prime rate, which rate may not be the lowest or most favorable rate then being charged commercial borrowers or others by the Administrative Agent. Any change in the Prime Rate shall take effect at the opening of business on the day such change is announced.
“Principal Office” shall mean the main banking office of the Administrative Agent in Pittsburgh, Pennsylvania.
“Project Cardinal Acquisition” shall mean the acquisition of all of the equity interests of the Project Cardinal Target pursuant to the terms of the Project Cardinal Acquisition Agreement.
“Project Cardinal Acquisition Agreement” shall mean that certain Sale and Purchase Agreement, dated June 10, 2021, by and among Faster S.R.L., Silvia Venturelli and Ralf Torchalla, as amended, modified or supplemented.
“Project Cardinal Target” shall mean HE-DI S.R.L., an Italian società a responsabilità limitata, individually and/or collectively with its subsidiaries.
“Project Vitality Acquisition” shall mean the acquisition (by merger) of all of the equity interests of the Project Vitality Target pursuant to the terms of the Project Vitality Acquisition Agreement.
“Project Vitality Acquisition Agreement” shall mean that certain Agreement and Plan of Merger, dated October 9, 2020, by and among the Borrower, Project Vitality Merger Sub, Project Vitality Target, ICM Holdco I Corp, a Delaware corporation and SBF II Representative Corp., in its capacity as the Equityholder Representative thereunder.
“Project Vitality Closing Date” shall mean the date of the consummation of the Project Vitality Acquisition in accordance with Section 8.2.6(ii)(A).
31
“Project Vitality Letters of Credit” shall mean up to two (2) letters of credit with an aggregate stated amount not exceeding $2,500,000 issued by Bank of Montreal for the account of a Subsidiary of the Borrower (after giving effect to the Project Vitality Acquisition), which shall be a wholly owned Subsidiary of the Borrower and (upon the consummation of the Project Vitality Acquisition) a Loan Party; provided that (i) BMO Harris Bank shall be a Lender as of the Project Vitality Closing Date, (ii) on the Project Vitality Closing Date, BMO Harris Bank and the Borrower shall have provided written notice to the Borrower identifying the Project Vitality Letters of Credit, including the letter of credit number and beneficiary with respect thereto, the stated amount thereof and any other information with respect thereto reasonably requested by the Administrative Agent and (iii) all of the conditions precedent with respect to issuance of Letters of Credit hereunder shall be satisfied with respect to the Project Vitality Letters of Credit, as if such Project Vitality Letters of Credit were issued hereunder on such date.
“Project Vitality Merger Sub” shall mean Vitality Merger Sub, Inc., a Delaware corporation.
“Project Vitality Target” shall mean BWG Holdings I Corp, a Delaware corporation, individually and/or collectively with its Subsidiaries.
“Purchase Money Security Interest” shall mean Liens upon tangible personal property securing loans to any Loan Party or Subsidiary of a Loan Party or deferred payments by such Loan Party or Subsidiary for the purchase of such tangible personal property.
“QFC” has the meaning assigned to the term "qualified financial contract" in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).
“QFC Credit Support” shall have the meaning specified in Section 11.15 [Acknowledgment Regarding Any Supported QFCs].
“Qualified ECP Guarantor” shall mean, in respect of any Swap Obligation, each Loan Party that, at the time the Guaranty (or grant of security interest, as applicable) becomes or would become effective with respect to such Swap Obligation, has total assets exceeding $10,000,000 or such other Loan Party as constitutes an “eligible contract participant” under the Commodity Exchange Act and which may cause another Person to qualify as an “eligible contract participant” with respect to such Swap Obligation at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
“Ratable Share” shall mean:
(i) with respect to a Lender’s obligation to make Revolving Credit Loans, participate in Letters of Credit and other Letter of Credit Obligations, and receive payments, interest, and fees related thereto, the proportion that such Lender’s Revolving Credit Commitment bears to the Revolving Credit Commitments of all of the Lenders, provided however that if the Revolving Credit Commitments have terminated or expired, the Ratable Shares for purposes of this clause shall be determined based upon the Revolving Credit Commitments most recently in effect, giving effect to any assignments.
(ii) with respect to a Lender’s obligation to make any class of Term Loans and receive payments, interest, and fees related thereto, the proportion that such Lender’s applicable Term Loans bear to the applicable Term Loans of all of the Lenders.
32
(iii) with respect to all other matters as to a particular Lender, the percentage obtained by dividing (i) such Lender’s Revolving Credit Commitment plus Term Loans by (ii) the sum of the aggregate amount of the Revolving Credit Commitments plus Term Loans of all Lenders; provided however that if the Revolving Credit Commitments have terminated or expired, the computation in this clause shall be determined based upon the Revolving Credit Commitments most recently in effect, giving effect to any assignments, and not on the current amount of the Revolving Credit Commitments and provided further in the case of Section 2.10 [Defaulting Lenders] when a Defaulting Lender shall exist, “Ratable Share” shall mean the percentage of the aggregate Commitments (disregarding any Defaulting Lender’s Commitment) represented by such Lender’s Commitment.
“Recipient” shall mean (i) the Administrative Agent, (ii) any Lender and (iii) the Issuing Lender, as applicable.
“Recovery Event” shall mean any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of the Borrower or any of its Subsidiaries, including any event described in clause (iii) of Schedule 8.1.3 hereof.
“Reference Currency” shall have the meaning specified in the definition of “Equivalent Amount.”
“Reimbursement Obligation” shall have the meaning specified in Section 2.9.3.1.
“Reinvestment Notice” shall mean a written notice executed by an Authorized Officer of the Borrower stating that no Event of Default has occurred and is continuing and that the Borrower (directly or indirectly through a Subsidiary) intends and expects to use all or a specified portion of the Net Cash Proceeds of an Asset Sale or Recovery Event to acquire or repair assets useful in its business, other than current assets within one hundred eighty (180) days of receipt of the Net Cash Proceeds.
“Related Parties” shall mean, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.
“Relief Proceeding” shall mean any proceeding seeking a decree or order for relief in respect of any Loan Party or Subsidiary of a Loan Party in a voluntary or involuntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator (or similar official) of any Loan Party or Subsidiary of a Loan Party for any substantial part of its property, or for the winding-up or liquidation of its affairs, or an assignment for the benefit of its creditors.
“Reportable Compliance Event” shall mean that any Covered Entity becomes a Sanctioned Person, or is charged by indictment, criminal complaint or similar charging instrument, arraigned, or custodially detained in connection with any Anti-Terrorism Law or Anti-Corruption Law or any predicate crime to any Anti-Terrorism Law or Anti-Corruption Law, or has knowledge of facts or circumstances to the effect that it is reasonably likely that any aspect of its operations is in actual or probable violation of any Anti-Terrorism Law or any Anti-Corruption Law.
33
“Required Lenders” shall mean at least two (2) Lenders (other than any Defaulting Lender) having more than 50% of the sum of (a) the aggregate amount of the Revolving Credit Commitments of the Lenders (excluding any Defaulting Lender) or, after the termination of the Revolving Credit Commitments, the outstanding Revolving Credit Loans and Ratable Share of Letter of Credit Obligations and outstanding Swing Loans of the Lenders (excluding any Defaulting Lender) and (b) the aggregate outstanding amount of any Term Loans.
“Required Share” shall have the meaning assigned to such term in Section 5.11 [Settlement Date Procedures].
“Resolution Authority” shall mean an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Restricted Payments” shall have the meaning specified in Section 8.2.5 [Dividends and Related Distributions].
“Revolving Credit Commitment” shall mean, as to any Lender at any time, the amount initially set forth opposite its name on Schedule 1.1(A) in the column labeled “Amount of Commitment for Revolving Credit Loans,” as such Commitment is thereafter assigned or modified and Revolving Credit Commitments shall mean the aggregate Revolving Credit Commitments of all of the Lenders.
“Revolving Credit Loans” shall mean collectively and Revolving Credit Loan shall mean separately all Revolving Credit Loans or any Revolving Credit Loan made by the Lenders or one of the Lenders to the Borrower pursuant to Section 2.1 [Revolving Credit Commitments] or Section 2.9.3 [Disbursements, Reimbursement].
“Revolving Facility Usage” shall mean at any time the sum of the outstanding Revolving Credit Loans, the outstanding Swing Loans, and the Letter of Credit Obligations.
“Sanctioned Person” shall mean (a) a Person named on the list of “Specially Designated Nationals and Blocked Persons” maintained by OFAC available at http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx, or as otherwise published from time to time, (b) a Person named on the lists maintained by the European Union available at http://eeas.europa.eu/cfsp/sanctions/consol-list_en.htm, or as otherwise published from time to time, (c) a Person named on the lists maintained by Her Majesty’s Treasury available at http://www.hm-treasury.gov.uk/fin_sanctions_index.htm, or as otherwise published from time to time, (d) a Person that is specifically targeted by any other relevant sanctions authority of a jurisdiction in which the Borrower or any of its Subsidiaries conduct business, (e) (i) an agency of the government of, or an organization controlled by, a Designated Jurisdiction, to the extent such agency or organization is subject to a sanctions program administered by OFAC, or (ii) a Person located, organized or resident in a Designated Jurisdiction, to the extent such Person is subject to a sanctions program administered by OFAC or (f) a Person controlled by any such Person set forth in clauses (a) through (e) above.
34
“Secured Parties” shall mean, collectively, the Administrative Agent, the Lenders, the Issuing Lender, any Hedge Bank, any Cash Management Bank, each co-agent or sub-agent appointed by the Administrative Agent from time to time pursuant to Section 11.5 [Delegation of Duties], and the other Persons the Obligations owing to which are or are purported to be secured by the Collateral under the terms of the Collateral Documents.
“Security and Pledge Agreement” shall mean that certain Consolidated, Amended and Restated Security and Pledge Agreement executed and delivered on or about the date hereof by each of the Loan Parties to the Administrative Agent for the benefit of the Secured Parties.
“Settlement Date” shall mean the Business Day on which the Administrative Agent elects to effect settlement pursuant Section 5.11 [Settlement Date Procedures].
“SOFR” means, for any day, a rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“SOFR Adjustment” means, 0.10% per annum (10.0 basis points).
“SOFR Floor” means a rate of interest per annum equal to 0.0 basis points (0.0%).
“SOFR Reserve Percentage” shall mean, for any day, the maximum effective percentage in effect on such day, if any, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including, without limitation, supplemental, marginal and emergency reserve requirements) with respect to SOFR funding.
“Solvent” shall mean, with respect to any Person on any date of determination, taking into account any right of reimbursement, contribution or similar right available to such Person from other Persons, that on such date (i) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (ii) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (iv) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature, and (v) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
“Specified Loan Party” shall mean any Loan Party that is, at the time on which the Guaranty (or grant of security interest, as applicable) becomes effective with respect to a Swap Obligation, a corporation, partnership, proprietorship, organization, trust or other entity that would not be an “eligible contract participant” under the Commodity Exchange Act at such time but for the effect of Section 12.8 [Keepwell].
35
“Standard & Poor’s” shall mean Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.
“Statements” shall have the meaning specified in Section 6.1.6(i) [Historical Statements].
“Subsidiary” of any Person at any time shall mean any corporation, trust, partnership, limited liability company or other business entity (i) of which more than 50% of the outstanding voting securities or other interests normally entitled to vote for the election of the directors or trustees (regardless of any contingency which does or may suspend or dilute the voting rights) is at such time owned directly or indirectly by such Person or one or more of such Person’s Subsidiaries, or (ii) which is controlled or capable of being controlled by such Person or one or more of such Person’s Subsidiaries; provided that any trust formed by a Subsidiary of the Borrower in connection with the Project Vitality Acquisition shall not be deemed to be a Subsidiary of the Borrower so long as the value of its assets does not exceed $15,000,000 (and if such amount is exceeded, it shall only be a Subsidiary to the extent otherwise constituting a Subsidiary in accordance with this definition).
“Subsidiary Equity Interests” shall have the meaning specified in Section 6.1.2 [Subsidiaries; Investment Companies].
“Supported QFC” shall have the meaning specified in Section 11.15 [Acknowledgement Regarding Any Supported QFCs].
“Swap” shall mean any “swap” as defined in Section 1a(47) of the CEA and regulations thereunder, other than (a) a swap entered into, or subject to the rules of, a board of trade designated as a contract market under Section 5 of the CEA, or (b) a commodity option entered into pursuant to CFTC Regulation 32.3(a).
“Swap Obligation” shall mean any obligation to pay or perform under any agreement, contract or transaction that constitutes a Swap which is also a Lender Provided Interest Rate Hedge or a Lender Provided Foreign Currency Hedge.
“Swing Loan Commitment” shall mean PNC’s commitment to make Swing Loans to the Borrower pursuant to Section 2.1.2 [Swing Loan Commitment] hereof in an aggregate principal amount up to $35,000,000.
“Swing Loan Lender” shall mean PNC, in its capacity as a lender of Swing Loans.
“Swing Loan Note” shall mean the Swing Loan Note of the Borrower in the form of Exhibit 1.1(E) evidencing the Swing Loans, together with all amendments, extensions, renewals, replacements, refinancings or refundings thereof in whole or in part.
“Swing Loan Request” shall mean a request for Swing Loans made in accordance with Section 2.5.2 [Swing Loan Requests] hereof.
36
“Swing Loans” shall mean collectively, and Swing Loan shall mean separately, all Swing Loans or any Swing Loan made by PNC to the Borrower pursuant to Section 2.1.2 [Swing Loan Commitment] hereof.
“TARGET2” shall mean the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilizes a single shared platform and which was launched on November 19, 2007.
“TARGET Day” shall mean any day on which TARGET2 is open for the settlement of payments in Euros.
“Taxes” shall mean all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Official Body, including any interest, additions to tax or penalties applicable thereto.
“Term Loan” shall mean collectively, and individually, as applicable, all Term Loans made to the Borrower pursuant to Section 3.1 [Term Loan Commitments] and/or any Incremental Term Loans.
“Term Loan Commitment” shall mean, as to any Lender at any time, the amount set forth opposite its name on Schedule 1.1(A) in the column labeled “Amount of Commitment for Term Loans”, as such Commitment is thereafter assigned or modified and Term Loan Commitments shall mean the aggregate Term Loan Commitments of all of the Lenders.
“Term Loan Maturity Date” shall mean, (i) with respect to the Initial Term Loans made pursuant to Section 3.1 [Term Loan Commitments], October 28, 2025 and (ii) with respect to any Incremental Term Loan, the final maturity date applicable thereto as specified in the applicable amendment relating to such Incremental Term Loan.
“Term Rate Loan” shall mean a Loan that bears interest at a rate based on the Eurocurrency Rate, Term SOFR Rate or Term RFR.
“Term Rate Loan Option” shall mean the option of the Borrower to have Loans bear interest at the rate and under the terms specified in [Section 4.1.1(ii) [Revolving Credit Term Rate Loan Option] or Section 4.1.3(ii) [Term Loan Eurocurrency Rate Option], as applicable.
“Term RFR” means, for any Term RFR Borrowing for any Interest Period, a rate per annum determined by the Administrative Agent (rounded upwards, at the Administrative Agent’s discretion, to the nearest 1/100 of 1%) equal to, for any Obligations, interest, fees, commissions, or other amounts denominated in, or calculated with respect to Sterling, the TSRR as administered by the TSRR Administrator (or any other Person that takes over the administration of such rate) for a period equal in length to such Interest Period, as displayed on the applicable Bloomberg page (or on any successor or substitute page or service providing such quotations as determined by the Administrative Agent from time to time; in each case, the “TSRR Rate”) at approximately 11:55 a.m. (London time) two (2) Business Days prior to the commencement of such Interest Period; provided, that if by such time the TSRR Rate in respect of such day has not been so published, or if such day is not a Business Day, then the TSRR Rate for such day will be the TSRR Rate as published in respect of the first preceding Business Day for which such TSRR Rate was published thereon; provided further that any TSRR Rate so determined based on the first preceding Business Day shall be utilized for purposes of calculation of the TSRR for no more than three (3) consecutive Business Days (any such day, collectively, the “TSRR Lookback Day”); provided further that if the Term RFR as determined above would be less than the Floor, such rate shall be deemed to be the Floor for purposes of this Agreement.
37
The Term RFR for each outstanding Term RFR Loan shall be adjusted automatically on and as of the first day of each Interest Period without notice to the Borrower. Determination of the Term RFR by Administrative Agent shall be deemed conclusive absent manifest error.
“Term RFR Adjustment” means with respect to Term RFR Loans, the applicable adjustment set forth in the table below:
Term RFR |
Interest Period |
Adjustment to |
TSRR Rate |
1 month |
0.326% |
TSSR Rate |
3 month |
0.1193% |
“Term RFR Administrator” means the TSRR Administrator.
“Term RFR Borrowing” means, as to any Borrowing Tranche, a Term RFR Loan comprising such Borrowing Tranche.
“Term RFR Business Day” means as applicable, for any Obligations, interest, fees, commissions or other amounts denominated in, or calculated with respect to Sterling, a day on which banks are open for general business in London.
“Term RFR Loan” means a Loan that bears interest at a rate based on a Term RFR.
“Term RFR Lookback Day” means the TSRR Lookback Day.
“Term RFR Option” means the option of the Borrower to have Loans bear interest at the rate and under the terms specified in Section 4.1.1(ii)(C) [Revolving Credit Term RFR Option].
“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by the Administrative Agent in its reasonable discretion).
“Term SOFR Determination Date” shall have the meaning specified in the definition of “Term SOFR Rate”.
“Term SOFR Rate” shall mean, with respect to any amount to which the Term SOFR Rate Option applies, for any Interest Period, the interest rate per annum determined by the Administrative Agent by dividing (the resulting quotient rounded upwards, at the Administrative Agent’s discretion, to the nearest 1/100th of 1%) (A) the Term SOFR Reference Rate for a tenor comparable to such Interest Period, as such rate is published by the Term SOFR Administrator on the day (the “Term SOFR Determination Date”) that is two (2) Business Days prior to the first day of such Interest Period, by (B) a number equal to 1.00 minus the SOFR Reserve Percentage.
38
If the Term SOFR Reference Rate for the applicable tenor has not been published or replaced with a Benchmark Replacement by 5:00 p.m. (Pittsburgh, Pennsylvania time) on the Term SOFR Determination Date, then the Term SOFR Reference Rate shall be the Term SOFR Reference Rate for such tenor on the first Business Day preceding such Term SOFR Determination Date for which such Term SOFR Reference Rate for such tenor was published in accordance herewith, so long as such first preceding Business Day is not more than three (3) Business Days prior to such Term SOFR Determination Date. If the Term SOFR Rate, determined as provided above, would be less than the SOFR Floor, then the Term SOFR Rate shall be deemed to be the SOFR Floor. The Term SOFR Rate shall be adjusted automatically without notice to the Borrower on and as of (i) the first day of each Interest Period, and (ii) the effective date of any change in the SOFR Reserve Percentage.
“Term SOFR Rate Loan” means a Loan that bears interest based on the Term SOFR Rate.
“Term SOFR Rate Option” means the option of the Borrower to have Loans bear interest at the rate and under the terms specified in Section 4.1(a)(i)(1) [Revolving Credit Loan Term SOFR Rate Option] and Section 4.1(c)(i)(1) [Term Loan Term SOFR Rate Option], as applicable.
“Term SOFR Reference Rate” shall mean the forward-looking term rate based on SOFR.
“TSRR” means a rate equal to the ICE Term SONIA Reference Rate as administered by the TSRR Administrator.
“TSRR Administrator” means ICE Benchmark Administration Limited.
“TSRR Rate” shall have the meaning specified in the definition of “Term RFR”.
“TSSR Lookback Day” shall have the meaning specified in the definition of “Term RFR”.
“Type”, when used in reference to any Loan or Borrowing Tranche, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing Tranche, is determined by reference to (a) the Base Rate Option (with respect to Loans denominated in Dollars) or (b) the Term Rate Loan Option for such Currency.
“UCP” shall have the meaning specified in Section 11.11.1 [Governing Law].
“UK Financial Institution” shall mean any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended form time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person subject to IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” shall mean the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
39
“USA Patriot Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 10756, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.
“U.S. Government Securities Business Day” means any day except for (a) a Saturday or Sunday or (b) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“U.S. Person” shall mean any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.
“U.S. Tax Compliance Certificate” shall have the meaning specified in Section 5.9.7 [Status of Lenders].
“Withholding Agent” shall mean any Loan Party and the Administrative Agent.
“Write-Down and Conversion Powers” shall mean, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
1.2 Construction . Unless the context of this Agreement otherwise clearly requires, the following rules of construction shall apply to this Agreement and each of the other Loan Documents: (i) references to the plural include the singular, the plural, the part and the whole and the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; (ii) the words “hereof,” “herein,” “hereunder,” “hereto” and similar terms in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document as a whole; (iii) article, section, subsection, clause, schedule and exhibit references are to this Agreement or other Loan Document, as the case may be, unless otherwise specified; (iv) reference to any Person includes such Person’s successors and assigns; (v) reference to any agreement, including this Agreement and any other Loan Document together with the schedules and exhibits hereto or thereto, document or instrument means such agreement, document or instrument as amended, modified, replaced, substituted for, superseded or restated; (vi) relative to the determination of any period of time, “from” means “from and including,” “to” means “to but excluding,” and “through” means “through and including”; (vii) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights, (viii) section headings herein and in each other Loan Document are included for convenience and shall not affect the interpretation of this Agreement or such Loan Document, (ix) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (x) unless otherwise specified, all references herein to times of day shall constitute references to Eastern Standard Time or Eastern Daylight Time, as applicable.
40
1.3 Accounting Principles; Changes in GAAP . Except as otherwise provided in this Agreement, all computations and determinations as to accounting or financial matters and all financial statements to be delivered pursuant to this Agreement shall be made and prepared in accordance with GAAP (including principles of consolidation where appropriate), and all accounting or financial terms shall have the meanings ascribed to such terms by GAAP; provided, however, that all accounting terms used in Section 8.2 [Negative Covenants] (and all defined terms used in the definition of any accounting term used in Section 8.2 [Negative Covenants]) shall have the meaning given to such terms (and defined terms) under GAAP as in effect on the date hereof applied on a basis consistent with those used in preparing Statements referred to in Section 6.1.6(i) [Historical Statements]. Notwithstanding the foregoing, if the Borrower notifies the Administrative Agent in writing that the Borrower wishes to amend any financial covenant in Section 8.2 [Negative Covenants], any related definition and/or the definition of the term Leverage Ratio for purposes of interest, Letter of Credit Fee and Commitment Fee determinations to eliminate the effect of any change in GAAP occurring after the Closing Date on the operation of such financial covenants and/or interest, Letter of Credit Fee or Commitment Fee determinations (or if the Administrative Agent notifies the Borrower in writing that the Required Lenders wish to amend any financial covenant in Section 8.2 [Negative Covenants], any related definition and/or the definition of the term Leverage Ratio for purposes of interest, Letter of Credit Fee and Commitment Fee determinations to eliminate the effect of any such change in GAAP), then the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratios or requirements to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, the Loan Parties’ compliance with such covenants and/or the definition of the term Leverage Ratio for purposes of interest, Letter of Credit Fee and Commitment Fee determinations shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenants or definitions are amended in a manner satisfactory to the Borrower and the Required Lenders, and the Loan Parties shall provide to the Administrative Agent, when they deliver their financial statements pursuant to Sections 8.3.1 [Quarterly Financial Statements] and 8.3.2 [Annual Financial Statements], such reconciliation statements as shall be reasonably requested by the Administrative Agent. Notwithstanding anything else set forth herein, any lease that was or would have been treated as an operating lease under GAAP as in effect on December 14, 2018 that would become or be treated as a capital lease solely as a result of a change in GAAP after December 14, 2018 shall always be treated as an operating lease for all purposes and at all times under this Agreement.
1.4 Currency Calculations . All financial statements and Compliance Certificates shall be set forth in Dollars. For purposes of preparing the financial statements, calculating financial covenants and determining compliance with covenants expressed in Dollars, Optional Currencies shall be converted to Dollars in accordance with GAAP.
1.5 Divisions . For all purposes under the Loan Documents, in connection with any LLC Division: (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its equity interests at such time.
41
1.6 Benchmark Replacement Notification . Section 4.4.4 [Benchmark Replacement Setting] of this Agreement provides a mechanism for determining an alternative rate of interest in the event that the Term SOFR Rate, Daily Simple SOFR, the Eurocurrency Rate or Term RFR for any applicable Currency is no longer available or in certain other circumstances. The Administrative Agent does not warrant or accept any responsibility for and shall not have any liability with respect to, the administration, submission or any other matter related to the Term SOFR Rate, Daily Simple SOFR, the Eurocurrency Rate or Term RFR for any applicable Currency, or with respect to any alternative or successor rate thereto, or replacement rate therefor.
2.REVOLVING CREDIT AND SWING LOAN FACILITIES
2.1 Revolving Credit Commitments .
2.1.1 Revolving Credit Loans; Optional Currency Loans . Subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, each Lender severally agrees to make Revolving Credit Loans in either Dollars or one or more Optional Currencies (each an “Optional Currency Loan”) to the Borrower at any time or from time to time on or after the date hereof to the Expiration Date; provided that after giving effect to each such Loan (i) the aggregate Dollar Equivalent amount of Revolving Credit Loans from such Lender shall not exceed such Lender’s Revolving Credit Commitment minus such Lender’s Ratable Share of the outstanding Swing Loans and Letter of Credit Obligations, (ii) the Revolving Facility Usage shall not exceed the Revolving Credit Commitments, and (iii) no Revolving Credit Loan to which the Base Rate Option applies shall be made in an Optional Currency. Within such limits of time and amount and subject to the other provisions of this Agreement, the Borrower may borrow, repay and reborrow pursuant to this Section 2.1 [Revolving Credit Commitments].
2.1.2 Swing Loan Commitment . Subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, and in order to facilitate loans and repayments between Settlement Dates, PNC may, at its option, cancelable at any time for any reason whatsoever, make swing loans in Dollars (the “Swing Loans”) to the Borrower at any time or from time to time after the date hereof to, but not including, the Expiration Date, in an aggregate principal amount up to but not in excess of $35,000,000, provided that after giving effect to such Loan, the Revolving Facility Usage shall not exceed the aggregate Revolving Credit Commitments of the Lenders. Within such limits of time and amount and subject to the other provisions of this Agreement, the Borrower may borrow, repay and reborrow pursuant to this Section 2.1.2 [Swing Loan Commitment].
2.2 Nature of Lenders’ Obligations with Respect to Revolving Credit Loans . Each Lender shall be obligated to participate in each request for Revolving Credit Loans pursuant to Section 2.5 [Loan Requests; Swing Loan Requests] in accordance with its Ratable Share. The aggregate Dollar Equivalent of each Lender’s Revolving Credit Loans outstanding hereunder to the Borrower at any time shall never exceed its Revolving Credit Commitment minus its Ratable Share of the outstanding Swing Loans and Letter of Credit Obligations. The obligations of each Lender hereunder are several. The failure of any Lender to perform its obligations hereunder shall not affect the Obligations of the Borrower to any other party nor shall any other party be liable for the failure of such Lender to perform its obligations hereunder. The Lenders shall have no obligation to make Revolving Credit Loans hereunder on or after the Expiration Date.
42
2.3 Commitment Fees . Accruing from the date hereof until the Expiration Date, the Borrower agrees to pay to the Administrative Agent for the account of each Lender according to its Ratable Share, a nonrefundable commitment fee (the “Commitment Fee”) equal to Applicable Commitment Fee Rate (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) multiplied by the daily difference between the amount of (i) the Revolving Credit Commitments and (ii) the Dollar Equivalent amount of the Revolving Facility Usage (provided however, that solely in connection with determining the share of each Lender in the Commitment Fee, the Revolving Facility Usage with respect to the portion of the Commitment Fee allocated to PNC shall include the full amount of the outstanding Swing Loans, and with respect to the portion of the Commitment Fee allocated by the Administrative Agent to all of the Lenders other than PNC, such portion of the Commitment Fee shall be calculated (according to each such Lender’s Ratable Share) as if the Revolving Facility Usage excludes the outstanding Swing Loans); provided, further, that any Commitment Fee accrued with respect to the Revolving Credit Commitment of a Defaulting Lender during the period prior to the time such Lender became a Defaulting Lender and unpaid at such time shall not be payable by the Borrower so long as such Lender shall be a Defaulting Lender except to the extent that such Commitment Fee shall otherwise have been due and payable by the Borrower prior to such time; and provided further that no Commitment Fee shall accrue with respect to the Revolving Credit Commitment of a Defaulting Lender so long as such Lender shall be a Defaulting Lender. Subject to the provisos in the directly preceding sentence, all Commitment Fees shall be payable quarterly in arrears and in U.S. Dollars.
2.4 Termination or Reduction of Revolving Credit Commitments . The Borrower shall have the right, upon not less than three (3) Business Days’ notice to the Administrative Agent, to terminate the Revolving Credit Commitments or, from time to time, to reduce the aggregate amount of the Revolving Credit Commitments (ratably among the Lenders in proportion to their Ratable Shares); provided that no such termination or reduction of Revolving Credit Commitments shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Credit Loans made on the effective date thereof, the Revolving Facility Usage would exceed the aggregate Revolving Credit Commitments of the Lenders. Any such reduction shall be in an amount equal to $1,000,000, or a whole multiple thereof, and shall reduce permanently the Revolving Credit Commitments then in effect. Any such reduction or termination shall be accompanied by prepayment of the Notes, together with outstanding Commitment Fees, and the full amount of interest accrued on the principal sum to be prepaid (and all amounts referred to in Section 5.10 [Indemnity] hereof) to the extent necessary to cause the aggregate Revolving Facility Usage after giving effect to such prepayments to be equal to or less than the Revolving Credit Commitments as so reduced or terminated. Any notice to reduce the Revolving Credit Commitments under this Section 2.4 [Termination or Reduction of Revolving Credit Commitments] shall be irrevocable.
2.5 Loan Requests; Swing Loan Requests .
43
2.5.1 Loan Requests . Except as otherwise provided herein, the Borrower may from time to time prior to the Expiration Date request the Lenders to make Revolving Credit Loans, or renew or convert the Interest Rate Option applicable to existing Revolving Credit Loans or Term Loans pursuant to Section 4.2 [Interest Periods], by delivering to the Administrative Agent, not later than 10:00 a.m., (a) three (3) Business Days prior to the proposed Borrowing Date with respect to (i) the making of Revolving Credit Loans denominated in Dollars to which the Term SOFR Rate Option applies or (ii) the conversion to or the renewal of the Term SOFR Rate Option for any Loans denominated in Dollars; (b) four (4) Business Days prior to the proposed Borrowing Date with respect to (i) the making of Revolving Credit Loans denominated in Optional Currencies to which the Eurocurrency Rate Option applies, or (ii) the conversion to or renewal of a Eurocurrency Rate Option for any Loans denominated in Optional Currencies; (c) four (4) Business Days prior to the proposed Borrowing Date with respect to (i) the making of Revolving Credit Loans denominated in Optional Currencies to which the Term RFR Option applies, or (ii) the conversion to a Term RFR Option for any Loans denominated in Optional Currencies, and (d) the same Business Day of the proposed Borrowing Date with respect to the making of a Revolving Credit Loan to which the Base Rate Option applies or the last day of the preceding Interest Period with respect to the conversion to the Base Rate Option for any Loan, in each case, of a duly completed request therefor signed by an Authorized Officer of the Borrower substantially in the form of Exhibit 2.5.1 or a request by telephone from any Authorized Officer of the Borrower immediately confirmed in writing by letter, facsimile or telex in such form (each, a “Loan Request”), it being understood that the Administrative Agent may rely on the authority of any Authorized Officer of the Borrower making such a telephonic request without the necessity of receipt of such written confirmation. Each Loan Request shall be irrevocable and shall specify (A) the aggregate amount of the proposed Loans comprising each Borrowing Tranche, and, if applicable, the Interest Period, which amount shall be in (x) the minimum amount of $500,000 (or the Dollar Equivalent thereof) for each Borrowing Tranche, (B) which Interest Rate Option shall apply to the proposed Dollar denominated Loans comprising the applicable Borrowing Tranche, (C) the currency in which such Revolving Credit Loans shall be funded if the Borrower elects an Optional Currency, the applicable Interest Rate Option, and (D) an appropriate Interest Period, if applicable. No Optional Currency Loan may be converted into a Loan with a different Interest Rate Option, or a Loan denominated in a different Currency.
2.5.2 Swing Loan Requests . Except as otherwise provided herein, the Borrower may from time to time prior to the Expiration Date request the Swing Loan Lender to make Swing Loans by delivery to the Swing Loan Lender not later than 12:00 noon on the proposed Borrowing Date of a duly completed request therefor signed by an Authorized Officer of the Borrower substantially in the form of Exhibit 2.5.2 hereto or a request by telephone immediately confirmed in writing by letter, facsimile or telex (each, a “Swing Loan Request”), it being understood that the Administrative Agent may rely on the authority of any Authorized Officer of the Borrower making such a telephonic request without the necessity of receipt of such written confirmation. Each Swing Loan Request shall be irrevocable and shall specify the proposed Borrowing Date and the principal amount of such Swing Loan, which shall be not less than $100,000.
2.6 Making Revolving Credit Loans and Swing Loans; Presumptions by the Administrative Agent; Repayment of Revolving Credit Loans; Borrowings to Repay Swing Loans .
44
2.6.1 Making Revolving Credit Loans . The Administrative Agent shall, promptly after receipt by it of a Loan Request pursuant to Section 2.5 [Loan Requests; Swing Loan Requests], notify the Lenders of its receipt of such Loan Request specifying the information provided by the Borrower, including the currency in which the Revolving Credit Loan is requested, and the apportionment among the Lenders of the requested Revolving Credit Loans as determined by the Administrative Agent in accordance with Section 2.2 [Nature of Lenders’ Obligations with Respect to Revolving Credit Loans]. Each Lender shall remit the principal amount of each Revolving Credit Loan in the requested currency (in the case of Optional Currency Loans, in Dollars if so requested by the Administrative Agent) to the Administrative Agent such that the Administrative Agent is able to, and the Administrative Agent shall, to the extent the Lenders have made funds available to it for such purpose and subject to Section 7.2 [Each Loan or Letter of Credit], fund such Revolving Credit Loans to the Borrower in U.S. Dollars or the requested Optional Currency (as applicable) in immediately available funds at the Principal Office prior to 2:00 p.m., on the applicable Borrowing Date; provided that if any Lender fails to remit such funds to the Administrative Agent in a timely manner, the Administrative Agent may elect in its sole discretion to fund with its own funds, including funds in the requested Optional Currency, the Revolving Credit Loans of such Lender on such Borrowing Date, and such Lender shall be subject to the repayment obligation in Section 2.6.2 [Presumptions by the Administrative Agent].
2.6.2 Presumptions by the Administrative Agent . Unless the Administrative Agent shall have received notice from a Lender prior to the proposed time of any Loan bearing interest at the Base Rate, or, for Loans other than Loans bearing interest at the Base Rate, prior to the close of business the day before the Borrowing Date, that such Lender will not make available to the Administrative Agent such Lender’s share of such Loan, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.6.1 [Making Revolving Credit Loans] and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Loan available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in the appropriate currency with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of a payment to be made by such Lender, the greater of the Effective Federal Funds Rate (or, for payments in an Optional Currency, the Overnight Rate), and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation and (ii) in the case of a payment to be made by the Borrower, the interest rate applicable to Loans under the Base Rate Option or in the case of Optional Currencies, in accordance with such market practice, in each case, as applicable. If such Lender pays its share of the applicable Loan to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.
2.6.3 Making Swing Loans . So long as PNC elects to make Swing Loans, PNC shall, after receipt by it of a Swing Loan Request pursuant to Section 2.5.2 [Swing Loan Requests], fund such Swing Loan to the Borrower in U.S. Dollars only and in immediately available funds at the Principal Office prior to 4:00 p.m. on the Borrowing Date.
45
2.6.4 Repayment of Revolving Credit Loans . The Borrower shall repay the Revolving Credit Loans together with all outstanding interest thereon on the Expiration Date.
2.6.5 Borrowings to Repay Swing Loans . PNC may, at its option, exercisable at any time for any reason whatsoever (and in addition to any right to require payment on any Settlement Date in accordance with Section 5.11 [Settlement Date Procedures]), demand repayment of the Swing Loans, and each Lender shall make a Revolving Credit Loan in an amount equal to such Lender’s Ratable Share of the aggregate principal amount of the outstanding Swing Loans, plus, if PNC so requests, accrued interest thereon, provided that no Lender shall be obligated in any event to make Revolving Credit Loans in excess of its Revolving Credit Commitment minus its Ratable Share of Letter of Credit Obligations. Revolving Credit Loans made pursuant to the preceding sentence shall bear interest at the Base Rate Option and shall be deemed to have been properly requested in accordance with Section 2.5.1 [Loan Requests] without regard to any of the requirements of that provision. PNC shall provide notice to the Lenders (which may be telephonic or written notice by letter, facsimile or telex) that such Revolving Credit Loans are to be made under this Section 2.6.5 [Borrowings to Repay Swing Loans] and of the apportionment among the Lenders, and the Lenders shall be unconditionally obligated to fund such Revolving Credit Loans (whether or not the conditions specified in Section 2.5.1 [Loan Requests] are then satisfied) by the time PNC so requests, which shall not be earlier than 3:00 p.m. on the Business Day next after the date the Lenders receive such notice from PNC.
2.6.6 Swing Loans Under Cash Management Agreements . In addition to making Swing Loans pursuant to the foregoing provisions of Section 2.6.3 [Making Swing Loans], without the requirement for a specific request from the Borrower pursuant to Section 2.5.2 [Swing Loan Requests], PNC as the Swing Loan Lender may make Swing Loans to the Borrower in accordance with the provisions of the agreements between the Borrower and such Swing Loan Lender relating to the Borrower’s deposit, sweep and other accounts at such Swing Loan Lender and related arrangements and agreements regarding the management and investment of the Borrower’s cash assets as in effect from time to time (the “Cash Management Agreements”) to the extent of the daily aggregate net negative balance in the Borrower’s accounts which are subject to the provisions of the Cash Management Agreements. Swing Loans made pursuant to this Section 2.6.6 [Swing Loans Under Cash Management Agreements] in accordance with the provisions of the Cash Management Agreements shall (i) be subject to the limitations as to aggregate amount set forth in Section 2.1.2 [Swing Loan Commitment], (ii) not be subject to the limitations as to individual amount set forth in Section 2.5.2 [Swing Loan Requests], (iii) be payable by the Borrower, both as to principal and interest, at the rates and times set forth in the Cash Management Agreements (but in no event later than the Expiration Date), (iv) not be made at any time after such Swing Loan Lender has received written notice of the occurrence of an Event of Default and so long as such shall continue to exist, or, unless consented to by the Required Lenders, a Potential Default and so long as such shall continue to exist, (v) if not repaid by the Borrower in accordance with the provisions of the Cash Management Agreements, be subject to each Lender’s obligation pursuant to Section 2.6.5 [Borrowings to Repay Swing Loans], and (vi) except as provided in the foregoing subsections (i) through (v), be subject to all of the terms and conditions of this Section 2 [Revolving Credit and Swing Loan Facilities].
46
2.7 Notes . The Obligation of the Borrower to repay the aggregate unpaid principal amount of the Revolving Credit Loans, Swing Loans and Term Loans made to it by each Lender, together with interest thereon, to the extent requested by such Lender, shall be evidenced by a revolving credit Note, a swing loan Note and a term Note, respectively, in each case dated the Closing Date or pursuant to Section 2.11(a)(viii) [Notes], payable to the order of such Lender in a face amount equal to the Revolving Credit Commitment, Swing Loan Commitment or Term Loan Commitment, as applicable, of such Lender.
2.8 Use of Proceeds . The proceeds of the Loans shall be used to fund ongoing working capital, capital expenditures, mergers, acquisitions (including the Project Vitality Acquisition), shareholder distributions permitted under this Agreement, other general corporate purposes, and to pay fees and expenses in connection with this Agreement and the Project Vitality Acquisition.
2.9 Letter of Credit Subfacility .
2.9.1 Issuance of Letters of Credit . The Borrower or any Loan Party may at any time prior to the Expiration Date request the issuance of a standby or trade letter of credit (each a “Letter of Credit”), which may be denominated in either Dollars or an Optional Currency, for its own account or the account of another Loan Party, or the amendment or extension of an existing Letter of Credit, by delivering or transmitting electronically, or having such other Loan Party deliver or transmit electronically to the Issuing Lender (with a copy to the Administrative Agent) a completed application for letter of credit, or request for such amendment or extension, as applicable, in such form as the Issuing Lender may specify from time to time by no later than 10:00 a.m. at least five (5) Business Days, or such shorter period as may be agreed to by the Issuing Lender, in advance of the proposed date of issuance. The Borrower or such Loan Party shall authorize and direct the Issuing Lender to name the Borrower or any Loan Party as the “Applicant” or “Account Party” of each Letter of Credit. Promptly after receipt of any Letter of Credit application, the Issuing Lender shall confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit application and if not, such Issuing Lender will provide the Administrative Agent with a copy thereof. As of the Closing Date, each of the Existing Letters of Credit shall constitute, for all purposes of this Agreement and the other Loan Documents, a Letter of Credit issued and outstanding hereunder. As of the Project Vitality Closing Date, each of the project Vitality Letters of Credit shall constitute, for all purposes of this Agreement and the other Loan Documents, a Letter of Credit issued and outstanding hereunder.
2.9.1.1 Unless the Issuing Lender has received notice from any Lender, the Administrative Agent or any Loan Party, at least one day prior to the requested date of issuance, amendment or extension of the applicable Letter of Credit, that one or more applicable conditions in Section 7 [Conditions of Lending and Issuance of Letters of Credit] is not satisfied, then, subject to the terms and conditions hereof and in reliance on the agreements of the other Lenders set forth in this Section 2.9 [Letter of Credit Subfacility], the Issuing Lender or any of the Issuing Lender’s Affiliates will issue the proposed Letter of Credit or agree to such amendment or extension, provided that each Letter of Credit shall (A) have a maximum maturity of twelve (12) months from the date of issuance, and (B) in no event expire later than the Expiration Date; provided that any Letter of Credit may expire after such date (each such Letter of Credit, an “Extended Letter of Credit”) with the consent of the applicable Issuing Lender and subject to the requirements of Section 2.9.11 [Cash Collateral for Extended Letters of Credit]; and provided further that in no event shall (i) the Letter of Credit Obligations exceed, at any one time, $10,000,000 (the “Letter of Credit Sublimit”) or (ii) the Revolving Facility Usage exceed, at any one time, the Revolving Credit Commitments.
47
Each request by the Borrower for the issuance, amendment or extension of a Letter of Credit shall be deemed to be a representation by the Borrower that it shall be in compliance with the preceding sentence and with Section 7 [Conditions of Lending and Issuance of Letters of Credit] after giving effect to the requested issuance, amendment or extension of such Letter of Credit. Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to the beneficiary thereof, the applicable Issuing Lender will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.
2.9.1.2 Notwithstanding Section 2.9.1.1, the Issuing Lender shall not be under any obligation to issue any Letter of Credit if (i) any order, judgment or decree of any Official Body or arbitrator shall by its terms purport to enjoin or restrain the Issuing Lender from issuing the Letter of Credit, or any Law applicable to the Issuing Lender or any request or directive (whether or not having the force of law) from any Official Body with jurisdiction over the Issuing Lender shall prohibit, or request that the Issuing Lender refrain from, the issuance of letters of credit generally or the Letter of Credit in particular or shall impose upon the Issuing Lender with respect to the Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Lender is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the Issuing Lender any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the Issuing Lender in good faith deems material to it, or (ii) the issuance of the Letter of Credit would violate one or more policies of the Issuing Lender applicable to letters of credit generally.
2.9.2 Letter of Credit Fees . The Borrower shall pay in Dollars (i) to the Administrative Agent for the ratable account of the Lenders a fee (the “Letter of Credit Fee”) equal to the Applicable Letter of Credit Fee Rate on the daily amount available to be drawn under each Letter of Credit, and (ii) to the Issuing Lender for its own account a fronting fee equal to 0.125% per annum on the daily amount available to be drawn under each Letter of Credit. All Letter of Credit Fees and fronting fees shall be computed on the basis of a year of 360 days and actual days elapsed and shall be payable quarterly in arrears on each Payment Date following issuance of each Letter of Credit. The Borrower shall also pay (in Dollars) to the Issuing Lender for the Issuing Lender’s sole account the Issuing Lender’s then in effect customary fees and administrative expenses payable with respect to letters of credit as the Issuing Lender may generally charge or incur from time to time in connection with the issuance, maintenance, amendment (if any), assignment or transfer (if any), negotiation, and administration of letters of credit, which customary fees and administrative expenses are set forth on a schedule provided to the Borrower on or before the date hereof by the Issuing Lender and upon request by the Borrower, provided that the Borrower shall not request delivery of such schedule more than four (4) times in any calendar year.
2.9.3 Disbursements, Reimbursement . Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Lender a participation in such Letter of Credit and each drawing thereunder in an amount equal to such Lender’s Ratable Share of the maximum amount available to be drawn under such Letter of Credit and the amount of such drawing, respectively, in each case in the currency in which each Letter of Credit is issued.
48
2.9.3.1 In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, the Issuing Lender will promptly notify the Borrower and the Administrative Agent thereof. Provided that it shall have received such notice, the Borrower shall reimburse (such obligation to reimburse the Issuing Lender shall sometimes be referred to as a “Reimbursement Obligation”) the Issuing Lender prior to 12:00 noon on each date that an amount is paid by the Issuing Lender under any Letter of Credit (each such date, a “Drawing Date”) by paying to the Administrative Agent for the account of the Issuing Lender an amount equal to the amount so paid by the Issuing Lender in the same currency as paid, unless otherwise required by the Administrative Agent or the Issuing Lender. In the event the Borrower fails to reimburse the Issuing Lender (through the Administrative Agent) for the full amount of any drawing under any Letter of Credit by 2:00 p.m. on the Drawing Date, the Administrative Agent will promptly notify each Lender thereof, and the Borrower shall be deemed to have requested that Revolving Credit Loans in U.S. Dollars (and, if the Letter of Credit was denominated in another currency, in the Dollar Equivalent amount to the amount paid by the Issuing Lender in such other currency on the Drawing Date thereof) be made by the Lenders under the Base Rate Option to be disbursed on the Drawing Date under such Letter of Credit, subject to the amount of the unutilized portion of the Revolving Credit Commitment and subject to the conditions set forth in Section 7.2 [Each Loan or Letter of Credit] other than any notice requirements. Any notice given by the Administrative Agent or Issuing Lender pursuant to this Section 2.9.3.1 may be oral if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.
2.9.3.2 Each Lender shall upon any notice pursuant to Section 2.9.3.1 make available to the Administrative Agent for the account of the Issuing Lender an amount in Dollars in immediately available funds equal to its Ratable Share of the amount of the drawing (and, if the Letter of Credit was denominated in another currency, in the Dollar Equivalent amount to the amount paid by the Issuing Lender in such other currency on the Drawing Date thereof), whereupon the participating Lenders shall (subject to Section 2.9.3 [Disbursements; Reimbursement]) each be deemed to have made a Revolving Credit Loan under the Base Rate Option to the Borrower in that amount. If any Lender so notified fails to make available to the Administrative Agent for the account of the Issuing Lender the amount of such Lender’s Ratable Share of such amount by no later than 2:00 p.m. on the Drawing Date, then interest shall accrue on such Lender’s obligation to make such payment, from the Drawing Date to the date on which such Lender makes such payment (i) at a rate per annum equal to the Effective Federal Funds Rate during the first three (3) days following the Drawing Date and (ii) at a rate per annum equal to the rate applicable to Revolving Credit Loans under the Base Rate Option on and after the fourth day following the Drawing Date. The Administrative Agent and the Issuing Lender will promptly give notice (as described in Section 2.9.3.1 above) of the occurrence of the Drawing Date, but failure of the Administrative Agent or the Issuing Lender to give any such notice on the Drawing Date or in sufficient time to enable any Lender to effect such payment on such date shall not relieve such Lender from its obligation under this Section 2.9.3.2.
2.9.3.3 With respect to any unreimbursed drawing that is not converted into Revolving Credit Loans in Dollars under the Base Rate Option to the Borrower in whole or in part as contemplated by Section 2.9.3.1, because of the Borrower’s failure to satisfy the conditions set forth in Section 7.2 [Each Loan or Letter of Credit] other than any notice requirements, or for any other reason, the Borrower shall be deemed to have incurred from the Issuing Lender a borrowing (each a “Letter of Credit Borrowing”) in the amount of such drawing (and, if the Letter of Credit was denominated in another currency, in the Dollar Equivalent of the amount paid by the Issuing Lender in such other currency on the Drawing Date thereof).
49
Such Letter of Credit Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the rate per annum applicable to the Revolving Credit Loans under the Base Rate Option. Each Lender’s payment to the Administrative Agent for the account of the Issuing Lender pursuant to Section 2.9.3 [Disbursements, Reimbursement] shall be deemed to be a payment in respect of its participation in such Letter of Credit Borrowing (each a “Participation Advance”) from such Lender in satisfaction of its participation obligation under this Section 2.9.3 [Disbursements, Reimbursement].
2.9.4 Repayment of Participation Advances .
2.9.4.1 Upon (and only upon) receipt by the Administrative Agent for the account of the Issuing Lender of immediately available funds from the Borrower (i) in reimbursement of any payment made by the Issuing Lender under the Letter of Credit with respect to which any Lender has made a Participation Advance to the Administrative Agent, or (ii) in payment of interest on such a payment made by the Issuing Lender under such a Letter of Credit, the Administrative Agent on behalf of the Issuing Lender will pay to each Lender, in the same funds as those received by the Administrative Agent, the amount of such Lender’s Ratable Share of such funds, except the Administrative Agent shall retain for the account of the Issuing Lender the amount of the Ratable Share of such funds of any Lender that did not make a Participation Advance in respect of such payment by the Issuing Lender.
2.9.4.2 If the Administrative Agent is required at any time to return to any Loan Party, or to a trustee, receiver, liquidator, custodian, or any official in any Insolvency Proceeding, any portion of any payment made by any Loan Party to the Administrative Agent for the account of the Issuing Lender pursuant to this Section 2.9 [Letter of Credit Subfacility] in reimbursement of a payment made under any Letter of Credit or interest or fees thereon, each Lender shall, on demand of the Administrative Agent, forthwith return to the Administrative Agent for the account of the Issuing Lender the amount of its Ratable Share of any amounts so returned by the Administrative Agent plus interest thereon from the date such demand is made to the date such amounts are returned by such Lender to the Administrative Agent, at a rate per annum equal to the Effective Federal Funds Rate (or, for any payment in an Optional Currency, the Overnight Rate) in effect from time to time.
2.9.5 Documentation . Each Loan Party agrees to be bound by the terms of the Issuing Lender’s application and agreement for letters of credit and the Issuing Lender’s written regulations and customary practices relating to letters of credit, though such interpretation may be different from such Loan Party’s own. In the event of a conflict between such application or agreement and this Agreement, this Agreement shall govern. It is understood and agreed that, except in the case of gross negligence or willful misconduct, the Issuing Lender shall not be liable for any error, negligence and/or mistakes, whether of omission or commission, in following any Loan Party’s instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto.
50
2.9.6 Determinations to Honor Drawing Requests . In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit.
2.9.7 Nature of Participation and Reimbursement Obligations . Each Lender’s obligation in accordance with this Agreement to make the Revolving Credit Loans or Participation Advances, as contemplated by Section 2.9.3 [Disbursements, Reimbursement], as a result of a drawing under a Letter of Credit, and the Obligations of the Borrower to reimburse the Issuing Lender upon a draw under a Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Section 2.9 [Letter of Credit Subfacility] under all circumstances, including the following circumstances:
(i) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Issuing Lender or any of its Affiliates, the Borrower or any other Person for any reason whatsoever, or which any Loan Party may have against the Issuing Lender or any of its Affiliates, any Lender or any other Person for any reason whatsoever;
(ii) the failure of any Loan Party or any other Person to comply, in connection with a Letter of Credit Borrowing, with the conditions set forth in Sections 2.1 [Revolving Credit Commitments], 2.5 [Loan Requests; Swing Loan Requests], 2.6 [Making Revolving Credit Loans and Swing Loans; Etc.] or 7.2 [Each Loan or Letter of Credit] or as otherwise set forth in this Agreement for the making of a Revolving Credit Loan, it being acknowledged that such conditions are not required for the making of a Letter of Credit Borrowing and the obligation of the Lenders to make Participation Advances under Section 2.9.3 [Disbursements, Reimbursement];
(iii) any lack of validity or enforceability of any Letter of Credit;
(iv) any claim of breach of warranty that might be made by any Loan Party or any Lender against any beneficiary of a Letter of Credit, or the existence of any claim, set-off, recoupment, counterclaim, crossclaim, defense or other right which any Loan Party or any Lender may have at any time against a beneficiary, successor beneficiary any transferee or assignee of any Letter of Credit or the proceeds thereof (or any Persons for whom any such transferee may be acting), the Issuing Lender or its Affiliates or any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between any Loan Party or Subsidiaries of a Loan Party and the beneficiary for which any Letter of Credit was procured);
(v) the lack of power or authority of any signer of (or any defect in or forgery of any signature or endorsement on) or the form of or lack of validity, sufficiency, accuracy, enforceability or genuineness of any draft, demand, instrument, certificate or other document presented under or in connection with any Letter of Credit, or any fraud or alleged fraud in connection with any Letter of Credit, or the transport of any property or provision of services relating to a Letter of Credit, in each case even if the Issuing Lender or any of its Affiliates has been notified thereof;
51
(vi) payment by the Issuing Lender or any of its Affiliates under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit;
(vii) the solvency of, or any acts or omissions by, any beneficiary of any Letter of Credit, or any other Person having a role in any transaction or obligation relating to a Letter of Credit, or the existence, nature, quality, quantity, condition, value or other characteristic of any property or services relating to a Letter of Credit;
(viii) any failure by the Issuing Lender or any of its Affiliates to issue any Letter of Credit in the form requested by any Loan Party, unless the Issuing Lender has received written notice from such Loan Party of such failure within three Business Days after the Issuing Lender shall have furnished such Loan Party and the Administrative Agent a copy of such Letter of Credit and such error is material and no drawing has been made thereon prior to receipt of such notice;
(ix) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of any Loan Party or Subsidiaries of a Loan Party;
(x) any breach of this Agreement or any other Loan Document by any party thereto;
(xi) the occurrence or continuance of an Insolvency Proceeding with respect to any Loan Party;
(xii) the fact that an Event of Default or a Potential Default shall have occurred and be continuing;
(xiii) the fact that the Expiration Date shall have passed or this Agreement or the Commitments hereunder shall have been terminated; and
(xiv) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.
2.9.8 Indemnity . The Borrower hereby agrees to protect, indemnify, pay and save harmless the Issuing Lender and any of its Affiliates that has issued a Letter of Credit from and against any and all claims, demands, liabilities, damages, taxes, penalties, interest, judgments, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel) which the Issuing Lender or any of its Affiliates may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit, other than as a result of the gross negligence or willful misconduct of the Issuing Lender as determined by a final non-appealable judgment of a court of competent jurisdiction.
52
2.9.9 Liability for Acts and Omissions . As between any Loan Party and the Issuing Lender, or the Issuing Lender’s Affiliates, such Loan Party assumes all risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Issuing Lender shall not be responsible for any of the following, including any losses or damages to any Loan Party or other Person or property relating therefrom: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged (even if the Issuing Lender or its Affiliates shall have been notified thereof); (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such 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; (iii) the failure of the beneficiary of any such Letter of Credit, or any other party to which such Letter of Credit may be transferred, to comply fully with any conditions required in order to draw upon such Letter of Credit or any other claim of any Loan Party against any beneficiary of such Letter of Credit, or any such transferee, or any dispute between or among any Loan Party and any beneficiary of any Letter of Credit or any such transferee; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of the Issuing Lender or its Affiliates, as applicable, including any act or omission of any Official Body, and none of the above shall affect or impair, or prevent the vesting of, any of the Issuing Lender’s or its Affiliates rights or powers hereunder. Nothing in the preceding sentence shall relieve the Issuing Lender from liability for the Issuing Lender’s gross negligence or willful misconduct in connection with actions or omissions described in such clauses (i) through (viii) of such sentence. In no event shall the Issuing Lender or its Affiliates be liable to any Loan Party for any indirect, consequential, incidental, punitive, exemplary or special damages or expenses, or for any damages resulting from any change in the value of any property relating to a Letter of Credit.
Without limiting the generality of the foregoing, the Issuing Lender and each of its Affiliates (i) may rely on any oral or other communication believed in good faith by the Issuing Lender or such Affiliate to have been authorized or given by or on behalf of the applicant for a Letter of Credit, (ii) may honor any presentation if the documents presented appear on their face substantially to comply with the terms and conditions of the relevant Letter of Credit; (iii) may honor a previously dishonored presentation under a Letter of Credit, whether such dishonor was pursuant to a court order, to settle or compromise any claim of wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the same extent as if such presentation had initially been honored, together with any interest paid by the Issuing Lender or its Affiliate; (iv) may honor any drawing that is payable upon presentation of a statement advising negotiation or payment, upon receipt of such statement (even if such statement indicates that a draft or other document is being delivered separately), and shall not be liable for any failure of any such draft or other document to arrive, or to conform in any way with the relevant Letter of Credit; (v) may pay any paying or negotiating bank claiming that it rightfully honored under the laws or practices of the place where such bank is located; and (vi) may settle or adjust any claim or demand made on the Issuing Lender or its Affiliate in any way related to any order issued at the applicant’s request to an air carrier, a letter of guarantee or of indemnity issued to a carrier or any similar document (each an “Order”) and honor any drawing in connection with any Letter of Credit that is the subject of such Order, notwithstanding that any drafts or other documents presented in connection with such Letter of Credit fail to conform in any way with such Letter of Credit.
53
In furtherance and extension and not in limitation of the specific provisions set forth above, any action taken or omitted by the Issuing Lender or its Affiliates under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not put the Issuing Lender or its Affiliates under any resulting liability to the Borrower or any Lender.
2.9.10 Issuing Lender Reporting Requirements . Each Issuing Lender shall, on the first Business Day of each month, provide to Administrative Agent and Borrower a schedule of the Letters of Credit issued by it, in form and substance satisfactory to Administrative Agent, showing the date of issuance of each Letter of Credit, the account party, the original face amount (if any), and the expiration date of any Letter of Credit outstanding at any time during the preceding month, and any other information relating to such Letter of Credit that the Administrative Agent may request.
2.9.11 Cash Collateral for Extended Letters of Credit .
(i) Cash Collateralization. The Borrower shall provide Cash Collateral to the Issuing Lender with respect to each Extended Letter of Credit (in an amount equal to 105% of the maximum face amount of each Extended Letter of Credit) by a date that is no later than 10 Business Days prior to the Expiration Date by depositing such amount in immediately available funds, in Dollars, into a cash collateral account maintained at the Issuing Lender and shall enter into a cash collateral agreement in form and substance satisfactory to the Issuing Lender and such other documentation as the Issuing Lender or the Administrative Agent may reasonably request; provided that if the Borrower fails to provide Cash Collateral with respect to any such Extended Letter of Credit by such time, such event shall be treated as a drawing under such Extended Letter of Credit in an amount equal to 105% of the maximum face amount of each such Letter of Credit, which shall be reimbursed (or participations therein funded) in accordance with Section 2.9.3 [Disbursements; Reimbursement], with the proceeds of Revolving Credit Loans (or funded participations) being utilized to provide Cash Collateral for such Letter of Credit.
(ii) Grant of Security Interest. The Borrower, and to the extent provided by any Lender, each such Lender, hereby grants to the Issuing Lender of each Extended Letter of Credit, and agrees to maintain, a first priority security interest in, all Cash Collateral required to be provided by this Section 2.9.11 [Cash Collateral for Extended Letters of Credit] as security for the Issuing Lender’s obligation to fund draws under such Extended Letters of Credit, to be applied pursuant to subsection (iii) below. If at any time the Issuing Lender determines that the Cash Collateral is subject to any right or claim of any Person other than the Issuing Lender as herein provided, or that the total amount of such Cash Collateral is less than the amount required pursuant to subsection (i) above, the Borrower will, promptly upon demand by the Issuing Lender, pay or provide to the Issuing Lender additional Cash Collateral in an amount sufficient to eliminate such deficiency.
54
(iii) Application. Notwithstanding anything to the contrary contained in this Agreement or any other Loan Document, Cash Collateral provided under this Section 2.9.11 [Cash Collateral for Extended Letters of Credit] in respect of Extended Letters of Credit shall be applied to reimburse the Issuing Lender for all drawings made under such Extended Letters of Credit and any and all fees, expenses and charges incurred in connection therewith, prior to any other application of such property as may otherwise be provided for herein.
(iv) Survival. With respect to any Extended Letter of Credit, each party’s obligations under this Section 2.9 [Letter of Credit Subfacility] and all other rights and duties of the Issuing Lender of such Extended Letter of Credit, the Lenders and the Loan Parties with respect to such Extended Letter of Credit shall survive the resignation or replacement of the Issuing Lender or any assignment of rights by the Issuing Lender, the termination of the Commitments and the repayment, satisfaction or discharge of the Obligations.
2.10 Defaulting Lenders .
2.10.1 Defaulting Lender Adjustments . Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable law:
(i) Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as specified in the definition of Required Lenders.
55
(ii) Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article 9 [Default] or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 9.2.3 [Setoff] shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to any Issuing Lender or Swing Loan Lender hereunder; third, to Cash Collateralize the Issuing Lender’s Fronting Exposure with respect to such Defaulting Lender in accordance with Section 5.14 [Cash Collateral]; fourth, as the Borrower may request (so long as no Potential Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement and (y) Cash Collateralize the Issuing Lender’s future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in accordance with Section 5.14 [Cash Collateral]; sixth, to the payment of any amounts owing to the Lenders, the Issuing Lender or Swing Loan Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, the Issuing Lender or Swing Loan Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Potential Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender's breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans or Letter of Credit Borrowing in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made or the related Letters of Credit were issued at a time when the conditions specified in Section 7.2 [Each Loan or Letter of Credit] were satisfied or waived, such payment shall be applied solely to pay the Loans of, and Letter of Credit Borrowings owed to, all non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or Letter of Credit Borrowing owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in Letter of Credit Obligations and Swing Loans are held by the Lenders pro rata in accordance with the Revolving Credit Commitments without giving effect to Section 2.10.1(iv) [Reallocation of Participation to Reduce Fronting Exposure]. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.10.1(ii) [Defaulting Lender Waterfall] shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.
(iii) Certain Fees. (1) No Defaulting Lender shall be entitled to receive any Commitment Fee for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).
(2) Each Defaulting Lender shall be entitled to receive Letter of Credit Fees for any period during which that Lender is a Defaulting Lender only to the extent allocable to its Ratable Share of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to Section 5.14 [Cash Collateral].
(3) With respect to any Letter of Credit Fee not required to be paid to any Defaulting Lender pursuant to clause (2) above, the Borrower shall (x) pay to each non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in Letter of Credit Obligations that has been reallocated to such non-Defaulting Lender pursuant to clause (iv) below, (y) pay to each Issuing Lender the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to such Issuing Lender’s Fronting Exposure to such Defaulting Lender, and (z) not be required to pay the remaining amount of any such fee.
56
(iv) Reallocation of Participations to Reduce Fronting Exposure. All or any part of such Defaulting Lender’s participation in Letter of Credit Obligations and Swing Loans shall be reallocated among the non-Defaulting Lenders in accordance with their respective Ratable Shares (calculated without regard to such Defaulting Lender’s Commitment) but only to the extent that such reallocation does not cause the aggregate Revolving Facility Usage of any non-Defaulting Lender to exceed such non-Defaulting Lender’s Revolving Credit Commitment. No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a non-Defaulting Lender as a result of such non-Defaulting Lender’s increased exposure following such reallocation.
2.10.2 Defaulting Lender Cure . If the Borrower, the Administrative Agent and each Swing Loan Lender and Issuing Lender agree in writing that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions specified therein (which may include arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Loans and funded and unfunded participations in Letters of Credit and Swing Loans to be held pro rata by the Lenders in accordance with the Revolving Credit Commitments (without giving effect to Section 2.10.1(iv) [Reallocation of Participations to Reduce Fronting Exposure], whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.
2.10.3 New Swing Loans/Letters of Credit . So long as any Lender is a Defaulting Lender, (i) the Swing Loan Lender shall not be required to fund any Swing Loans unless it is satisfied that it will have no Fronting Exposure after giving effect to such Swing Loan and (ii) no Issuing Lender shall be required to issue, extend, renew or increase any Letter of Credit unless it is satisfied that it will have no Fronting Exposure after giving effect thereto.
2.11 Increase in Revolving Credit Commitments; Incremental Term Loans .
(a) Increasing Lenders and New Lenders. The Borrower may request that (i) the current Lenders increase their Revolving Credit Commitments or provide one or more additional term loans (each, an “Incremental Term Loan”) (any current Lender which elects to increase its Revolving Credit Commitment or provide an Incremental Term Loan shall be referred to as an “Increasing Lender”) or (ii) one or more new lenders (each a “New Lender”) join this Agreement and provide a Revolving Credit Commitment or an Incremental Term Loan hereunder, subject to the following terms and conditions:
57
(i) No Obligation to Increase. No current Lender shall be obligated to (x) increase its Revolving Credit Commitment and/or provide an Incremental Term Loan and any increase in the Revolving Credit Commitment and/or issuance of any Incremental Term Loan by any current Lender shall be in the sole discretion of such current Lender, or (y) provide an Incremental Term Loan and any Incremental Term Loan provided by any Lender shall be in the sole discretion of Lender.
(ii) Defaults. There shall exist no Events of Default or Potential Default prior to giving effect to such increase or on the effective date of such increase after giving effect to such increase.
(iii) Aggregate Commitments. The aggregate amount of all increases under this Section 2.11 [Increase in Revolving Credit Commitments; Incremental Term Loans] shall not exceed $300,000,000 and after giving effect to such increase, the total Commitments shall not exceed $900,000,000.
(iv) Terms of Incremental Term Loans. The Incremental Term Loans will mature and amortize in a manner reasonably acceptable to the Administrative Agent, the Lenders making such Incremental Term Loan and the Borrower, but will not in any event have a shorter weighted average life to maturity than the remaining weighted average life to maturity (as reasonably determined by the Administrative Agent) of the Initial Term Loans or a maturity date earlier than the Term Loan Maturity Date. The Incremental Term Loans shall share ratably with the Initial Term Loan in mandatory prepayments and shall have ratable voting rights. Except as provided above, all other terms and conditions applicable to any Incremental Term Loan, to the extent not consistent with the terms and conditions applicable to the Initial Term Loans, shall be reasonably satisfactory to the Administrative Agent and the Borrower (provided that such other terms and conditions shall not be more restrictive than the terms and conditions applicable to Initial Term Loans unless (x) the Lenders under any such Initial Term Loans also receive the benefit of such more restrictive terms or (y) any such provisions apply only after the Term Loan Maturity Date).
(v) Minimum Commitments. The aggregate amount of the increases in the Revolving Credit Commitments and Incremental Term Loans at any time provided by New Lenders and/or an Increasing Lenders shall be at least $25,000,000, and increments of $5,000,000 thereafter.
(vi) Maximum Increases. The aggregate number of increases of the Revolving Credit Commitments and Incremental Term Loans shall not exceed three (3) such increases during the term of this Agreement.
58
(vii) Resolutions; Opinion. The Loan Parties shall deliver to the Administrative Agent on or before the effective date of such increase the following documents in a form reasonably acceptable to the Administrative Agent: (1) certifications of their corporate secretaries with attached resolutions certifying that the increase in the Revolving Credit Commitment and/or Incremental Term Loan has been approved by such Loan Parties, and (2) an opinion of counsel addressed to the Administrative Agent and the Lenders addressing the authorization and execution of the Loan Documents entered into in connection therewith by, and enforceability of such Loan Documents against, the Loan Parties.
(viii) Notes. To the extent requested thereby, the Borrower shall execute and deliver (1) to each Increasing Lender a replacement revolving credit Note and/or term Note reflecting the new amount of such Increasing Lender’s Commitments after giving effect to the increase (and the prior Note issued to such Increasing Lender shall be deemed to be automatically terminated and cancelled) and (2) to each New Lender a revolving credit Note and/or term Note reflecting the amount of such New Lender’s Commitments.
(ix) Approval of New Lenders. Any New Lender shall be subject to the approval of the Administrative Agent and the Borrower.
(x) Increasing Lenders. Each Increasing Lender shall confirm its agreement to increase its Commitments pursuant to an acknowledgement in a form acceptable to the Administrative Agent and delivered to the Administrative Agent at least five (5) days before the effective date of such increase.
(xi) New Lender Joinder. Each New Lender shall execute a lender joinder pursuant to which such New Lender shall join and become a party to this Agreement and the other Loan Documents with a Commitment in the amount set forth in such lender joinder.
(xii) Fees. Borrower shall pay any Commitment Fees, Letter of Credit Fees, Administrative Agent’s Fee or other fees or amounts due from the Borrower under this Agreement or the Administrative Agent’s Letter in connection with such increase.
(xiii) Amendment. Incremental Term Loans shall be effected by an amendment to this Agreement setting forth the terms of the Incremental Term Loans executed by (x) the Administrative Agent, (y) each Lender or New Lender agreeing to provide any portion of the Incremental Term Loans, and (z) the Borrower and the Loan Parties, and reaffirmations of the Loan Documents executed by the Borrower and the Loan Parties, in each case in form and substance reasonably satisfactory to the Administrative Agent. Such amendment may, without the consent of the other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section 2.11 [Increase in Revolving Credit Commitments; Incremental Term Loans].
(b) Treatment of Outstanding Loans and Letters of Credit.
59
(i) Repayment of Outstanding Loans; Borrowing of New Loans. On the effective date of such increase in the Revolving Credit Commitments, the Borrower shall repay all Revolving Credit Loans then outstanding, subject to the Borrower’s indemnity obligations under Section 5.10 [Indemnity]; provided, that the Administrative Agent will use its reasonable efforts to assist the Borrower in attempting to minimize such indemnity obligations under Section 5.10 [Indemnity]; provided, further, that it may borrow new Loans with a Borrowing Date on such date. Each of the Lenders shall participate in any new Loans made on or after such date in accordance with their respective Ratable Shares after giving effect to the increase in Revolving Credit Commitments contemplated by this Section 2.11(b) [Treatment of Outstanding Loans and Letters of Credit].
(ii) Outstanding Letters of Credit. Repayment of Outstanding Loans; Borrowing of New Loans. On the effective date of such increase, each Increasing Lender and each New Lender: (1) will be deemed to have purchased a participation in each then outstanding Letter of Credit equal to its Ratable Share of such Letter of Credit and the participation of each other Lender in such Letter of Credit shall be adjusted accordingly and (2) will acquire, (and will pay to the Administrative Agent, for the account of each Lender, in immediately available funds, an amount equal to) its Ratable Share of all outstanding Participation Advances.
(iii) Adjustment of Sublimits. Upon any increase of the Revolving Credit Commitments pursuant to this Section 2.11 [Increase in Revolving Credit Commitments; Incremental Term Loan], the Borrower and the Administrative Agent, on behalf of the Required Lenders, will negotiate in good faith to consider increases, if appropriate and agreed to by the Borrower and the Required Lenders, of the sublimits under the Revolving Credit Commitments, and thresholds and baskets set forth in this Agreement, including without limitation Article 8 hereof, to reflect the increase of the Revolving Credit Commitments and the financial condition and business operations of the Borrower and its consolidated Subsidiaries at such time. Nothing in this Section 2.11(b)(ii) [Outstanding Letters of Credit] shall obligate the Administrative Agent or the Lenders to agree to any revisions to the sublimits, thresholds and/or baskets referenced herein.
2.12 Utilization of Commitments in Optional Currencies .
2.12.1 Periodic Computations of Dollar Equivalent Amounts of Revolving Credit Loans that are Optional Currency Loans and Letters of Credit Outstanding; Repayment in Same Currency . For purposes of determining utilization of the Revolving Credit Commitments, the Administrative Agent will determine the Dollar Equivalent amount of (i) the outstanding and proposed Revolving Credit Loans that are Optional Currency Loans and Letters of Credit to be denominated in an Optional Currency as of the requested Borrowing Date or date of issuance, as the case may be, (ii) the outstanding Letter of Credit Obligations denominated in an Optional Currency as of the last Business Day of each month, and (iii) the outstanding Revolving Credit Loans denominated in an Optional Currency, with respect to each Borrowing Tranche of a Term Rate Loan, as of the end of each Interest Period (each such date under clauses (i) through (iii), and any other date on which the Administrative Agent determines it is necessary or advisable to make such computation, in its sole discretion, is referred to as a “Computation Date”). Unless otherwise provided in this Agreement or agreed to by the Administrative Agent and the Borrower, each Loan and Reimbursement Obligation shall be repaid or prepaid in the same currency in which the Loan or Reimbursement Obligation was made unless repayment in such currency is not possible, in which case repayment shall be made in an alternative form of payment approved by the Required Lenders.
60
2.13 European Monetary Union .
(i) Payments In Euros Under Certain Circumstances. If (i) any Optional Currency ceases to be lawful currency of the nation issuing the same and is replaced by the Euro or (ii) any Optional Currency and the Euro are at the same time recognized by any governmental authority of the nation issuing such currency as lawful currency of such nation and the Administrative Agent or the Required Lenders shall so request in a notice delivered to the Borrower, then any amount payable hereunder by any party hereto in such Optional Currency shall instead be payable in Euros and the amount so payable shall be determined by translating the amount payable in such Optional Currency to the Euro at the exchange rate established by that nation for the purpose of implementing the replacement of the relevant Optional Currency by the Euro (and the provisions governing payments in Optional Currencies in this Agreement shall apply to such payment in Euros as if such payment in Euros were a payment in an Optional Currency). Prior to the occurrence of the event or events described in clause (i) or (ii) of the preceding sentence, each amount payable hereunder in any Optional Currency will, except as otherwise provided herein, continue to be payable only in that currency.
(ii) Additional Compensation Under Certain Circumstances. The Borrower agrees, at the request of any Lender, to compensate such Lender for any loss, cost, expense or reduction in return that such Lender shall reasonably determine shall be incurred or sustained by such Lender as a result of the replacement of any Optional Currency by the Euro and that would not have been incurred or sustained but for the transactions provided for herein. A certificate of any Lender setting forth such Lender’s determination of the amount or amounts necessary to compensate such Lender shall be delivered to the Borrower and shall be conclusive absent manifest error so long as such determination is made on a reasonable basis. The Borrower shall pay such Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.
(iii) Requests for Additional Optional Currencies. The Borrower may deliver to the Administrative Agent a written request that Revolving Credit Loans hereunder also be permitted to be made in any other lawful currency (other than Dollars), in addition to the currencies specified in the definition of “Optional Currency” herein, provided that such currency must be freely traded in the offshore interbank foreign exchange markets, freely transferable, freely convertible into Dollars and available to the Lenders in the applicable interbank market. The Administrative Agent will notify the Lenders of any such request promptly after the Administrative Agent receives such request. The Administrative Agent will promptly notify the Borrower of the acceptance or rejection by the Administrative Agent and each of the Lenders of the Borrower’s request. The requested currency shall be approved as an Optional Currency hereunder only if the Administrative Agent and all of the Lenders approve of the Borrower’s request.
3.INITIAL TERM LOAN
61
3.1 Term Loan Commitments . Subject to the terms and conditions hereof, and relying upon the representations and warranties herein set forth, each Lender severally agrees to make a Term Loan to the Borrower on the Closing Date (the “Initial Term Loans”) in Dollars in such principal amount as the Borrower shall request up to, but not exceeding such Lender’s Term Loan Commitment in effect on the Closing Date.
3.2 Nature of Lenders’ Obligations with Respect to Term Loans; Repayment Terms .
(i) The obligations of each Lender to make an Initial Term Loan to the Borrower shall equal its Ratable Share of the requested Initial Term Loans; provided that no Lender’s Initial Term Loan to the Borrower shall exceed its Term Loan Commitment in effect on the Closing Date. The failure of any Lender to make an Initial Term Loan shall not relieve any other Lender of its obligations to make an Initial Term Loan nor shall it impose any additional liability on any other Lender hereunder. The Lenders shall have no obligation to make the Initial Term Loans hereunder after the Closing Date, and any portion of the Initial Term Loan Commitment not drawn on the Closing Date shall automatically expire. The Term Loan Commitments are not revolving credit commitments, and the Borrower shall not have the right to borrow, repay and reborrow under Section 3.1 [Term Loan Commitments].
(ii) The Borrower shall repay to the applicable Lenders the aggregate principal amount of all Initial Term Loans outstanding on the following dates in the respective amounts set forth opposite such dates (which amounts shall be reduced as a result of the application of voluntary and mandatory prepayments in accordance with the order of priority set forth in Section 5.6 [Voluntary Prepayments] and Section 5.7 [Mandatory Prepayments]):
62
Date |
Amount |
April 2, 2021 |
$2,500,000 |
July 2, 2021 |
$2,500,000 |
October 1, 2021 |
$2,500,000 |
December 31, 2021 |
$2,500,000 |
April 1, 2022 |
$3,750,000 |
July 1, 2022 |
$3,750,000 |
September 30, 2022 |
$3,750,000 |
December 30, 2022 |
$3,750,000 |
March 31, 2023 |
$3,750,000 |
June 30, 2023 |
$3,750,000 |
September 29, 2023 |
$3,750,000 |
December 29, 2023 |
$3,750,000 |
March 29, 2024 |
$5,000,000 |
June 28, 2024 |
$5,000,000 |
September 27, 2024 |
$5,000,000 |
December 27, 2024 |
$5,000,000 |
March 28, 2025 |
$5,000,000 |
June 27, 2025 |
$5,000,000 |
September 26, 2025 |
$5,000,000 |
provided, however, that the final principal repayment installment of the Initial Term Loans shall be repaid on the Term Loan Maturity Date applicable to the Initial Term Loans and in any event shall be in an amount equal to the aggregate principal amount of all Initial Term Loans outstanding on such date.
4.INTEREST RATES
4.1 Interest Rate Options . The Borrower shall pay interest in respect of the outstanding unpaid principal amount of the Loans as selected by it from the applicable Interest Rate Option set forth below applicable to the Loans, it being understood that, subject to the provisions of this Agreement, the Borrower may select different Interest Rate Options and different Interest Periods to apply simultaneously to the Loans comprising different Borrowing Tranches and may convert to or renew one or more Interest Rate Options with respect to all or any portion of the Loans comprising any Borrowing Tranche; provided that there shall not be at any one time outstanding more than six (6) Borrowing Tranches in the aggregate among all of the Loans and provided further that if an Event of Default or Potential Default exists and is continuing, the Borrower may not request, convert to, or renew any Term Rate Loan Option for any Loans and the Required Lenders may demand that (i) all existing Borrowing Tranches of Dollar Loans bearing interest under the Term SOFR Rate Option shall be converted immediately to the Base Rate Option and (ii) all existing Borrowing Tranches of Loans denominated in an Optional Currency shall be prepaid, or redenominated into Dollars in the amount of the Dollar Equivalent thereof and converted immediately to the Base Rate Option, subject, in each case, to the obligation of the Borrower to pay any indemnity under Section 5.10 [Indemnity] in connection with such conversion. If at any time the designated rate applicable to any Loan made by any Lender exceeds such Lender’s highest lawful rate, the rate of interest on such Lender’s Loan shall be limited to such Lender’s highest lawful rate. The applicable Base Rate, Term SOFR Rate, Daily Simple SOFR, Eurocurrency Rate or Term RFR shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. Interest on the principal amount of each Optional Currency Loan shall be paid by the Borrower in such Optional Currency (unless not possible in which case the Required Lenders may permit an alternative form of payment).
63
4.1.1 Revolving Credit Interest Rate Options; Swing Line Interest Rate . The Borrower shall have the right to select from the following Interest Rate Options applicable to the Revolving Credit Loans:
(i) Revolving Credit Base Rate Option:
(A) With respect to Revolving Credit Loans that are Dollar Loans, a fluctuating rate per annum (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) equal to the Base Rate plus the Applicable Margin, such interest rate to change automatically from time to time effective as of the effective date of each change in the Base Rate.
(ii) Revolving Credit Term Rate Loan Option:
(A) With respect to any Revolving Loans denominated in Dollars, a rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equal to the Term SOFR Rate as determined for each applicable Interest Period plus the SOFR Adjustment plus the Applicable Margin; or
(B) With respect to any Revolving Loans denominated in Canadian Dollars, Australian Dollars and Euros, a rate per annum (computed on the basis of a year of 360 days and actual days elapsed, except that interest on Loans denominated in the foregoing Currencies as to which market practice differs from the foregoing shall be computed in accordance with market practice for such Loans) equal to the Eurocurrency Rate for such Currency as determined for each applicable Interest Period plus the Applicable Margin.
(C) With respect to any Revolving Loans denominated in British Pounds Sterling, a rate per annum (computed on the basis of a year of 360 days and actual days elapsed, except that interest on Loans denominated in the foregoing Currencies as to which market practice differs from the foregoing shall be computed in accordance with market practice for such Loans) equal to the Term RFR Rate for such Currency as determined for each applicable Interest Period plus the Term RFR Adjustment plus the Applicable Margin.
Subject to Section 4.3 [Interest After Default], only the Daily SOFR Option shall apply to the Swing Loans.
4.1.2 Swing Loan Interest Rate . The Swing Loans shall accrue interest at a fluctuating rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equal to Daily Simple SOFR plus the SOFR Adjustment plus the Applicable Margin.
64
4.1.3 Term Loan Interest Rate Options . The Borrower shall have the right to select from the following Interest Rate Options applicable to the Term Loans:
(i) Term Loan Base Rate Option: A fluctuating rate per annum equal to the Base Rate plus the Applicable Margin, such interest rate to change automatically from time to time effective as of the effective date of each change in the Base Rate; or
(ii) Term Loan Term Rate Loan Option: A rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equal to the Term SOFR Rate as determined for each applicable Interest Period plus the SOFR Adjustment plus the Applicable Margin.
4.1.4 Interest Act (Canada) . For purposes of the Interest Act (Canada): (i) whenever any interest or fee under this Agreement is calculated on the basis of a period of time other than a calendar year, such rate used in such calculation, when expressed as an annual rate, is equivalent to (x) such rate, multiplied by (y) the actual number of days in the calendar year in which the period for which such interest or fee is calculated ends, and divided by (z) the number of days in such period of time, (ii) the principle of deemed reinvestment of interest shall not apply to any interest calculation under this Agreement, and (iii) the rates of interest stipulated in this Agreement are intended to be nominal rates and not effective rates or yields.
4.1.5 Rate Calculations; Rate Quotations . All computations of interest for Loans bearing interest at the Base Rate (including such Loans determined by reference to the Daily Simple SOFR) shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed or, in the case of interest in respect of Loans denominated in Optional Currencies as to which market practice differs from the foregoing, in accordance with such market practice. The Borrower may call the Administrative Agent on or before the date on which a Loan Request is to be delivered to receive an indication of the rates then in effect, but it is acknowledged that such projection shall not be binding on the Administrative Agent or the Lenders nor affect the rate of interest which thereafter is actually in effect when the election is made.
4.2 Conforming Changes Relating to Term SOFR, the Eurocurrency Rate, Term RFR, or Daily Simple SOFR. With respect to the Term SOFR Rate, the Eurocurrency Rate, Term RFR, Daily Simple SOFR, the Administrative Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document; provided that, the Administrative Agent shall provide notice to the Borrower and the Lenders of each such amendment implementing such Conforming Changes reasonably promptly after such amendment becomes effective.
4.3 Interest After Default . To the extent permitted by Law, upon the occurrence of an Event of Default and until such time such Event of Default shall have been cured or waived, at the discretion of the Administrative Agent or upon written demand by the Required Lenders to the Administrative Agent:
65
4.3.1 Letter of Credit Fees, Interest Rate . The Letter of Credit Fees and the rate of interest for each Loan otherwise applicable pursuant to Section 2.9.2 [Letter of Credit Fees] or Section 4.1 [Interest Rate Options], respectively, shall be increased by 2.00% per annum;
4.3.2 Other Obligations . Each other Obligation hereunder if not paid when due shall bear interest (subject in all cases other than the failure to pay principal of the Loans, to the request of the Required Lenders) at a rate per annum equal to the sum of the rate of interest applicable to Revolving Credit Loans under the Base Rate Option plus an additional 2.00% per annum from the time such Obligation becomes due and payable and until it is Paid In Full; and
4.3.3 Acknowledgment . The Borrower acknowledges that the increase in rates referred to in this Section 4.3 [Interest After Default] reflects, among other things, the fact that such Loans or other amounts have become a substantially greater risk given their default status and that the Lenders are entitled to additional compensation for such risk, and all such interest shall be payable by Borrower upon demand by Administrative Agent.
4.4 Rate Unascertainable; Increased Costs; Deposits Not Available; Illegality; Benchmark Replacement Setting .
4.4.1 Unascertainable; Increased Costs; Deposits Not Available .
(i) the Administrative Agent shall have determined (which determination shall be conclusive and binding absent manifest error) that
(1) the Eurocurrency Rate, the Term SOFR Rate, Daily Simple SOFR or Term RFR cannot be determined pursuant to the definition thereof; or
(2) with respect to any Loan denominated in an Optional Currency, a fundamental change has occurred in the foreign exchange or interbank markets with respect to such Currency (including, without limitation, changes in national or international financial, political or economic conditions or currency exchange rates or exchange controls); or
(ii) with respect to any Eurocurrency Rate Loan or any request therefor or a conversion thereto or a continuation thereof, the Required Lenders have determined (which determination shall be conclusive and binding absent manifest error) that deposits in the applicable Currency are not being offered to banks in the applicable offshore interbank market for the applicable Currency, amount or Interest Period of such Eurocurrency Rate Loan, and the Required Lenders have provided notice of such determination to the Administrative Agent;
(iii) with respect to any Term RFR Loan or any request therefor or a conversion thereto or a continuation thereof, the Required Lenders have determined (which determination shall be conclusive and binding absent manifest error) that deposits in the applicable Currency are not being offered to banks in the applicable offshore interbank market for the applicable Currency, amount or Interest Period of such Term RFR Loan, and the Required Lenders have provided notice of such determination to the Administrative Agent; or (iv) the Required Lenders have determined that for any reason in connection with any request for a Eurocurrency Rate Loan, a Term SOFR Rate Loan, Daily SOFR Loan or a Term RFR Loan or a conversion thereto or continuation thereof that the Term SOFR Rate, Daily Simple SOFR, Eurocurrency Rate or Term RFR, does not adequately and fairly reflect the cost to such Lenders of making or maintaining such Loans during the applicable Interest Period does not adequately and fairly reflect the cost to such Lenders of making or maintaining such Loans, as applicable, and the Required Lenders have provided notice of such determination to the Administrative Agent,
66
then the Administrative Agent shall have the rights specified in Section 4.4.3 [Administrative Agent’s and Lender’s Rights].
4.4.2 Illegality . If at any time any Lender shall have determined, or any Official Body shall have asserted, that the making, maintenance or funding of any Loan to which any Interest Rate Option applies, or the determination or charging of interest rates based upon any Interest Rate Option has been made impracticable or unlawful by compliance by such Lender in good faith with any Law or any interpretation or application thereof by any Official Body or with any request or directive of any such Official Body (whether or not having the force of Law), or any Official Body has imposed material restrictions on the authority of such Lender to purchase, sell, or take deposits of any Currency in the applicable interbank market for the applicable Currency,
then the Administrative Agent shall have the rights specified in Section 4.4.3 [Administrative Agent’s and Lender’s Rights].
4.4.3 Administrative Agent’s and Lender’s Rights . In the case of any event specified in Section 4.4.1(a) [Unascertainable; Increased Costs; Deposits Not Available] above, the Administrative Agent shall promptly notify the Lenders and the Borrower thereof, and in the case of an event specified in Section 4.4.1(b) [Illegality] above, such Lender shall promptly so notify the Administrative Agent and endorse a certificate to such notice as to the specific circumstances of such notice, and the Administrative Agent shall promptly send copies of such notice and certificate to the other Lenders and the Borrower.
(i) Upon such date as shall be specified in such notice (which shall not be earlier than the date such notice is given), the obligation of (i) the Lenders, in the case of such notice given by the Administrative Agent, or (ii) such Lender, in the case of such notice given by such Lender, to allow the Borrower to select, convert to or renew a Loan under the affected Interest Rate Option in each such Currency shall be suspended (to the extent of the affected Interest Rate Option, or the applicable Interest Periods) until the Administrative Agent shall have later notified the Borrower, or such Lender shall have later notified the Administrative Agent, of the Administrative Agent’s or such Lender’s, as the case may be, determination that the circumstances giving rise to such previous determination no longer exist.
67
(ii) If at any time the Administrative Agent makes a determination under Section 4.4.1 [Unascertainable; Increased Costs; Deposits Not Available] (a) if the Borrower has previously notified the Administrative Agent of its selection of, conversion to or renewal of an affected Interest Rate Option, and such Interest Rate Option has not yet gone into effect, such notification shall (i) with regard to any such pending request for Loans denominated in Dollars, be deemed to provide for selection of, conversion to or renewal of the Base Rate Option otherwise available with respect to such Loans in the amount specified therein and (ii) with regard to any such pending request for Loans denominated in an Optional Currency, be deemed ineffective (in each case to the extent of the affected Interest Rate Option, or the applicable Interest Periods), (b) any outstanding affected Loans denominated in Dollars shall be deemed to have been converted into Base Rate Loans immediately or, in the case of Term Rate Loans, at the end of the applicable Interest Period, and (c) any outstanding affected Loans denominated in an Optional Currency shall, at the Borrower’s election, either be converted into Base Rate Loans denominated in Dollars (in an amount equal to the Equivalent Amount of such Optional Currency) immediately or, in the case of Term Rate Loans, at the end of the applicable Interest Period or prepaid in full immediately or, in the case of Term Rate Loans, at the end of the applicable Interest Period; provided, however that absent notice from the Borrower of conversion or prepayment, such Loans shall automatically be converted to Base Rate Loans (in an amount equal to the Equivalent Amount of such Optional Currency).
(iii) If any Lender notifies the Administrative Agent of a determination under Section 4.4.2 [Illegality], the Borrower shall, subject to the Borrower’s indemnification Obligations under Section 5.10 [Indemnity], as to any Loan of the Lender to which an affected Interest Rate Option applies, on the date specified in such notice either convert such Loan to the Base Rate Option otherwise available with respect to such Loan (which shall be, with respect to Loans denominated in an Optional Currency, in an amount equal to the Dollar Equivalent of such Optional Currency) or prepay such Loan in accordance with Section 5.2 [Voluntary Prepayments]. Absent due notice from the Borrower of conversion or prepayment, such Loan shall automatically be converted to the Base Rate Option otherwise available with respect to such Loan (which shall be, with respect to Loans denominated in an Optional Currency, in an amount equal to the Equivalent Amount of such Optional Currency) upon such specified date.
4.4.4 Benchmark Replacement Setting .
(i) Benchmark Replacement. Notwithstanding anything to the contrary herein or in any other Loan Document (and any agreement executed in connection with an Interest Rate Hedge shall be deemed not to be a “Loan Document” for purposes of this Section 4.4.4), if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred prior to any setting of the then-current Benchmark for any Currency, then (A) if a Benchmark Replacement is determined in accordance with clause (1) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of such Benchmark setting and subsequent Benchmark settings without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document and (B) if a Benchmark Replacement is determined in accordance with clause (2) of the definition of “Benchmark Replacement” for such Benchmark Replacement Date, such Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of any Benchmark setting at or after 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Lenders without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document so long as the Administrative Agent has not received, by such time, written notice from Lenders comprising the Required Lenders of objection to such Benchmark Replacement.
68
(ii) Benchmark Replacement Conforming Changes. In connection with the use, administration, adoption or implementation of a Benchmark Replacement, the Administrative Agent may make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document.
(iii) Notices; Standards for Decisions and Determinations. The Administrative Agent will promptly notify the Borrower and the Lenders of (A) the implementation of any Benchmark Replacement, and (B) the effectiveness of any Conforming Changes in connection with the use, administration, adoption, or implementation of a Benchmark Replacement. The Administrative Agent will notify the Borrower of (x) the removal or reinstatement of any tenor of a Benchmark pursuant to paragraph (iv) below and (y) the commencement of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or, if applicable, any Lender (or group of Lenders) pursuant to this Section, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Loan Document except, in each case, as expressly required pursuant to this Section.
(iv) Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary herein or in any other Loan Document, at any time (including in connection with the implementation of a Benchmark Replacement), (A) if the then-current Benchmark is a term rate or based on a term rate and either (I) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion or (II) the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is not or will not be representative, then the Administrative Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for any Benchmark settings at or after such time to remove such unavailable or non-representative tenor; and (B) if a tenor that was removed pursuant to clause (A) above either (I) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (II) is not, or is no longer, subject to an announcement that it is not or will not be representative for a Benchmark (including a Benchmark Replacement), then the Administrative Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for all Benchmark settings at or after such time to reinstate such previously removed tenor.
69
(v) Benchmark Unavailability Period. Upon the Borrower’s receipt of notice of the commencement of a Benchmark Unavailability Period with respect to a given Benchmark, the Borrower may revoke any pending request for a Loan bearing interest based on or with reference to such Benchmark or conversion to or continuation of Loans bearing interest based on or with reference to the affected Benchmark to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request into a request for a Loan of or conversion to Loans bearing interest under the Base Rate Option. During a Benchmark Unavailability Period [or at any time that a tenor for the then-current Benchmark is not an Available Tenor], the component of the Base Rate based upon the then-current Benchmark or such tenor for such Benchmark, as applicable, will not be used in any determination of the Base Rate.
(vi) Definitions. As used in this Section:
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark for any Currency, as applicable, if such Benchmark for such Currency is a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an interest period pursuant to this Agreement as of such date and not including, for the avoidance of doubt, any tenor of such Benchmark that is then-removed from the definition of “Interest Period” pursuant to clause (iv) of this Section.
“Benchmark” means, initially, with respect to Obligations, interest, fees, commissions, or other amounts denominated in, or calculated with respect to, (a) Dollars, SOFR and the Term SOFR Reference Rate, (b) British Pounds Sterling, the Term RFR applicable for such Currency, or (c) Canadian Dollars, Australian Dollars or Euros, the Eurocurrency Rate applicable for such Currency; provided that if a Benchmark Transition Event has occurred with respect to the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to this Section.
“Benchmark Replacement” means, with respect to any Benchmark Transition Event, the first applicable alternative set forth in the order below that can be determined by the Administrative Agent for the applicable Benchmark Replacement Date:
(1) Where the Benchmark is Term SOFR the sum of: (A) Daily Simple SOFR and (B) the SOFR Adjustment;
(2) the sum of (A) the alternate benchmark rate that has been selected by the Administrative Agent and the Borrower, giving due consideration to (x) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (y) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement to the then-current Benchmark for syndicated credit facilities denominated in the applicable Currency at such time in the United States and (B) the related Benchmark Replacement Adjustment;
70
provided, that if the Benchmark Replacement as determined pursuant to clause (1) or (2) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents; and provided further, that any Benchmark Replacement shall be administratively feasible as determined by the Administrative Agent in its sole discretion.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement , the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrower, giving due consideration to (A) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (B) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for syndicated credit facilities denominated in the applicable Currency at such time.
“Benchmark Replacement Date” means a date and time determined by the Administrative Agent, which date shall be no later than the earliest to occur of the following events with respect to the then-current Benchmark for any Currency:
(1) in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of (A) the date of the public statement or publication of information referenced therein and (B) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate or is based on a term rate, all Available Tenors of such Benchmark (or such component thereof); or
(2) in the case of clause (3) of the definition of “Benchmark Transition Event,” the date determined by the Administrative Agent, which date shall promptly follow the date of the public statement or publication of information referenced therein;
For the avoidance of doubt, if such Benchmark is a term rate or is based on a term rate, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (1) or (2) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
71
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark for any Currency:
(1) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate or is based on a term rate, all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof);
(2) a public statement or publication of information by an Official Body having jurisdiction over the Administrative Agent, the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Federal Reserve Board, the Federal Reserve Bank of New York, the central bank for the Currency applicable to such Benchmark, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate or is based on a term rate, all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide such Benchmark (or such component thereof) or, if such Benchmark is a term rate or is based on a term rate, any Available Tenor of such Benchmark (or such component thereof); or
(3) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) or an Official Body having jurisdiction over the Administrative Agent announcing that such Benchmark (or such component thereof) or, if such Benchmark is a term rate or is based on a term rate, all Available Tenors of such Benchmark (or such component thereof) are not, or as of a specified future date will not be, representative.
For the avoidance of doubt, if such Benchmark is a term rate or is based on a term rate, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
72
“Benchmark Unavailability Period” means the period (if any) (x) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for any Currency for all purposes hereunder and under any Loan Document in accordance with this Section 4.4.4 and (y) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for such Currency for all purposes hereunder and under any Loan Document in accordance with this Section 4.4.4.
“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.
4.5 Selection of Interest Rate Options . If the Borrower fails to select a new Interest Period to apply to any Borrowing Tranche of Loans under any Term Rate Loan Option at the expiration of an existing Interest Period applicable to such Borrowing Tranche in accordance with the provisions of Section 4.2 [Interest Periods], (a) with respect to Dollar Loans, the Borrower shall be deemed to have converted such Borrowing Tranche to the Base Rate Option, as applicable to Revolving Credit Loans or Term Loans, as the case may be, commencing upon the last day of the existing Interest Period, and (b) with respect to Optional Currency Loans, such Loans shall be continued under the applicable Term Rate Loan Option in their original currency with an Interest Period of one (1) month.
5.PAYMENTS
5.1 Payments . All payments and prepayments to be made in respect of principal, interest, Commitment Fees, Letter of Credit Fees, Administrative Agent’s Fee or other fees or amounts due from the Borrower hereunder shall be payable prior to (i) except with respect to principal and interest on Loans denominated in an Optional Currency, 11:00 a.m. and (ii) with respect to principal and interest on Loans denominated in an Optional Currency, the Applicable Time specified by the Administrative Agent on the date when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrower, and without set-off, counterclaim or other deduction of any nature, and an action therefor shall immediately accrue. Such payments shall be made to the Administrative Agent at the Principal Office for the account of PNC with respect to the Swing Loans and for the ratable accounts of the Lenders with respect to the Revolving Credit Loans or Term Loans in U.S. Dollars and in immediately available funds, and the Administrative Agent shall promptly distribute such amounts to the Lenders in immediately available funds; provided that in the event payments are received by 11:00 a.m. by the Administrative Agent with respect to the Loans and such payments are not distributed to the Lenders on the same day received by the Administrative Agent, the Administrative Agent shall pay the Lenders interest at the Effective Federal Funds Rate in the case of Loans or other amounts due in Dollars, or the Overnight Rate in the case of Loans or other amounts due in an Optional Currency, with respect to the amount of such payments for each day held by the Administrative Agent and not distributed to the Lenders and the Borrower shall have no obligation to reimburse such additional interest or any portion thereof. The Administrative Agent’s and each Lender’s statement of account, ledger or other relevant record shall, in the absence of manifest error, be conclusive as the statement of the amount of principal of and interest on the Loans and other amounts owing under this Agreement (including the Equivalent Amounts of the applicable currencies where such computations are required) and shall be deemed an “account stated”. All payments of principal and interest made in respect of the Loans must be repaid in the same currency (whether Dollars or the applicable Optional Currency) in which such Loan was made and all Unpaid Drawings with respect to each Letter of Credit shall be made in the same currency (whether Dollars or the applicable Optional Currency) in which such Letter of Credit was issued; provided however that if repayment in an Optional Currency is not reasonably possible, the Borrower may repay such Loans in another currency or pursuant to an alternative form of payment approved by the Required Lenders. The Administrative Agent may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of the applicable Borrower with the Administrative Agent.
73
5.2 Pro Rata Treatment of Lenders .
(i) Each borrowing of Revolving Credit Loans shall be allocated to each Lender according to its Ratable Share, and each selection of, conversion to or renewal of any Interest Rate Option and each payment or prepayment by the Borrower with respect to principal, interest, Commitment Fees and Letter of Credit Fees (but excluding the Administrative Agent’s Fee and the Issuing Lender’s fronting fee) shall (except as otherwise may be provided with respect to a Defaulting Lender and except as provided in Sections 4.4.3 [Administrative Agent’s and Lender’s Rights] in the case of an event specified in Section 4.4 [Rate Unascertainable; Etc.], 5.6.2 [Replacement of a Lender] or 5.8 [Increased Costs]) be payable ratably among the Lenders entitled to such payment in accordance with the amount of principal, interest, Commitment Fees and Letter of Credit Fees, as set forth in this Agreement. Notwithstanding any of the foregoing, each borrowing or payment or prepayment by the Borrower of principal, interest, fees or other amounts from the Borrower with respect to Swing Loans shall be made by or to PNC according to Section 2.6.5 [Borrowings to Repay Swing Loans].
(ii) Term Loans shall be allocated to each Lender according to its Ratable Share of such Term Loans, and each selection of, conversion to or renewal of any Interest Rate Option and each payment or prepayment by the Borrower with respect to principal and interest (but excluding any fee in connection with any Administrative Agent’s Letter) shall (except as otherwise may be provided with respect to a Defaulting Lender and except as provided in Section 4.4.3 [Administrative Agent’s and Lender’s Rights] in the case of an event specified in Section 4.4.1 [Unascertainable; Increased Costs, Deposits Not Available], 5.6.2 [Replacement of a Lender] or 5.8 [Increased Costs]) be payable ratably among the Lenders of Term Loans entitled to such payment in accordance with the amount of principal and interest as set forth in this Agreement.
5.3 Sharing of Payments by Lenders . If any Lender shall, by exercising any right of setoff, counterclaim or banker’s lien, by receipt of voluntary payment, by realization upon security, or by any other non-pro rata source, obtain payment in respect of any principal of or interest on any of its Loans or other obligations hereunder resulting in such Lender’s receiving payment of a proportion of the aggregate amount of its Loans and accrued interest thereon or other such obligations greater than the pro-rata share of the amount such Lender is entitled thereto, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and such other obligations of
74
the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them, provided that:
(i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other amounts, if any, required by Law (including court order) to be paid by the Lender or the holder making such purchase; and
(ii) the provisions of this Section 5.3 [Sharing of Payments by Lenders] shall not be construed to apply to (x) any payment made by the Loan Parties pursuant to and in accordance with the express terms of the Loan Documents or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or Participation Advances to any assignee or participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this Section 5.3 [Sharing of Payments by Lenders] shall apply).
Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against each Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of each Loan Party in the amount of such participation.
5.4 Administrative Agent’s Clawback .
5.4.1 Funding by Lenders; Presumption by Administrative Agent . Unless the Administrative Agent shall have received notice from a Lender (x) in the case of Loans to which the Base Rate Option applies, two (2) hours prior to the proposed time of such Borrowing Tranche of Loans and (y) otherwise, prior to the proposed date of any Borrowing Tranche of Loans that such Lender will not make available to the Administrative Agent such Lender’s Ratable Share, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.6.1 [Making Revolving Credit Loans] or Section 3.2 [Nature of Lenders’ Obligations with Respect to Term Loans; Repayment Terms] and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing Tranche of Loans available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of a payment to be made by such Lender, the greater of the Effective Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, and (ii) in the case of a payment to be made by the Borrower, the interest rate applicable to Loans under the Base Rate Option. If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period.
75
If such Lender pays its share of the applicable Borrowing Tranche of Loans to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan included in such Borrowing Tranche of Loans. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.
5.4.2 Payments by Borrower; Presumptions by Administrative Agent . Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Lender hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Lender, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Lender, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the Issuing Lender, with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Effective Federal Funds Rate (or, for payments in an Optional Currency, the Overnight Rate) and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
5.5 Interest Payment Dates . Interest on Loans to which the Base Rate Option or Daily SOFR Option applies, interest shall be due and payable in arrears on each Payment Date. Interest on Loans to which a Term Rate Loan Option applies shall be due and payable on the last day of each Interest Period for those Loans and, if such Interest Period is longer than three (3) months, also on the 90th day of such Interest Period. Interest on mandatory prepayments of principal under Section 5.7 [Mandatory Prepayments] shall be due on the date such mandatory prepayment is due. Interest on the principal amount of each Loan or other monetary Obligation shall be due and payable on demand after such principal amount or other monetary Obligation becomes due and payable (whether on the stated Expiration Date or applicable Term Loan Maturity Date, as applicable, upon acceleration or otherwise).
5.6 Voluntary Prepayments .
5.6.1 Right to Prepay . The Borrower shall have the right at its option from time to time to prepay the Loans in whole or part without premium or penalty (except as provided in Section 5.6.2 [Replacement of a Lender] below, in Section 5.8 [Increased Costs] and Section 5.10 [Indemnity]). Whenever the Borrower desires to prepay any part of the Loans, it shall provide a prepayment notice to the Administrative Agent by 1:00 p.m. (i) at least one (1) Business Day prior to the date of prepayment of the Revolving Credit Loans or Term Loans that bear interest at the Base Rate Option; (ii) at least three (3) Business Days prior to the date of prepayment of the Revolving Credit Loans or Term Loans denominated in Dollars that bear interest at the Term SOFR Rate Option; (iii) at least four (4) Business Days prior to the date of prepayment of the Revolving Credit Loans or Term Loans denominated in Optional Currencies that bear interest at the Eurocurrency Rate Option; (iv) at least four (4) Business Days prior to the date of prepayment of the Revolving Credit Loans denominated in Optional Currencies that bear interest at the Term RFR Option; or (v) no later than 1:00 p.m. on the date of prepayment of Swing Loans, setting forth the following information:
76
(a) the date, which shall be a Business Day, on which the proposed prepayment is to be made;
(b) a statement indicating the application of the prepayment among the Revolving Credit Loans, the Term Loans and Swing Loans;
(c) a statement indicating the application of the prepayment between Loans to which the Base Rate Option, the Eurocurrency Rate Option, Term SOFR Rate Option or the Term RFR Option applies; and
(d) the total principal amount of such prepayment, which shall not be less than the lesser of (i) the Revolving Facility Usage or (ii) $100,000 for any Swing Loan or $100,000 for any Revolving Credit Loan or Term Loan.
Any prepayment notice may be conditioned on the effectiveness of other financing arrangements or one or more other transactions, but otherwise shall be irrevocable. Subject to the foregoing sentence, the principal amount of the Loans for which a prepayment notice is given, together with interest on such principal amount, shall be due and payable on the date specified in such prepayment notice as the date on which the proposed prepayment is to be made. All Term Loan prepayments permitted pursuant to this Section 5.6.1 [Right to Prepay] shall be applied to the remaining scheduled principal installments of the Term Loans on a pro rata basis (including the payment of principal due on the Term Loan Maturity Date of each Term Loan). Except as provided in Section 4.4.3 [Administrative Agent’s and Lender’s Rights], if the Borrower prepays a Loan but fails to specify the applicable Borrowing Tranche which the Borrower is prepaying, the prepayment shall be applied (i) first to Revolving Credit Loans and then to Term Loans; and (ii) after giving effect to the allocations in clause (i) above and in the preceding sentence, first to the Loans subject to the Base Rate Option, then to Loans subject to the Term SOFR Rate Option, then to Loans subject to the Term Rate Loan Option denominated in an Optional Currency. Any prepayment hereunder shall be subject to the Borrower’s Obligation to indemnify the Lenders under Section 5.10 [Indemnity]. Prepayments shall be made in the currency in which such Loan was made unless otherwise directed by the Administrative Agent or agreed to by the Required Lenders.
5.6.2 Replacement of a Lender . In the event any Lender (i) gives notice under Section 4.4.1(iii) [Unascertainable; Increased Costs; Deposits Not Available] or Section 4.4.2 [Illegality], (ii) requests compensation under Section 5.8 [Increased Costs], or requires the Borrower to pay any Indemnified Taxes or additional amount to any Lender or any Official Body for the account of any Lender pursuant to Section 5.9 [Taxes], (iii) is a Defaulting Lender, (iv) becomes subject to the control of an Official Body (other than normal and customary supervision), or (v) is a Non-Consenting Lender referred to in Section 11.1 [Modifications, Amendments or Waivers], then in any such event the Borrower may, at its sole option and expense, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 11.8 [Successors and Assigns]), all of its interests, rights (other than existing rights to payments pursuant to Sections 5.8 [Increased Costs] or 5.9 [Taxes]) and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:
77
(i) the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 11.8.2(iv) [Assignment and Assumption Agreement];
(ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and Participation Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 5.10 [Indemnity]) 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);
(iii) in the case of any such assignment resulting from a claim for compensation under Section 5.8.1 [Increased Costs Generally] or payments required to be made pursuant to Section 5.9 [Taxes], such assignment will result in a reduction in such compensation or payments the Borrower will be liable for thereafter; and
(iv) such assignment does not conflict with applicable Law.
A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
5.6.3 Designation of a Different Lending Office . If any Lender requests compensation under Section 5.8 [Increased Costs], or the Borrower is or will be required to pay any Indemnified Taxes or additional amounts to any Lender or any Official Body for the account of any Lender pursuant to Section 5.9 [Taxes], then such Lender shall (at the request of the Borrower) 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 reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 5.8 [Increased Costs] or Section 5.9 [Taxes], as the case may be, in the future, and (ii) would not subject such Lender to any material unreimbursed cost or expense and would not otherwise be materially disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment
5.7 Mandatory Prepayments .
5.7.1 Sale of Assets and Recovery Events . If the Borrower or any of its Subsidiaries receives Net Cash Proceeds from any Asset Sales or Recovery Events in excess of $2,500,000 in the aggregate in any fiscal year, the Borrower shall make a mandatory prepayment (subject to Borrower’s indemnity obligations under Sections 5.8 [Increased Costs] and 5.10 [Indemnity]) of principal on the Term Loans within thirty (30) Business Days of the date of receipt by the Borrower or any of its Subsidiaries of such Net Cash Proceeds in an amount equal to 100% of such Net Cash Proceeds; provided that if the Borrower reinvests such proceeds to acquire or repair assets useful in its business, other than current assets, within one hundred eighty (180) days of the date of receipt by the Borrower or any of its Subsidiaries of such Net Cash Proceeds, no such prepayment shall be required in respect of the portion of such Net Cash Proceeds so reinvested. If at the end of the period specified above (or such earlier date, if any, as the Borrower or the relevant Subsidiary determines not to reinvest the Net Cash Proceeds from such Asset Sale or Recovery Event as set forth above) any portion of such Net Cash Proceeds has not been so reinvested, the Borrower will make a prepayment of the Term Loans to the extent required above without regard to the preceding proviso. All prepayments pursuant to this Section 5.7.1 [Sale of Assets and Recovery Events] shall be applied to payment of the principal amount of the Term Loans by application to the remaining scheduled principal installments of the Term Loans on a pro rata basis (including the payment of principal due on the Term Loan Maturity Date of each Term Loan).
78
5.7.2 [Reserved] .
5.7.3 Debt Issuances . Upon the incurrence or issuance by any Loan Party or any of its Subsidiaries of any Indebtedness not permitted to be incurred or issued in accordance with Section 8.2.1 [Indebtedness], the Borrower shall prepay (subject to Borrower’s indemnity obligations under Sections 5.8 [Increased Costs] and 5.10 [Indemnity]) the Term Loans in an amount equal to one hundred percent (100%) of the Net Cash Proceeds of such debt issuance, such prepayment to be effected within five (5) Business Days following the receipt of the proceeds of such debt issuances. All prepayments pursuant to this Section 5.7.3 [Debt Issuances] shall be applied to payment of the principal amount of the Term Loans by application to the remaining scheduled principal installments of the Term Loans on a pro rata basis (including the payment of principal due on the Term Loan Maturity Date of each Term Loan).
5.7.4 Certain Foreign Subsidiary Debt Issuances . Upon the incurrence or issuance by any Foreign Subsidiary of any Indebtedness pursuant to Section 8.2.1(vii)(B), the Borrower shall prepay (subject to Borrower’s indemnity obligations under Sections 5.8 [Increased Costs] and 5.10 [Indemnity]) Revolving Credit Loans (without a permanent reduction in the Revolving Credit Commitments) in an amount equal to the lesser of (x) one hundred percent (100%) of the Net Cash Proceeds of such debt issuance and (y) the aggregate outstanding principal amount of Revolving Credit Loans as of the date of receipt of such proceeds, such prepayment to be effected within five (5) Business Days following receipt of the proceeds of such debt issuance.
5.7.5 Currency Fluctuations . If on any Computation Date the Revolving Facility Usage is equal to or greater than the Revolving Credit Commitments as a result of a change in exchange rates between one (1) or more Optional Currencies and Dollars, then the Administrative Agent shall notify the Borrower of the same. The Borrower shall pay or prepay (subject to Borrower’s indemnity obligations under Sections 5.8 [Increased Costs] and 5.10 [Indemnity]) within one (1) Business Day after receiving such notice such that the Revolving Facility Usage shall not exceed the aggregate Revolving Credit Commitments after giving effect to such payments or prepayments
5.7.6 Application Among Interest Rate Options . All prepayments required pursuant to this Section 5.7 [Mandatory Prepayments] shall first be applied among the Interest Rate Options to the principal amount of the Loans subject to the Base Rate Option, then to Loans subject to the Term SOFR Rate Option, then to Loans subject to the Term Rate Loan Option denominated in an Optional Currency. In accordance with Section 5.10 [Indemnity], the Borrower shall indemnify the Lenders for any loss or expense incurred with respect to any such prepayments applied against Loans subject to a Term Rate Loan Option on any day other than the last day of the applicable Interest Period.
79
5.8 Increased Costs .
5.8.1 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 which is reflected in the Eurocurrency Rate or Term SOFR Rate) or the Issuing Lender;
(ii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (ii) through (iv) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or
(iii) impose on any Lender or any the Issuing Lender any other condition, cost or expense (other than Taxes) affecting this Agreement or 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 or such other Recipient of making, converting to, continuing or maintaining any Loan or of maintaining its obligation to make any such Loan, or to increase the cost to such Lender, the Issuing Lender or such other Recipient 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, the Issuing Lender or other Recipient hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, the Issuing Lender or other Recipient, the Borrower will pay to such Lender, the Issuing Lender or other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Lender, as the case may be, for such additional costs incurred or reduction suffered.
5.8.2 Capital Requirements . If any Lender or the Issuing Lender determines in good faith that any Change in Law affecting such Lender or the Issuing Lender or any lending office of such Lender or such Lender’s or the Issuing Lender’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Lender’s capital or on the capital of such Lender’s or the Issuing Lender’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 or Swing Loans held by, such Lender, or the Letters of Credit issued by the Issuing Lender, to a level below that which such Lender or the Issuing Lender or such Lender’s or the Issuing Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Lender’s policies and the policies of such Lender’s or the Issuing Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the Issuing Lender, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Lender or such Lender’s or the Issuing Lender’s holding company for any such reduction suffered.
80
5.8.3 Certificates for Reimbursement; Repayment of Outstanding Loans; Borrowing of New Loans . A certificate of a Lender or the Issuing Lender setting forth the amount or amounts necessary to compensate such Lender or the Issuing Lender or its holding company, as the case may be, as specified in Sections 5.8.1 [Increased Costs Generally] or 5.8.2 [Capital Requirements] and delivered to the Borrower shall include in reasonable detail the basis therefor and the calculation thereof and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Lender, as the case may be, the amount shown as due on any such certificate within twenty (20) days after receipt thereof.
5.8.4 Delay in Requests . Failure or delay on the part of any Lender or the Issuing Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or the Issuing Lender’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or the Issuing Lender pursuant to this Section for any increased costs incurred or reductions suffered more than six (6) months prior to the date that such Lender or the Issuing Lender, 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 Issuing Lender’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 six (6) month period referred to above shall be extended to include the period of retroactive effect thereof).
5.8.5 [Reserved] .
5.9 Taxes .
5.9.1 Issuing Lender . For purposes of this Section 5.9 [Taxes], the term “Lender” includes the Issuing Lender and the term “applicable Law” includes FATCA.
5.9.2 Payments Free of Taxes . Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be without deduction or withholding for any Taxes, except as required by applicable Law. If any applicable Law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Official Body in accordance with applicable Law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 5.9 [Taxes]) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.
5.9.3 Payment of Other Taxes by the Loan Parties . The Loan Parties shall timely pay to the relevant Official Body in accordance with applicable Law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.
81
5.9.4 Indemnification by the Loan Parties . The Loan Parties shall jointly and severally indemnify each Recipient, within ten (10) Business Days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 5.9 [Taxes]) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Official Body. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.
5.9.5 Indemnification by the Lenders . Each Lender shall severally indemnify the Administrative Agent, within ten (10) days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that any Loan Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of any of the Loan Parties to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 11.8.4 [Participations] relating to the maintenance of a Participant Register, and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Official Body. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this Section 5.9.5 [Indemnification by the Lenders].
5.9.6 Evidence of Payments . As soon as practicable after any payment of Taxes by any Loan Party to an Official Body pursuant to this Section 5.9 [Taxes], such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Official Body evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
5.9.7 Status of Lenders .
(i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable Law or reasonably requested by the 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. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 5.9.7(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.
82
(ii) Without limiting the generality of the foregoing,
(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;
(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:
(i) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN-E (or W-8BEN if applicable) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN-E (or W-8BEN if applicable) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;
(ii) executed originals of IRS Form W-8ECI;
(iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit 5.9.7(A) to the effect that such Foreign Lender is not (A) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed originals of IRS Form W-8BEN-E (or W-8BEN if applicable); or
(iv) to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN-E (or W-8BEN if applicable), a U.S. Tax Compliance Certificate substantially in the form of Exhibit 5.9.7(B) or Exhibit 5.9.7(C), IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit 5.9.7(D) on behalf of each such direct and indirect partner;
83
(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of any other form prescribed by applicable Law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable Law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and
(D) if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.
5.9.8 Treatment of Certain Refunds . If any party determines in good faith that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 5.9 [Taxes] (including by the payment of additional amounts pursuant to this Section 5.9 [Taxes]), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 5.9 [Taxes] with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Official Body with respect to such refund). Such indemnifying party, upon the request of such indemnified party incurred in connection with obtaining such refund, shall repay to such indemnified party the amount paid over pursuant to this Section 5.9.8 [Treatment of Certain Refunds] (plus any penalties, interest or other charges imposed by the relevant Official Body) in the event that such indemnified party is required to repay such refund to such Official Body. Notwithstanding anything to the contrary in this Section 5.9.8 [Treatment of Certain Refunds]), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this Section 5.9.8 [Treatment of Certain Refunds] the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
84
5.9.9 Survival . Each party’s obligations under this Section 5.9 [Taxes] shall survive the resignation of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all Obligations.
5.10 Indemnity . In addition to the compensation or payments required by Section 5.8 [Increased Costs]or Section 5.9 [Taxes], the Borrower shall indemnify each Lender against all liabilities, losses or expenses (including any foreign exchange losses and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan, from fees payable to terminate the deposits from which such funds were obtained or from the performance of any foreign exchange contract) which such Lender sustains or incurs as a consequence of any:
(i) payment, prepayment, conversion or renewal of any Loan to which a Term Rate Loan Option applies on a day other than the last day of the corresponding Interest Period, whether or not such payment or prepayment is mandatory, voluntary or automatic and whether or not such payment or prepayment is then due, or any voluntary prepayment without the required notice, or
(ii) attempt by the Borrower to revoke (expressly, by later inconsistent notices or otherwise) in whole or part any Loan Requests under Section 2.5 [Loan Requests; Swing Loan Requests] or Section 4.2 [Interest Periods] or notice relating to prepayments under Section 5.6 [Voluntary Prepayments].
If any Lender sustains or incurs any such loss or expense, it shall from time to time notify the Borrower of the amount determined in good faith by such Lender (which determination may include such assumptions, allocations of costs and expenses and averaging or attribution methods as such Lender shall in good faith deem reasonable) to be necessary to indemnify such Lender for such loss or expense. Such notice shall set forth in reasonable detail the basis for such determination. Such amount shall be due and payable by the Borrower to such Lender ten (10) Business Days after such notice is given.
85
5.11 Settlement Date Procedures . In order to minimize the transfer of funds between the Lenders and the Administrative Agent, the Borrower may borrow, repay and reborrow Swing Loans and PNC may make Swing Loans as provided in Section 2.1.2 [Swing Loan Commitments] hereof during the period between Settlement Dates. The Administrative Agent shall notify each Lender of its Ratable Share of the total of the Revolving Credit Loans and the Swing Loans (each a “Required Share”). On such Settlement Date, each Lender shall pay to the Administrative Agent the amount equal to the difference between its Required Share and its Revolving Credit Loans, and the Administrative Agent shall pay to each Lender its Ratable Share of all payments made by the Borrower to the Administrative Agent with respect to the Revolving Credit Loans. The Administrative Agent shall also effect settlement in accordance with the foregoing sentence on the proposed Borrowing Dates for Revolving Credit Loans and on any mandatory prepayment date as provided for herein and may at its option effect settlement on any other Business Day. These settlement procedures are established solely as a matter of administrative convenience, and nothing contained in this Section 5.11 [Settlement Date Procedures] shall relieve the Lenders of their obligations to fund Revolving Credit Loans on dates other than a Settlement Date pursuant to Section 2.1.2 [Swing Loan Commitment]. The Administrative Agent may at any time at its option for any reason whatsoever require each Lender to pay immediately to the Administrative Agent such Lender’s Ratable Share of the outstanding Revolving Credit Loans and each Lender may at any time require the Administrative Agent to pay immediately to such Lender its Ratable Share of all payments made by the Borrower to the Administrative Agent with respect to the Revolving Credit Loans.
5.12 Currency Conversion Procedures for Judgments . If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in any currency (the “Original Currency”) into another currency (the “Other Currency”), the parties hereby agree, to the fullest extent permitted by Law, that the rate of exchange used shall be that at which in accordance with normal lending procedures the Administrative Agent could purchase the Original Currency with the Other Currency after any premium and costs of exchange on the Business Day preceding that on which final judgment is given.
5.13 Indemnity in Certain Events . The obligation of Borrower in respect of any sum due from Borrower to any Lender hereunder shall, notwithstanding any judgment in an Other Currency, whether pursuant to a judgment or otherwise, be discharged only to the extent that, on the Business Day following receipt by any Lender of any sum adjudged to be so due in such Other Currency, such Lender may in accordance with normal lending procedures purchase the Original Currency with such Other Currency. If the amount of the Original Currency so purchased is less than the sum originally due to such Lender in the Original Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment or payment, to indemnify such Lender against such loss.
5.14 Cash Collateral . At any time that there shall exist a Defaulting Lender, within one (1) Business Day following the written request of the Administrative Agent or the Issuing Lender (with a copy to the Administrative Agent) the Borrower shall Cash Collateralize the Issuing Lender’s Fronting Exposure with respect to such Defaulting Lender (determined after giving effect to Section 2.10.1(iv) [Reallocation of Participations to Reduce Fronting Exposure] and any Cash Collateral provided by such Defaulting Lender) in an amount not less than 105% of the Issuing Lender’s Fronting Exposure.
5.14.1 Grant of Security Interest . The Borrower, and to the extent provided by any Defaulting Lender, such Defaulting Lender, hereby grants to the Administrative Agent, for the benefit of the Issuing Lender, and agrees to maintain, a first priority security interest in all such Cash Collateral as security for the Defaulting Lenders’ obligation to fund participations in respect of Letter of Credit Obligations, to be applied pursuant to Section 5.14.2 [Application] below. If at any time the Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person other than the Administrative Agent and the Issuing Lender as herein provided, or that the total amount of such Cash Collateral is less than the amount set forth in Section 5.14 [Cash Collateral] above, the Borrower will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency (after giving effect to any Cash Collateral provided by the Defaulting Lender).
86
5.14.2 Application . Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under this Section 5.14 [Cash Collateral] or Section 2.10 [Defaulting Lender] in respect of Letters of Credit shall be applied to the satisfaction of the Defaulting Lender’s obligation to fund participations in respect of Letter of Credit Obligations (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) for which the Cash Collateral was so provided, prior to any other application of such property as may otherwise be provided for herein.
5.14.3 Termination of Requirement . Cash Collateral (or the appropriate portion thereof) provided to reduce the Issuing Lender’s Fronting Exposure shall no longer be required to be held as Cash Collateral pursuant to this Section 5.14 [Cash Collateral] following (i) the elimination of the applicable Fronting Exposure (including by the termination of Defaulting Lender status of the applicable Lender), or (ii) the determination by the Administrative Agent and the Issuing Lender that there exists excess Cash Collateral; provided that, subject to Section 2.10 [Defaulting Lenders] the Person providing Cash Collateral and the Issuing Lender may agree that Cash Collateral shall be held to support future anticipated Fronting Exposure or other obligations and provided further that to the extent that such Cash Collateral was provided by the Borrower, such Cash Collateral shall remain subject to the security interest granted pursuant to Section 5.14.1 [Grant of Security Interest] above.
6.REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties . The Loan Parties, jointly and severally, represent and warrant to the Administrative Agent and each of the Lenders on the Closing Date, on every date thereafter on which an extension of credit occurs, and on every date thereafter on which the representations and warranties set forth below are deemed made pursuant to the terms hereof as follows:
6.1.1 Organization and Qualification; Power and Authority; Compliance With Laws; Title to Properties; Event of Default . Each Loan Party and each Subsidiary of each Loan Party (i) is a corporation, partnership or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, (ii) has the lawful power to own or lease its properties and to engage in the business it presently conducts or proposes to conduct, (iii) is duly licensed or qualified and in good standing in all other jurisdictions where the property owned or leased by it or the nature of the business transacted by it or both makes such licensing or qualification necessary, except where the failure to be so licensed or qualified or in good standing would not reasonably be expected to result in a Material Adverse Change, (iv) has full power to enter into, execute, deliver and carry out this Agreement and the other Loan Documents to which it is a party, to incur the Indebtedness contemplated by the Loan Documents and to perform its Obligations under the Loan Documents to which it is a party, and all such actions have been duly authorized by all necessary proceedings on its part, (v) is in compliance in all material respects with all applicable Laws (other than Environmental Laws which are specifically addressed in Section 6.1.14 [Environmental Matters]) in all jurisdictions in which any Loan Party or Subsidiary of any Loan Party is presently doing business except where the failure to do so would not reasonably be expected to result in a Material Adverse Change, and (vi) except as would not reasonably be expected to result in a Material Adverse Change, has good and marketable or valid title, as applicable to or valid leasehold interest in all properties, assets and other rights which it purports to own or lease or which are reflected as owned or leased on its books and records, free and clear of all Liens and encumbrances except Permitted Liens. No Event of Default or Potential Default exists or is continuing.
87
6.1.2 Subsidiaries; Investment Companies .
(i) Schedule 6.1.2(i) states , as of the Closing Date, (A) the exact legal name of the Borrower and each of the Borrower’s Subsidiaries and its jurisdiction of organization, (B) the amount, percentage and type of equity interests in such Subsidiary (the “Subsidiary Equity Interests”) and (C) for each Loan Party, its chief executive office and U.S. taxpayer identification number (if applicable). The Borrower and each Subsidiary of the Borrower has good and marketable or valid title, as applicable to all of the Subsidiary Equity Interests it purports to own, free and clear in each case of any Lien, other than Permitted Liens, and all such Subsidiary Equity Interests have been validly issued, fully paid and nonassessable (to the extent such concepts are applicable to the respective Subsidiary Equity Interests). Except as set forth on Schedule 6.1.2(i), no Loan Party has during the five (5) years preceding the Closing Date (i) changed its legal name, (ii) changed its state of formation or (iii) been party to a merger, consolidation or other change in structure.
(ii) Set forth on Schedule 6.1.2(ii) is a list of all real property that is owned or leased by any Loan Party as of the Closing Date.
(iii) None of the Loan Parties or Subsidiaries of any Loan Party is an “investment company” registered or required to be registered under the Investment Company Act of 1940 or under the “control” of an “investment company” as such terms are defined in the Investment Company Act of 1940 and shall not become such an “investment company” or under such “control.”
6.1.3 Validity and Binding Effect . This Agreement and each of the other Loan Documents (i) has been duly and validly executed and delivered by each Loan Party, and (ii) constitutes, or will constitute, legal, valid and binding obligations of each Loan Party which is or will be a party thereto, enforceable against such Loan Party in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
88
6.1.4 No Conflict; Material Agreements; Consents . Neither the execution and delivery of this Agreement or the other Loan Documents by any Loan Party nor the consummation of the transactions herein or therein contemplated or compliance with the terms and provisions hereof or thereof by any of them (a) will conflict with, constitute a default under or result in any breach of (i) the terms and conditions of the certificate of incorporation, bylaws, certificate of limited partnership, partnership agreement, certificate of formation, limited liability company agreement or other organizational documents of any Loan Party (ii) any Law, (iii) except as would not reasonably be expected to result in a Material Adverse Change, any material agreement or instrument, or (iv) order, writ, judgment, injunction or decree to which any Loan Party or any of its Subsidiaries is a party or by which it or any of its Subsidiaries is bound or to which it is subject, or (b) result in the creation or enforcement of any Lien, charge or encumbrance whatsoever upon any property (now or hereafter acquired) of any Loan Party or any of its Subsidiaries (other than Liens granted under the Loan Documents). None of the Loan Parties or their Subsidiaries is bound by any contractual obligation, or subject to any restriction in any organization document, or any requirement of Law which could reasonably be expected to result in a Material Adverse Change. No consent, approval, exemption, order or authorization of, or a registration or filing with, any Official Body or any other Person is required by any Law or any agreement in connection with the execution, delivery and carrying out of this Agreement and the other Loan Documents, other than those which have been obtained, and except for the filing and recording of financing statements and other documents necessary in order to perfect the Liens created by the Collateral Documents.
6.1.5 Litigation . There are no actions, suits, proceedings or investigations pending or, to the knowledge of any Loan Party, threatened against such Loan Party or any Subsidiary of such Loan Party at law or in equity before any Official Body which individually or in the aggregate which could reasonably be expected to result in any Material Adverse Change. None of the Loan Parties or any Subsidiaries of any Loan Party is in violation of any order, writ, injunction or any decree of any Official Body which could reasonably be expected to result in any Material Adverse Change.
6.1.6 Financial Statements .
(i) Historical Statements. The Borrower has delivered to the Administrative Agent copies of its audited consolidated year-end financial statements for and as of the end of the fiscal year ended December 28, 2019. In addition, the Borrower has delivered to the Administrative Agent copies of its unaudited consolidated interim financial statements for the fiscal year to date and as of the end of the fiscal quarter ended June 27, 2020 (all such annual and interim statements being collectively referred to as the “Statements”). The Statements were compiled from the books and records maintained by the Borrower’s management, are correct and complete in all material respects and fairly represent the consolidated financial condition of the Borrower and its Subsidiaries as of the respective dates thereof and the results of operations for the fiscal periods then ended and have been prepared in accordance with GAAP consistently applied, except to the extent provided in the notes to said financial statements and subject (in the case of the interim statements) to normal year-end audit adjustments.
(ii) Accuracy of Financial Statements. Except as disclosed in such financial statements, there are no unrealized or anticipated losses from any commitments of the Borrower or any Subsidiary of the Borrower which may cause a Material Adverse Change. Since December 28, 2019, no Material Adverse Change has occurred.
89
6.1.7 Margin Stock . None of the Loan Parties or any Subsidiaries of any Loan Party engages or intends to engage principally, or as one of its important activities, in the business of extending credit for the purpose, immediately, incidentally or ultimately, of purchasing or carrying margin stock (within the meaning of Regulation U, T or X as promulgated by the Board of Governors of the Federal Reserve System). No part of the proceeds of any Loan has been or will be used, immediately, incidentally or ultimately, to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock in violation of the provisions of the regulations of the Board of Governors of the Federal Reserve System. None of the Loan Parties or any Subsidiary of any Loan Party holds or intends to hold margin stock in such amounts that more than 25% of the reasonable value of the assets of any Loan Party or Subsidiary of any Loan Party are or will be represented by margin stock.
6.1.8 Full Disclosure . Neither this Agreement nor any other Loan Document, nor any certificate, statement, agreement or other documents furnished to the Administrative Agent or any Lender in connection herewith or therewith, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein, in light of the circumstances under which they were made, not misleading. There are no facts known to the Loan Parties (other than matters of a general economic nature) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect and that have not been disclosed herein or in such other documents, certificates and statements furnished to the Lenders.
6.1.9 Taxes . All federal, state and material other tax returns required to have been filed with respect to each Loan Party and each Subsidiary of each Loan Party have been filed, and payment or adequate provision has been made for the payment of all taxes, fees, assessments and other governmental charges which have or may become due pursuant to said returns or to assessments received, except to the extent that such taxes, fees, assessments and other charges are being contested in good faith by appropriate proceedings diligently conducted and for which such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made.
6.1.10 Patents, Trademarks, Copyrights, Licenses, Etc . Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change, each Loan Party and each Subsidiary of each Loan Party owns or possesses all the patents, trademarks, service marks, trade names, copyrights, licenses, registrations, franchises, permits and rights necessary to own and operate its properties and to carry on its business as presently conducted and planned to be conducted by such Loan Party or Subsidiary, without known possible, alleged or actual conflict with the rights of others.
6.1.11 Liens in the Collateral . The Liens in the Collateral granted to the Administrative Agent for the benefit of the Lenders pursuant to the Collateral Documents constitute and will continue to constitute legal, valid and enforceable first priority security interests, subject to no other Liens other than Permitted Liens. All filing fees and other expenses in connection with the perfection of such Liens have been or will be paid by the Borrower.
6.1.12 Insurance . The properties of each Loan Party and each of its Subsidiaries are insured pursuant to policies and other bonds which are valid and in full force and effect and which provide adequate coverage from reputable and financially sound insurers in amounts sufficient to insure the assets and risks of each such Loan Party and Subsidiary in accordance with prudent business practice in the industry of such Loan Parties and Subsidiaries.
90
6.1.13 ERISA Compliance .
(i) Each Pension Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state Laws. Each Pension Plan that is intended to qualify under Section 401(a) of the Code has received from the IRS a favorable determination or opinion letter, which has not by its terms expired, that such Pension Plan is so qualified, or such Pension Plan is entitled to rely on an IRS advisory or opinion letter with respect to an IRS-approved master and prototype or volume submitter plan, or a timely application for such a determination or opinion letter is currently being processed by the IRS with respect thereto; and, to the best knowledge of Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification. Borrower and each member of the ERISA Group have made all required contributions to each Pension Plan subject to Sections 412 or 430 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Sections 412 or 430 of the Code has been made with respect to any Pension Plan.
(ii) There are no pending or, to the best knowledge of the Borrower, threatened claims, actions or lawsuits, or action by any Official Body, with respect to any Plan that could reasonably be expected to have a Material Adverse Change. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Change.
(iii) No ERISA Event has occurred or is reasonably expected to occur; (a) no Pension Plan has any unfunded pension liability (i.e., excess of benefit liabilities over the current value of that Pension Plan’s assets, determined pursuant to the assumptions used for funding the Pension Plan for the applicable plan year in accordance with Section 430 of the Code); (b) neither Borrower nor any member of the ERISA Group has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (c) neither Borrower nor any member of the ERISA Group has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 of ERISA, with respect to a Multiemployer Plan; (d) neither Borrower nor any member of the ERISA Group has received notice pursuant to Section 4242(a)(1)(B) of ERISA that a Multiemployer Plan is in reorganization and that additional contributions are due to the Multiemployer Plan pursuant to Section 4243 of ERISA; (e) neither Borrower nor any member of the ERISA Group has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA; and (f) no Pension Plan or Multiemployer Plan has been terminated by the plan administrator thereof nor by the PBGC, and no event or circumstance has occurred or exists that could reasonably be expected to cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Pension Plan or Multiemployer Plan
6.1.14 Environmental Matters . Each Loan Party is and, to the knowledge of each respective Loan Party and each of its Subsidiaries is and has been in compliance with applicable Environmental Laws except to the extent such matters would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change.
91
6.1.15 Solvency . On the Closing Date and after giving effect to the initial Loans hereunder, (i) the Borrower is Solvent and (ii) the Loan Parties and their Subsidiaries, taken as a whole, are Solvent.
6.1.16 Sanctions and other Anti-Terrorism Laws . (a) No Covered Entity, nor any director, officer, employee, agent and affiliate of any Covered Entity is a Sanctioned Person, and (b) no Covered Entity, either in its own right or through any third party, either (i) does business with, or derives any of its income from investments in or transactions with, any Sanctioned Person, or (ii) engages in any dealings or transactions prohibited by any Anti-Terrorism Laws.
6.1.17 Anti-Corruption Laws . The Borrower and its Subsidiaries have conducted their business in compliance with all Anti-Corruption Laws and have instituted and maintained policies and procedures designed to promote and achieve compliance with such laws.
6.1.18 EEA Financial Institution . No Loan Party is an Affected Financial Institution.
6.1.19 Material Contracts; Burdensome Restrictions . The material contracts relating to the business operations of each Loan Party and, to the Loan Parties’ knowledge, each Subsidiary of any Loan Party which is not itself a Loan Party, including all employee benefit plans and Multiemployer Plans are valid, binding and enforceable upon such Loan Party or Subsidiary and each of the other parties thereto in accordance with their respective terms, and there is no default by such Loan Party or such Subsidiary thereunder, or, to the Loan Parties’ knowledge, parties other than such Loan Party or such Subsidiary, as applicable, except in each case, as would not reasonably be expected to result in a Material Adverse Change. None of the Loan Parties or their respective Subsidiaries is bound by any contractual obligation, or subject to any restriction in any organization document, or any requirement of Law which would reasonably be expected to result in a Material Adverse Change.
6.1.20 Employment Matters . As of the Effective Date, there are no strikes, lockouts or slowdowns against any Loan Party or any Subsidiary of any Loan Party pending or, to the knowledge of any Loan Party, threatened. The hours worked by and payments made to employees of the Loan Parties and their Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable federal, state, local or foreign law dealing with such matters. All payments due from any Loan Party or any Subsidiary of any Loan Party, or for which any claim may be made against any Loan Party or any such Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of such Loan Party or such Subsidiary.
6.1.21 Beneficial Ownership . The Beneficial Ownership Certification executed and delivered to the Administrative Agent and Lenders for each Borrower on or prior to the date of this Agreement, as updated from time to time in accordance with this Agreement, is accurate, complete and correct as of the date hereof and as of the date any such update is delivered. The Borrower acknowledges and agrees that the Beneficial Ownership Certification is one of the Loan Documents.
92
7.CONDITIONS TO EFFECTIVENESS AND LENDING AND ISSUANCE OF LETTERS OF CREDIT
The effectiveness of this Agreement and the obligation of each Lender to make Loans and of the Issuing Lender to issue Letters of Credit hereunder is subject to the performance by each of the Loan Parties of its Obligations to be performed hereunder at or prior to the making of any such Loans or issuance of such Letters of Credit and to the satisfaction of the following further conditions:
7.1 Conditions to Effectiveness . The effectiveness of this Agreement is subject to the satisfaction of the following conditions precedent.
7.1.1 Deliveries . On the Closing Date, the Administrative Agent shall have received each of the following in form and substance satisfactory to the Administrative Agent:
(i) A certificate of each of the Loan Parties signed by an Authorized Officer, dated the Closing Date stating that (v) all representations and warranties of the Loan Parties set forth in this Agreement are true and correct in all material respects, except for representations and warranties which (A) specifically refer to an earlier date which shall have been true and correct in all material respects as of such earlier date referred to therein, and (B) are qualified by materiality which will be true and correct in all respects, (w) the Loan Parties are in compliance with each of the covenants and conditions hereunder, (x) no Event of Default or Potential Default exists, (y) the Loan Parties are in compliance with ERISA and applicable labor laws, and (z) no Material Adverse Change has occurred since the date of the last audited financial statements of the Borrower delivered to the Administrative Agent;
(ii) A certificate dated the Closing Date and signed by the Secretary or an Assistant Secretary of each of the Loan Parties, certifying as appropriate as to: (a) all action taken by each Loan Party to validly authorize, duly execute and deliver this Agreement and the other Loan Documents and attaching copies of such resolution or other corporate or organizational action; (b) the names of the Authorized Officers authorized to sign the Loan Documents and their true signatures; and (c) copies of its organizational documents as in effect on the Closing Date certified by the appropriate state official where such documents are filed in a state office together with certificates from the appropriate state officials as to the continued existence and good standing of each Loan Party in each state where organized or qualified to do business;
(iii) This Agreement and each of the other Loan Documents duly executed by the parties thereto and all appropriate financing statements and appropriate stock powers and certificates evidencing the pledged Collateral;
(iv) A written opinion of counsel for the Loan Parties, dated the Closing Date in form and substance acceptable to the Administrative Agent and its counsel; (v) Evidence that adequate insurance required to be maintained under this Agreement is in full force and effect, with additional insured and lender loss payable special endorsements attached thereto in form and substance satisfactory to the Administrative Agent and its counsel naming the Administrative Agent as additional insured and lender loss payee;
93
(vi) A duly completed Compliance Certificate as of the last day of the fiscal quarter of Borrower most recently ended prior to the Closing Date for which financial statements have been delivered under the Existing Credit Agreement, signed by an Authorized Officer of Borrower, evidencing pro forma compliance with the financial covenants as of the Closing Date (after giving effect to the transactions occurring on the Closing Date and the consummation of the Project Vitality Acquisition);
(vii) All material consents, regulatory approvals and licenses required to effectuate the transactions contemplated hereby;
(viii) Absence of any legal or regulatory prohibitions or restrictions in connection with the transactions contemplated hereby;
(ix) Absence of any Material Adverse Change from the information previously delivered to the Administrative Agent in connection with the transactions contemplated hereby;
(x) A Lien search in acceptable scope and with acceptable results;
(xi) An executed landlord’s waiver or other lien waiver agreement from the lessor, warehouse operator or other applicable Person for each leased Collateral location requested by the Administrative Agent;
(xii) Receipt of the Loan Parties’ most recent audited financial statements, prepared in accordance with GAAP;
(xiii) Evidence that any existing credit agreements, and the obligations thereunder have been paid in full and, if applicable, all liens and security interests related thereto shall have been released;
(xiv) Receipt of documentation and other information as requested by the Administrative Agent or any Lender in connection with applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the Patriot Act;
(xv) Within three (3) Business Days prior to the Closing Date, the Administrative Agent and each Lender shall have received, in form and substance acceptable to the Administrative Agent and each Lender an executed Beneficial Ownership Certification and such other documentation and other information requested in connection with applicable "know your customer" and anti-money laundering rules and regulations, including the USA PATRIOT Act; (xvi) Such other documents in connection with such transactions as the Administrative Agent or its counsel may reasonably request.
94
7.1.2 Payment of Fees . The Borrower shall have paid all fees and expenses payable on or before the Closing Date as required by this Agreement, the Administrative Agent’s Letter or any other Loan Document.
Without limiting the generality of the provisions of the last paragraph of Section 10.3 [Exculpatory Provisions], for purposes of determining compliance with the conditions specified in this Section 7.1 [Conditions to Effectiveness], each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.
7.2 Each Loan or Letter of Credit . At the time of making any Loans or issuing, extending or increasing any Letters of Credit and after giving effect to the proposed extensions of credit (including any such extension of credit on the Closing Date): (i) the representations and warranties of the Loan Parties shall then be true and correct in all material respects, except for representations and warranties which (A) specifically refer to an earlier date which shall have been true and correct in all material respects as of such earlier date referred to therein, and (B) are qualified by materiality which will be true and correct in all respects, (ii) no Event of Default or Potential Default shall have occurred and be continuing, (iii) the Borrower shall have delivered to the Administrative Agent a duly executed and completed Loan Request or to the Issuing Lender an application for a Letter of Credit, as the case may be, and (iv) in the case of any Loan or Letter of Credit to be denominated in an Optional Currency, there shall not have occurred any change in national or international financial, political or economic conditions or currency exchange rates or exchange controls which in the reasonable opinion of the Administrative Agent, the Required Lenders (in the case of any Loans to be denominated in an Optional Currency) or the Issuing Lender (in the case of any Letter of Credit to be denominated in an Optional Currency) would make it impracticable for such Loan or Letter of Credit to be denominated in the relevant Optional Currency.
8.COVENANTS
The Loan Parties, jointly and severally, covenant and agree that until Payment In Full, the Loan Parties shall comply at all times with the following covenants:
8.1 Affirmative Covenants .
8.1.1 Preservation of Existence, Etc . Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain its legal existence as a corporation, limited partnership or limited liability company and its license or qualification and good standing in each jurisdiction in which its ownership or lease of property or the nature of its business makes such license or qualification necessary, except as otherwise expressly permitted in Section 8.2.6 [Liquidations, Mergers, Consolidations, Acquisitions].
95
8.1.2 Payment of Taxes . Each Loan Party shall, and shall cause each of its Subsidiaries to, duly pay and discharge all federal, state and other material taxes levied or imposed upon them or their properties, income or assets otherwise due and payable, except to the extent that such taxes are being contested in good faith and by appropriate and lawful proceedings diligently conducted and for which such reserve or other appropriate provisions, if any, as shall be required by GAAP shall have been made.
8.1.3 Maintenance of Insurance . Each Loan Party shall, and shall cause each of its Subsidiaries to, insure its properties and assets against loss or damage by fire and such other insurable hazards as such assets are commonly insured and against other risks in such amounts as similar properties and assets are insured by prudent companies in similar circumstances carrying on similar businesses, and with reputable and financially sound insurers, including self-insurance to the extent customary. The Loan Parties shall comply with the covenants and provide the endorsement set forth on Schedule 8.1.3 relating to property and related insurance policies covering the Collateral.
8.1.4 Maintenance of Properties and Leases . Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain in good repair, working order and condition (ordinary wear and tear excepted) in accordance with the general practice of other businesses of similar character and size, all of those properties material to its business.
8.1.5 Visitation Rights . Each Loan Party shall, and shall cause each of its Subsidiaries to, permit any of the officers or authorized employees or representatives of (x) the Administrative Agent and (y) after the occurrence and during the continuance of an Event of Default, any of the Lenders, at reasonable times and upon reasonable notice to the Borrower, to visit and inspect any of its properties and to examine and make excerpts from its books and records and discuss its business affairs, finances and accounts with its officers, all in such detail and at such times and as often as any of the Lenders may reasonably request, provided that (i) the Administrative Agent shall conduct no more than two (2) such visits during any fiscal year of the Borrower unless an Event of Default shall have occurred and be continuing and (ii) so long as no Event of Default shall have occurred and be continuing, the Borrower shall be required to pay for no more than one such visit in any consecutive four fiscal quarter period. Notwithstanding the foregoing, none of the Borrower or any of its Subsidiaries will be required to disclose, permit the inspection, examination or making copies or abstracts of, or discussion of, any document, information or other matter that (i) constitutes non-financial trade secrets or non-financial proprietary information, (ii) in respect of which disclosure to the Administrative Agent or any Lender (or their respective representatives or contractors) is prohibited by law or any binding confidentiality agreement not entered into for purposes of qualifying for the exclusion in this clause (ii), or (iii) is subject to attorney-client or similar privilege or constitutes attorney work product; provided that, (x) in the case of a binding agreements with respect to clause (iii), the Borrower or the applicable Subsidiary shall use commercially reasonable efforts to obtain waivers and to otherwise provide such information that does not violate such obligations and (y) in the case of clauses (ii) (to the extent permitted under applicable law or such binding agreement) and (iii), shall notify the Administrative Agent as to the scope of the information that is not being provided under the applicable exception.
96
8.1.6 Keeping of Records and Books of Account . The Borrower shall, and shall cause each Subsidiary of the Borrower to, maintain and keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities to the extent necessary to enable the Borrower and its Subsidiaries to issue financial statements in accordance with GAAP and as otherwise required by applicable Laws of any Official Body having jurisdiction over the Borrower or any Subsidiary of the Borrower.
8.1.7 Compliance with Laws; Use of Proceeds . Each Loan Party shall, and shall cause each of its Subsidiaries to, comply with all applicable Laws, including all Environmental Laws, in all respects; provided that it shall not be deemed to be a violation of this Section 8.1.7 [Compliance with Laws; Use of Proceeds] if any failure to comply with any Law would not result in fines, penalties, remediation costs, other similar liabilities or injunctive relief which in the aggregate would constitute a Material Adverse Change. The Loan Parties will use the Letters of Credit and the proceeds of the Loans only in accordance with Section 2.8 [Use of Proceeds] and as permitted by applicable Law.
8.1.8 Pledged Assets, Further Assurances .
(a) Equity Interests. Except as otherwise provided below and solely with respect to each Loan Party, each Loan Party shall cause 100% of the equity interests in each direct or indirect Domestic Subsidiary of the Borrower owned by such Loan Party and 65% of the equity interests in each Foreign Direct Subsidiary of the Borrower owned by such Loan Party (in each case, other than Excluded Property), to be subject at all times to first priority Liens in favor of the Administrative Agent, for the benefit of the Secured Parties to secure the Obligations pursuant to the terms and conditions of the Collateral Documents, subject only to Permitted Liens.
(b) Personal Property. Each Loan Party cause all of its tangible and intangible personal property now owned or hereafter acquired by it (other than Excluded Property) to be subject at all times to a first priority Lien in favor of the Administrative Agent for the benefit of the Secured Parties, subject only to Permitted Liens, to secure the Obligations pursuant to the terms and conditions of the Collateral Documents and, in connection with the foregoing, deliver to the Administrative Agent such other documentation as the Administrative Agent may reasonably request including filings and deliveries necessary to perfect such Liens, organizational documents, resolutions and favorable opinions of counsel to such Person, all in form, content and scope reasonably satisfactory to the Administrative Agent.
(c) Landlord Consents. Each Loan Party shall use commercially reasonable efforts to, within thirty (30) days of the request of the Administrative Agent (or such later date as the Administrative Agent may agree in its sole discretion), to deliver or cause to be delivered to the Administrative Agent a duly executed landlord consent with respect to each such location where material corporate books and records and/or other assets of any of the Loan Parties are maintained, which consents shall be in form and substance reasonably acceptable to the Administrative Agent.
97
(d) Further Assurances. Each Loan Party shall, from time to time, at its expense, faithfully preserve and protect the Administrative Agent’s Lien on the Collateral whether now owned or hereafter acquired as a continuing first priority perfected Lien, subject only to Permitted Liens, and shall do such other acts and things as the Administrative Agent in its reasonable discretion may deem necessary or advisable from time to time in order to preserve, perfect and protect the Liens granted under the Loan Documents and to exercise and enforce its rights and remedies thereunder with respect to the Collateral.
8.1.9 Additional Guarantors . Each Loan Party shall give notice to the Administrative Agent within ten (10) days after creating a Subsidiary, or acquiring the equity interests of any other Person and cause each of their Domestic Subsidiaries, whether newly formed, after acquired or otherwise existing, to promptly (and in any event within thirty (30) days after such Subsidiary is formed or acquired (or such longer period of time as agreed to by the Administrative Agent in its sole discretion)) become a Guarantor hereunder by way of execution of a Joinder Agreement and delivery to the Administrative Agent of documents in the forms described in Section 7.1.1(ii) and (iv), such other documents necessary to grant and perfect Liens to the Administrative Agent for the benefit of the Secured Parties in the equity interests of, and Collateral held by, such Subsidiary and such other documents or agreements as the Administrative Agent may reasonably request. The Obligations shall be secured by, among other things, a first priority Lien in favor of the Administrative Agent in the assets of such new Guarantor of the type constituting Collateral granted by other Loan Parties at such time, and a pledge of the equity interests in such new Guarantor to the extent required to be pledged pursuant to Section 8.1.8 [Pledged Assets], in each case, subject only to Permitted Liens. Notwithstanding the foregoing, to the extent any new Subsidiary is created solely for the purpose of consummating a merger transaction pursuant to a Permitted Acquisition, and such new Subsidiary at no time holds any assets or liabilities other than any merger consideration contributed to it contemporaneously with the closing of such merger transaction, such new Subsidiary shall not be required to take the actions specified in this Section 8.1.9 [Additional Guarantors], until the consummation of such Permitted Acquisition (at which time, the surviving entity of the respective merger transaction shall be required to so comply with Section 8.1.8 [Pledged Assets] and 8.1.9 [Additional Guarantors], in accordance with the foregoing).
8.1.10 Sanctions and other Anti-Terrorism Laws; Anti-Corruption Laws . (a)(i) No Covered Entity will become a Sanctioned Person, (ii) the funds used to repay the Obligations will not be derived from any violation of Anti-Terrorism Laws or other unlawful activity, and (iii) the Borrower shall promptly notify the Administrative Agent in writing upon the occurrence of a Reportable Compliance Event.
(b) The Borrower and its Subsidiaries will conduct their business in compliance with the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act 2010, and all Anti-Corruption Laws, and maintain policies and procedures designed to promote and achieve compliance with all Anti-Corruption Laws.
98
8.1.11 Post-Closing Obligations . Each Loan Party shall, and shall cause each of its Subsidiaries to, comply with the obligations set forth on Schedule 8.1.11.
8.2 Negative Covenants .
8.2.1 Indebtedness . Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) [reserved]
(iii) Indebtedness of (A) a Loan Party to another Loan Party, and (B) of any Loan Party to a Subsidiary that is not a Loan Party so long as such Indebtedness under this clause (B) is subordinated to the Obligations in a manner satisfactory to the Administrative Agent;
(iv) Indebtedness incurred with respect to (A) Purchase Money Security Interests and (B) capitalized leases: provided that in the case of clause (A), any such Indebtedness shall be secured only by the tangible personal property acquired in connection with the incurrence of such Indebtedness and in the case of clause (B), any such Indebtedness shall be secured only by the asset subject to such capitalized lease; provided further that the sum of the aggregate principal amount of any Indebtedness incurred and outstanding under this clause (iv) shall not exceed $20,000,000;
(v) Existing Indebtedness as set forth on Schedule 8.2.1, including, with respect to any revolving facility Indebtedness set forth thereon, the incurrence of Indebtedness up to the aggregate applicable revolving facility size in effect on the Closing Date as set forth on Schedule 8.2.1 (in each case, including any extensions or renewals thereof; provided there is no increase in the amount thereof or other significant change in the terms thereof unless otherwise specified on Schedule 8.2.1);
(vi) Indebtedness of any Subsidiary acquired pursuant to a Permitted Acquisition in compliance with Section 8.2.6 [Liquidations, Mergers, Consolidations, Acquisitions], which Indebtedness is included in the purchase price of such Permitted Acquisition, has a maturity date of not earlier than the later of the Expiration Date and the latest Term Loan Maturity Date, and is subordinated to the Indebtedness under the Loan Documents on terms and conditions and pursuant to a subordination agreement acceptable to Administrative Agent (but extensions and renewals thereof shall not be permitted); provided, however, Borrower shall have ninety (90) days to provide the subordination of such Indebtedness if such Indebtedness is otherwise not refinanced in a manner permitted by this Agreement or as otherwise approved by Administrative Agent within such ninety (90) day period;
(vii) (A) Other Indebtedness entered into by any Loan Party or any Subsidiary of any Loan Party in an amount not to exceed $100,000,000 at any one time outstanding and (B) other Indebtedness entered into by Faster S.r.L.
99
and its non-Loan Party Subsidiaries in an aggregate principal amount not to exceed $50,000,000 and incurred for the general purpose (as determined by the Borrower and its Subsidiaries) of making direct or indirect repayments or distributions to the Borrower on account of the Permitted Project Cardinal Intercompany Investments; provided that, with respect to the Indebtedness incurred pursuant to this clause (B), (1) 100% of the Net Cash Proceeds of such Indebtedness are distributed to the Borrower concurrently with the incurrence of such Indebtedness, (2) the Borrower shall comply with any prepayment obligations pursuant to Section 5.7.4, and (3) no assets of any Loan Party shall be security for such Indebtedness;
(viii) Any (i) Lender Provided Interest Rate Hedge or Lender Provided Foreign Currency Hedge, (ii) other Interest Rate Hedge or Foreign Currency Hedge approved by the Administrative Agent that is entered into for hedging (rather than speculative) purposes, or (iii) Indebtedness under any Other Lender Provided Financial Service Product;
(ix) Guaranties permitted under Section 8.2.3 [Guaranties]; and
(x) (A) Indebtedness of a Subsidiary that is not a Loan Party to another Subsidiary that is not a Loan Party and (B) Indebtedness of a Subsidiary that is not a Loan Party to a Loan Party provided that such intercompany Indebtedness is permitted under Section 8.2.4 [Investments].
8.2.2 Liens; Lien Covenants . Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien on any of its property or assets, tangible or intangible, now owned or hereafter acquired, or agree or become liable to do so, except Permitted Liens.
8.2.3 Guaranties . Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time, directly or indirectly, become or be liable in respect of any Guaranty of any obligation or liability of any other Person, except for (a) Guaranties of obligations (including Indebtedness) of the Loan Parties and their Subsidiaries permitted hereunder; provided, that (i) if the Indebtedness that is being guarantied is unsecured and/or subordinated to the Obligations, the guaranty shall also be unsecured and/or subordinated to the Obligations to at least the same degree that the guarantied Indebtedness is subordinated to the Obligations, and (ii) any Guaranty by any Loan Party of any obligations of a Subsidiary that is not a Loan Party shall only be permitted to the extent permitted under Section 8.2.4 [Investments], and (b) Guaranties of the obligations of any other Person (other than the Loan Parties and their Subsidiaries) to the extent such Guaranty is permitted as an Investment in such other Person under Section 8.2.4 [Investments].
8.2.4 Investments . Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time make or suffer to remain outstanding any Investment, or agree, become or remain liable to do any of the foregoing, except:
(i) trade credit extended on usual and customary terms in the ordinary course of business; (ii) Investments of the Loan Parties and their Subsidiaries existing on the Closing Date in their Subsidiaries;
100
(iii) advances to employees to meet expenses incurred by such employees in the ordinary course of business;
(iv) to the extent constituting an Investment, the forgiveness or cancellation of intercompany indebtedness;
(v) Permitted Investments;
(vi) Permitted Acquisitions in compliance with Section 8.2.6 [Liquidations, Mergers, Consolidations, Acquisitions] and Investments permitted pursuant to Section 8.2.9 [Subsidiaries, Partnerships and Joint Ventures]; and
(vii) Permitted Intercompany Investments;
(viii) Permitted Project Cardinal Intercompany Investments; and
(ix) other Investments in an aggregate outstanding amount not to exceed $100,000,000.00.
For purposes of calculating the amount of any Investment, such amount shall equal (x) the amount of cash or non-cash assets actually invested less (y) any repayments, interest, returns, profits, dividends, distributions, income and similar amounts actually received in cash from such Investment (from dispositions or otherwise) (which amount referred to in this clause (y) shall not exceed the amount of such Investment at the time such Investment was made). The amount of any Investment consisting of the provision of services or the transfer of non-cash assets shall be equal to the fair market value of such services or non-cash assets, as the case may be, as reasonably determined by the Borrower in good faith.
8.2.5 Dividends and Related Distributions . Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, make or pay, or agree to become or remain liable to make or pay, any dividend or other distribution of any nature (whether in cash, property, securities or otherwise) on account of or in respect of its shares of Capital Stock, on account of the purchase, redemption, retirement or acquisition of its shares of Capital Stock (or warrants, options or rights therefor), including, for the avoidance of doubt, all stock repurchases by the Borrower (collectively, “Restricted Payments”), except (i) each Subsidiary may make Restricted Payments to other Loan Parties, (ii) the Borrower and its Subsidiaries may declare and make Restricted Payments payable solely in the Capital Stock of such Person, (iii) the Borrower may make other Restricted Payments payable to holders of its Capital Stock so long as, in the case of this clause (iii), (A) no Potential Default or Event of Default has occurred and is continuing or exists after giving effect thereto, and (B) the Loan Parties shall be in pro forma compliance with the covenants contained in Section 8.2.14 [Maximum Leverage Ratio] and Section 8.2.15 [Minimum Interest Coverage Ratio] after giving pro forma effect to such Restricted Payments (including any Indebtedness incurred in connection therewith), in each case, calculated as of the last day of the most recently ended fiscal quarter of the Borrower for which financial statements have been delivered hereunder pursuant to Section 8.3.1 [Quarterly Financial Statements] or 8.3.2 [Annual Financial Statements], and (iv) the Borrower and its Subsidiaries may pay dividends and distributions within sixty (60) days after the date of declaration thereof, if at the date of declaration of such payment, such payment would have complied with the other provisions of this Section.
101
8.2.6 Liquidations, Mergers, Consolidations, Acquisitions . Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, (a) dissolve, liquidate or windup its affairs, (b) become a party to any merger or consolidation, (c) acquire (i) a majority of the voting equity interests or economic interests of another Person, or (ii) all or substantially all of the assets of another Person or of a division, line of business or other business unit of another Person or (d) consummate an LLC Division; provided that:
(i) (A) any Loan Party other than the Borrower may consolidate or merge into, or liquidate into, the Borrower or another Loan Party which is wholly-owned by one or more of the other Loan Parties, (B) any Subsidiary of the Borrower that is not a Loan Party may consolidate or merge into, or liquidate into, the Borrower or any other Subsidiary and (C) any Subsidiary of the Borrower may dissolve or liquidate so long as either (1) such Subsidiary owns no assets at the time of such liquidation or dissolution or (2) any assets owned by such Subsidiary are transferred to the Borrower or another Subsidiary prior to such liquidation or dissolution (or if such Subsidiary is a Loan Party, to the Borrower or another Loan Party);
(ii) the Borrower and its Subsidiaries may (each of the following, a “Permitted Acquisition”) (A) consummate the Project Vitality Acquisition on or before December 31, 2020 in compliance with applicable Law and regulatory approvals and in accordance with the terms of the Project Vitality Acquisition Agreement, without giving effect to any modifications, amendments, consents or waivers by the Borrower or its Subsidiaries thereto that are materially adverse to the interests of the Lenders, unless consented to in writing by the Administrative Agent; provided that, concurrently with the closing of the Project Vitality Acquisition, the Loan Parties shall have taken all actions required by Sections 8.1.8 [Pledged Assets] and 8.1.9 [Additional Guarantors] (without giving effect to any permitted post-acquisition time period set forth therein), and (B) acquire, whether by purchase or by merger, (1) all or a majority of the ownership interests of another Person, or (2) all or substantially all of the assets of another Person or of a business or division of another Person, provided that, in the case of this clause (B), each of the following requirements are met:
(a) the Loan Parties shall have taken all actions required by Sections 8.1.8 [Pledged Assets] and 8.1.9 [Additional Guarantors] within the time frames set forth in Sections 8.1.8 [Pledged Assets] and 8.1.9 [Additional Guarantors];
(b) the business acquired, or the business conducted by the Person whose ownership interests are being acquired, as applicable, shall comply with Section 8.2.10 [Continuation of or Change in Business]; (c) no Potential Default or Event of Default shall exist immediately prior to or after giving effect to such Permitted Acquisition;
102
(d) the Borrower shall be in pro forma compliance with the covenants contained in Section 8.2.14 [Maximum Leverage Ratio] and Section 8.2.15 [Minimum Interest Coverage Ratio] after giving pro forma effect to such Permitted Acquisition (including in such computation Indebtedness assumed or incurred in connection with such Permitted Acquisition and income earned or expenses incurred by the Person, business or assets to be acquired prior to the date of such Permitted Acquisition as more fully set forth in the definition of Consolidated EBITDA), in each case, calculated as of the last day of the most recently ended fiscal quarter of the Borrower for which financial statements have been delivered hereunder pursuant to Section 8.3.1 [Quarterly Financial Statements] or 8.3.2 [Annual Financial Statements];
(e) such Permitted Acquisition is not a Hostile Acquisition;
(f) if the aggregate Consideration paid for any such Permitted Acquisitions exceeds $50,000,000 (each, a “Material Permitted Acquisition”), the Borrower shall demonstrate to the Administrative Agent’s satisfaction of the condition set forth in clause (e) above by completing and delivering at least five (5) Business Days prior to such Permitted Acquisition, a certificate in the form of Exhibit 8.2.6 evidencing such compliance); and
(g) in the case of a Material Permitted Acquisition, the Borrower shall deliver to the Administrative Agent (1) at least twenty (20) days before such Permitted Acquisition (or such later date approved by the Administrative Agent), all financial statements received with respect to the Persons or assets proposed to be acquired, (2) at least ten (10) days before such Permitted Acquisition (or such later date approved by the Administrative Agent), drafts of any agreements proposed to be entered into by such Borrower in connection with such Permitted Acquisition, and (3) prior to the time of such Permitted Acquisition (or such later date approved by the Administrative Agent), executed copies of such agreements entered into by Borrower in connection with such Permitted Acquisition, and shall deliver to the Administrative Agent such other information about such Person or its assets as any Lender may reasonably require; and
(iii) the Borrower and its Subsidiaries may consummate other Investments permitted under Section 8.2.4 [Investments].
8.2.7 Dispositions of Assets or Subsidiaries . Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or dispose of, voluntarily or involuntarily, any of its properties or assets (including, in each case, by way of an LLC Division), tangible or intangible (including sale, assignment, discount or other disposition of accounts, contract rights, chattel paper, equipment or general intangibles with or without recourse or of Capital Stock of a Subsidiary of such Loan Party), except:
103
(i) transactions involving the sale of inventory in the ordinary course of business;
(ii) any sale, transfer or lease of assets in the ordinary course of business which are no longer necessary or required in the conduct of such Loan Party’s or such Subsidiary’s business; or
(iii) any sale, transfer or lease of assets by any Subsidiary that is not a Loan Party to another Subsidiary that is not a Loan Party;
(iv) any sale, transfer or lease of assets constituting an Investment permitted by Section 8.2.4 [Investments];
(v) any sale, transfer or lease of assets by any Loan Party (other than the Borrower), or any Subsidiary of such Loan Party, to another Loan Party, and in the event that any Subsidiary that is a Foreign Direct Subsidiary is transferred by any Loan Party pursuant to a corporate restructuring and as a result of restructuring such transferred Subsidiary ceases to be a Foreign Direct Subsidiary, Administrative Agent shall release the pledge by the transferring Loan Party of 65% of its equity in such Subsidiary provided that the Borrower causes the direct parent company of the transferee Subsidiary, if such transferee Subsidiary is a Foreign Direct Subsidiary, to pledge 65% of its equity interest in such transferee Foreign Direct Subsidiary as required by this Agreement; and
(vi) the sale, lease or transfer of other property or assets not to exceed $15,000,000 in any fiscal year; provided that (1) at least 75% of the consideration received therefor by the Loan Parties or any such Subsidiary shall be in the form of cash or Permitted Investments, (2) no Event of Default or Potential Default shall exist or shall result therefrom and (3) any such disposition shall be for fair market value;
provided that, notwithstanding the foregoing, any Subsidiary that is a dormant entity with no material assets or commercial or business operations, may be dissolved or liquidated or may wind up its affairs without restriction.
8.2.8 Affiliate Transactions . Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, enter into or carry out any transaction with any Affiliate of any Loan Party (including purchasing property or services from or selling property or services to any Affiliate of any Loan Party or other Person) unless such transaction (i) is in accordance with Section 8.2.7(iii), or (ii) is not otherwise prohibited by this Agreement, is entered into upon fair and reasonable arm’s-length terms and conditions and is in accordance with all applicable Law.
8.2.9 Subsidiaries, Partnerships and Joint Ventures . Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to own or create directly or indirectly any Subsidiaries, except to the extent the Loan Parties have complied with Section 8.1.9 [Additional Guarantors] with respect to such Subsidiary. Each of the Loan Parties shall not become or agree to become a party to a Joint Venture other than a Permitted Joint Venture.
104
8.2.10 Continuation of or Change in Business . Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, engage in any business other than the business as conducted and operated by such Loan Party or Subsidiary during the present fiscal year and other related businesses in the hydraulic and electronic control systems industries, and adjacent, ancillary or reasonably related industrial goods businesses, including, without limitation, businesses that are related vertically in the same industry or channel to market.
8.2.11 Fiscal Year . The Borrower shall not, and shall not permit any Subsidiary of the Borrower to, change its fiscal year without the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld, conditioned or delayed.
8.2.12 [Reserved] .
8.2.13 Changes in Organizational Documents . Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, (i) without giving 10 calendar days’ prior written notice (or such shorter time as agreed to by the Administrative Agent) to the Administrative Agent, change its name, jurisdiction of organization or form of organization, or (ii) amend in any other respect its certificate of incorporation (including any provisions or resolutions relating to Capital Stock), by-laws, certificate of limited partnership, partnership agreement, certificate of formation, limited liability company agreement or other organizational documents if such change would reasonably be expected to be adverse in any material respect to the Lenders.
8.2.14 Maximum Leverage Ratio . The Loan Parties shall not as of the last day of any fiscal quarter permit the Leverage Ratio to exceed 3.75 to 1.00. This covenant shall be calculated as of the end of each fiscal quarter for the four (4) fiscal quarters then ended. As to any calculation in connection with a Material Permitted Acquisition, the maximum permitted Leverage Ratio permitted hereby shall be temporarily increased by 0.50 to 1.00 at the closing of such Material Permitted Acquisition and for the twelve (12) months following the closing of such Material Permitted Acquisition (such 12 month period, an “Adjustment Period”). Following the expiration of any Adjustment Period, the maximum Leverage Ratio cannot be subsequently increased again as a result of a subsequent Material Permitted Acquisition (and a subsequent Adjustment Period cannot commence) until the Borrower has delivered a quarterly Compliance Certificate evidencing that it was in compliance with the maximum Leverage Ratio as set forth in this Section 8.2.14 [Maximum Leverage Ratio] (after the decrease in such maximum Leverage Ratio following the expiration of such Adjustment Period).
8.2.15 Minimum Interest Coverage Ratio . The Loan Parties shall not as of the last day of any fiscal quarter permit the Interest Coverage Ratio to be less than 3.00 to 1.00. This covenant shall be calculated as of the end of each fiscal quarter for the four (4) fiscal quarters then ended.
8.2.16 Sanctions and other Anti-Terrorism Laws . No Covered Entity, either in its own right or through any third party, will (a) do business in or with, or derive any of its income from investments in or transactions with, any Sanctioned Person; (b) engage in any dealings or transactions prohibited by any Anti-Terrorism Law or (c) directly or indirectly use the Loans or any proceeds thereof to fund any operations in, finance any investments or activities in, or, make any payments to, a Sanctioned Person or otherwise in violation of any Anti-Terrorism Law.
105
8.2.17 Anti-Corruption Laws . Neither the Borrower nor any Subsidiary, directly or indirectly, shall use the Loans or any proceeds thereof for any purpose which would breach any Anti-Corruption Laws in any jurisdiction in which the Borrower or any of its Subsidiaries conduct business.
8.2.18 Limitation on Negative Pledges . Each of the Loan Parties shall not, and shall not permit any Subsidiary, to enter into or suffer to exist or become effective any agreement that (a) prohibits or limits the ability of such Loan Party or any of its Subsidiaries to (i) other than with respect to any Foreign Subsidiary, act as a Loan Party; (ii) make dividends or distribution to any Loan Party, (iii) pay any Indebtedness or other obligation owed to any Loan Party, (iv) make loans or advances to any Loan Party, or (v) create, incur, assume or suffer to exist any Lien upon any of its property or revenues, whether now owned or hereafter acquired, to secure the Obligations, other than, in the case of clauses (ii) through (v), (A) this Agreement and the other Loan Documents (B) with respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection with a disposition of assets permitted under this Agreement of all or substantially all of the equity interests or assets of such Subsidiary, (C) any agreements governing any purchase money Liens or capital lease obligations otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby), (D) customary non-assignment provisions with respect to contracts, leases or licensing agreements entered into by Borrower or any of its Subsidiaries, in each case entered into in the ordinary course of business, (E) applicable law, (F) provisions with respect to dividends and the disposition or distribution of assets or property in joint venture agreements, license agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements entered into in the ordinary course of business, (G) any restrictions under any Indebtedness permitted under Section 8.2.1 [Indebtedness]; provided that, either (1) such restrictions are no more restrictive than those contained under this Agreement or (2) such restrictions relate only to Foreign Subsidiaries obligated on such Indebtedness and the assets of such Foreign Subsidiaries; and (H) customary provisions restricting subletting, sublicensing or assignment of any intellectual property license or any lease governing any leasehold interests of a Loan Party and its Subsidiaries. In addition to the foregoing, in no event shall any Loan Party enter into an agreement with any other Person to restrict the ability of the Borrower or such Loan Party, to encumber, pledge, mortgage, grant a security interest in, assign, sell, lease, or otherwise dispose of or transfer, whether by sale, merger, consolidation, liquidation, dissolution or otherwise, any of the Collateral; and (b) requires the grant of any Lien on property for any obligation if a Lien on such property is given as security for the Obligations.
8.2.19 Use of Proceeds . Use the proceeds of any Loans or Letters of Credit, whether directly or indirectly, and whether immediately, incidentally or ultimately, (a) to purchase or carry margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System) or to extend credit to others for the purpose of carrying margin stock or to refund indebtedness originally incurred for such purpose, in each case in violation of the provisions of the regulations of the Board of Governors of the Federal Reserve System or (b) in contravention of any Law (including Anti-Terrorism Laws) or of any Loan Document.
8.3 Reporting Requirements . The Loan Parties will furnish or cause to be furnished to the Administrative Agent and each of the Lenders:
106
8.3.1 Quarterly Financial Statements . As soon as available and in any event within forty-five (45) calendar days after the end of each of the first three (3) fiscal quarters in each fiscal year, financial statements of the Borrower, consisting of a consolidated balance sheet as of the end of such fiscal quarter and related consolidated statements of income, stockholders’ equity and cash flows for the fiscal quarter then ended and the fiscal year through that date, all in reasonable detail and certified (subject to normal year-end audit adjustments) by the Chief Executive Officer, President or Chief Financial Officer of the Borrower as having been prepared in accordance with GAAP, consistently applied, and setting forth in comparative form the respective financial statements for the corresponding date and period in the previous fiscal year.
8.3.2 Annual Financial Statements . As soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year of the Borrower, audited financial statements of the Borrower consisting of a consolidated balance sheet as of the end of such fiscal year, and related consolidated statements of income, stockholders’ equity and cash flows for the fiscal year then ended, all in reasonable detail and setting forth in comparative form the financial statements as of the end of and for the preceding fiscal year, and certified by independent certified public accountants of nationally recognized standing reasonably satisfactory to the Administrative Agent. The certificate or report of accountants shall be free of any “going concern” or similar qualifications (other than any consistency qualification that may result from a change in the method used to prepare the financial statements as to which such accountants concur) and shall not indicate the occurrence or existence of any event, condition or contingency which would materially impair the prospect of payment or performance of any covenant, agreement or duty of any Loan Party under any of the Loan Documents.
8.3.3 Certificate of the Borrower . Concurrently with the financial statements of the Borrower furnished to the Administrative Agent and to the Lenders pursuant to Sections 8.3.1 [Quarterly Financial Statements] and 8.3.2 [Annual Financial Statements], a certificate (each a “Compliance Certificate”) of the Borrower signed by the Chief Executive Officer, President or Chief Financial Officer of the Borrower, in the form of Exhibit 8.3.3.
8.3.4 Notices .
8.3.4.1 Default. Promptly after any officer of any Loan Party has learned of the occurrence of an Event of Default or Potential Default, a certificate signed by an Authorized Officer setting forth the details of such Event of Default or Potential Default and the action which such Loan Party proposes to take with respect thereto.
8.3.4.2 Litigation. Promptly after the commencement thereof, notice of all actions, suits, proceedings or investigations before or by any Official Body or any other Person against any Loan Party or Subsidiary of any Loan Party which involve a claim or series of related claims in excess of $2,500,000, or which would reasonably be expected to constitute a Material Adverse Change.
8.3.4.3 Organizational Documents. Within the time limits set forth in Section 8.2.13 [Changes in Organizational Documents] (to the extent applicable), any amendment to the organizational documents of any Loan Party.
107
8.3.4.4 Erroneous Financial Information. Promptly in the event that the Borrower or its accountants conclude or advise that any previously issued financial statement, audit report or interim review should no longer be relied upon or that disclosure should be made or action should be taken to prevent future reliance, notice in writing setting forth the details thereof and the action which the Borrower proposes to take with respect thereto.
8.3.4.5 ERISA Event. Immediately upon the occurrence of any ERISA Event, notice in writing setting forth the details thereof and the action which the Borrower proposes to take with respect thereto.
8.3.4.6 Certain Mandatory Prepayment Events. Within 30 days of the occurrence of an Asset Sale or Recovery Event that would give rise to a mandatory prepayment under Section 5.7.1 [Sale of Assets and Recovery Events] (without regard to the proviso thereof), notice to the Administrative Agent of the occurrence of such Asset Sale or Recovery Event and, if the Borrower intends to reinvest the Net Cash Proceeds from such Asset Sale or Recovery Event in accordance with Section 5.7.1 [Sale of Assets and Recovery Events], a Reinvestment Notice with respect thereto.
8.3.4.7 Other Reports. Promptly upon their becoming available to the Borrower:
(i) Annual Budget. The annual forecasts or projections of the Borrower, to be supplied not later than sixty (60) days after the commencement of the fiscal year to which any of the foregoing may be applicable,
(ii) Management Letters. Any reports including management letters submitted to the Borrower by independent accountants in connection with any annual, interim or special audit,
(iii) SEC Reports; Shareholder Communications. Reports, including Forms 10-K, 10-Q and 8-K, registration statements and prospectuses and other shareholder communications, filed by the Borrower with the Securities and Exchange Commission.
(iv) USA Patriot Act; Beneficial Ownership. Promptly following any request therefor, information and documentation reasonably requested by the Administrative Agent or any Lender for purposes of compliance with applicable “know your customer” requirements under the USA Patriot Act, the Beneficial Ownership Regulation or other applicable anti-money laundering laws.
(v) Other Information. Such other reports and information as any of the Lenders may from time to time reasonably request.
108
8.3.5 Electronic Delivery . The financial statements required to be delivered pursuant to Section 8.3.4.7(iii) [SEC Reports; Shareholder Communications], Section 8.3.1 [Quarterly Financial Statements] and Section 8.3.2 [Annual Financial Statements] may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents on the Borrower’s website on the Internet or (ii) on which such documents are posted by the Borrower or on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access, including the Platform (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that the Borrower’s having filed with the Securities and Exchange Commission, and such documents being publicly available as posted on the Electronic Data Gathering, Analysis and Retrieval system (EDGAR) or otherwise, (a) an annual report on Form 10-K for such year will satisfy the Borrower’s obligation under Section 8.3.2 [Annual Financial Statements] with respect to such year and (b) a quarterly report on Form 10-Q for such quarter will satisfy the Borrower’s obligation under Section 8.3.1 [Quarterly Financial Statements] with respect to such quarter. The Administrative Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request by a Lender for delivery, and each Lender shall be solely responsible for timely accessing posted documents requesting delivery of copies to it or maintaining its copies of such documents.
9.DEFAULT
9.1 Events of Default . An Event of Default shall mean the occurrence or existence of any one or more of the following events or conditions (whatever the reason therefor and whether voluntary, involuntary or effected by operation of Law):
9.1.1 Payments Under Loan Documents . The Borrower shall fail to pay (i) any principal of any Loan (including scheduled installments, mandatory prepayments or the payment due at maturity), Reimbursement Obligation or Letter of Credit or Obligation on the date on which such principal or other amount becomes due in accordance with the terms hereof or thereof or (ii) any interest on any Loan, Reimbursement Obligation or Letter of Credit Obligation or any other amount owing hereunder or under the other Loan Documents on the date on which such interest or other amount becomes due in accordance with the terms hereof or thereof and such failure to pay described in this clause (ii) continues for three (3) or more Business Days;
9.1.2 Breach of Warranty . Any representation or warranty made at any time by any of the Loan Parties herein or by any of the Loan Parties in any other Loan Document, or in any certificate, other instrument or written statement furnished pursuant to the provisions hereof or thereof, shall prove to have been untrue in any material respect as of the time it was made or furnished (or shall prove to have been untrue in any respect as of the time it was made or furnished if such representation or warranty was already qualified by materiality);
9.1.3 [Reserved] .
9.1.4 Breach of Negative Covenants, Visitation Rights or Anti-Terrorism Laws . Any of the Loan Parties shall default in the observance or performance of any covenant contained in Section 8.1.1 [Preservation of Existence, Etc.] (with respect to the Borrower), Section 8.1.5 [Visitation Rights], Section 8.1.9 [Sanctions and other Anti-Terrorism Laws; Anti-Corruption Laws] or Section 8.2 [Negative Covenants];
109
9.1.5 Breach of Other Covenants . Any of the Loan Parties shall default in the observance or performance of any other covenant, condition or provision hereof or of any other Loan Document and such default shall continue unremedied for a period of thirty (30) Business Days;
9.1.6 Defaults in Other Agreements or Indebtedness . A default or event of default shall occur at any time under the terms of any other agreement involving the extension of Indebtedness under which any Loan Party or Subsidiary of any Loan Party may be obligated as a borrower or guarantor in excess of $7,500,000 in the aggregate, and such breach, default or event of default consists of the failure to pay (beyond any period of grace permitted with respect thereto) any Indebtedness when due (whether at stated maturity, by acceleration or otherwise) or if such breach or default permits or causes the acceleration of any Indebtedness;
9.1.7 Final Judgments or Orders . Any final judgments or orders for the payment of money in excess of $7,500,000 in the aggregate shall be entered against any Loan Party by a court having jurisdiction in the premises, which judgment is not discharged, vacated, bonded or stayed pending appeal within a period of thirty (30) days from the date of entry;
9.1.8 Loan Document Unenforceable . Any of the Loan Documents shall cease to be legal, valid and binding agreements enforceable against the party executing the same or such party’s successors and assigns (as permitted under the Loan Documents) in accordance with the respective terms thereof or shall in any way be terminated (except in accordance with its terms) or become or be declared ineffective or inoperative or shall in any way be challenged or contested by any Loan Party or cease to give or provide the respective Liens, security interests, rights, titles, interests, remedies, powers or privileges intended to be created thereby, except to the extent that any such loss of perfection or priority results from the failure of the Administrative Agent to file financing continuation statements or to maintain possession of certificates actually delivered to it representing securities pledged under the Collateral Documents;
9.1.9 Uninsured Losses; Proceedings Against Assets . There shall occur any material uninsured damage to or loss, theft or destruction of any of the Collateral in excess of $7,500,000 (unless covered by self-insurance approved by the Administrative Agent), or the Collateral or any other of the Loan Parties’ or any of their Subsidiaries’ assets are attached, seized, levied upon or subjected to a writ or distress warrant; or such come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors and the same is not cured within thirty (30) days thereafter;
9.1.10 Events Relating to Pension Plans and Multiemployer Plans . An ERISA Event occurs with respect to a Pension Plan which has resulted or could reasonably be expected to result in liability of Borrower or any member of the ERISA Group under Title IV of ERISA to the Pension Plan or the PBGC in an aggregate amount in excess of $7,500,000, or Borrower or any member of the ERISA Group fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan, where the aggregate amount of unamortized withdrawal liability is in excess of $7,500,000;
9.1.11 Change of Control . A Change of Control shall occur; or
110
9.1.12 Relief Proceedings . A Relief Proceeding shall have been instituted against any Loan Party or Subsidiary of a Loan Party and such Relief Proceeding shall remain undismissed or unstayed and in effect for a period of thirty (30) consecutive days or such court shall enter a decree or order granting any of the relief sought in such Relief Proceeding, (ii) any Loan Party or Subsidiary of a Loan Party institutes, or takes any action in furtherance of, a Relief Proceeding, or (iii) any Loan Party or any Subsidiary of a Loan Party ceases to be Solvent or admits in writing its inability to pay its debts as they mature.
9.2 Consequences of Event of Default .
9.2.1 Generally . If any Event of Default specified under Section 10.1 [Events of Default] shall occur and be continuing, the Lenders and the Administrative Agent shall be under no further obligation to make Loans and the Issuing Lender shall be under no obligation to issue Letters of Credit and the Administrative Agent may, and upon the request of the Required Lenders shall, take any or all of the following actions:
(a) declare the commitment of each Lender to make Loans and any obligation of the Issuing Lender to issue, amend or extend Letters of Credit to be terminated, whereupon such commitments and obligation shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower;
(c) require the Borrower to, and the Borrower shall thereupon, deposit in a non-interest-bearing account with the Administrative Agent, as Cash Collateral for its Obligations under the Loan Documents, an amount equal to the maximum amount currently or at any time thereafter available to be drawn on all outstanding Letters of Credit, and the Borrower hereby pledges to the Administrative Agent and the Lenders, and grants to the Administrative Agent and the Lenders a security interest in, all such cash as security for such Obligations; and
(d) exercise on behalf of itself, the Lenders and the Issuing Lender all rights and remedies available to it, the Lenders and the Issuing Lender under the Loan Documents;
provided that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans and any obligation of the Issuing Lender to issue, amend or extend any Letter of Credit shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrower to provide cash collateral as specified in clause (c) above shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.
111
9.2.2 Set-off . If an Event of Default shall have occurred and be continuing, each Lender, the Issuing Lender, and each of their respective Affiliates and any participant of such Lender or Affiliate which has agreed in writing to be bound by the provisions of Section 5.3 [Sharing of Payments by Lenders] is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the Issuing Lender or any such Affiliate or participant to or for the credit or the account of any Loan Party against any and all of the Obligations of such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender, the Issuing Lender, Affiliate or participant, irrespective of whether or not such Lender, Issuing Lender, Affiliate or participant shall have made any demand under this Agreement or any other Loan Document and although such Obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender or the Issuing Lender different from the branch or office holding such deposit or obligated on such Indebtedness. The rights of each Lender, the Issuing Lender and their respective Affiliates and participants under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the Issuing Lender or their respective Affiliates and participants may have. Each Lender and the Issuing Lender agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application; and
9.2.3 Enforcement of Rights and Remedies . Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with this Section 9.2 [Consequences of Event of Default] for the benefit of all the Lenders and the Issuing Lender; provided that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (b) the Issuing Lender or the Swing Loan Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as the Issuing Lender or Swing Loan Lender, as the case may be) hereunder and under the other Loan Documents, (c) any Lender from exercising setoff rights in accordance with Section 9.2.2 [Set-off] (subject to the terms of Section 5.3 [Sharing of Payments by Lenders]), or (d) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party under any Insolvency Proceeding; and provided, further, that if at any time there is no Person acting as Administrative Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to this Section 9.2.3 [Enforcement of Rights and Remedies], and (ii) in addition to the matters set forth in clauses (b), (c) and (d) of the preceding proviso and subject to Section 5.3 [Sharing of Payments by Lenders]), any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders; and
9.2.4 Application of Proceeds . From and after the date on which the Administrative Agent has taken any action pursuant to this Section 9.2 [Consequences of Event of Default] and until Payment in Full, any and all proceeds received by the Administrative Agent from any sale or other disposition of the Collateral, or any part thereof, or the exercise of any other remedy by the Administrative Agent, shall be applied as follows:
112
(i) First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts, including attorney fees, payable to the Administrative Agent in its capacity as such, the Issuing Lender in its capacity as such and the Swing Loan Lender in its capacity as such, ratably among the Administrative Agent, the Issuing Lender and Swing Loan Lender in proportion to the respective amounts described in this clause First payable to them;
(ii) Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders under the Loan Documents, including attorney fees, ratably among the Lenders in proportion to the respective amounts described in this clause Second payable to them;
(iii) Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and Reimbursement Obligations, ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them;
(iv) Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans, Reimbursement Obligations and payment obligations then owing under Lender Provided Interest Rate Hedges, Lender Provided Foreign Currency Hedges and Other Lender Provided Financial Service Products, ratably among the Lenders, the Issuing Lender, the applicable Hedge Banks and the applicable Cash Management Banks, in proportion to the respective amounts described in this clause Fourth held by them;
(v) Fifth, to the Administrative Agent for the account of the Issuing Lender, to Cash Collateralize any undrawn amounts under outstanding Letters of Credit; and
(vi) Last, the balance, if any, to the Loan Parties or as required by Law.
Notwithstanding anything to the contrary in this Section 9.2.4 [Application of Proceeds], no Swap Obligations of any Non-Qualifying Party shall be paid with amounts received from such Non-Qualifying Party under its Guaranty Agreement (including sums received as a result of the exercise of remedies with respect to such Guaranty Agreement) or from the proceeds of such Non-Qualifying Party’s Collateral if such Swap Obligations would constitute Excluded Hedge Liabilities; provided, however, that to the extent possible appropriate adjustments shall be made with respect to payments and/or the proceeds of Collateral from other Loan Parties that are Eligible Contract Participants with respect to such Swap Obligations to preserve the allocation to Obligations otherwise set forth above in this Section 9.2.4 [Application of Proceeds].
In addition, notwithstanding the foregoing, Obligations arising under Lender Provided Interest Rate Hedges, Lender Provided Foreign Currency Hedges and Other Lender Provided Financial Service Products shall be excluded from the application described above if the Administrative Agent has not received written notice thereof, together with such supporting documentation, as the Administrative Agent may reasonably request, from the applicable Cash Management Bank or Hedge Bank, as the case may be.
113
Each Person not a party to the Agreement that has given the notice contemplated by the preceding sentence shall, by such notice, be deemed to have acknowledged and accepted the appointment of the Administrative Agent pursuant to the terms of Article 10 hereof for itself and its Affiliates as if a “Lender” party hereto.
10.THE ADMINISTRATIVE AGENT
10.1 Appointment and Authority . Each of the Lenders and the Issuing Lender hereby irrevocably appoints PNC to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Section 10 [The Administrative Agent] are solely for the benefit of the Administrative Agent, the Lenders and the Issuing Lender, and neither the Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.
10.2 Rights as a Lender . The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.
10.3 Exculpatory Provisions . The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Administrative Agent:
(a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Potential Default or Event of Default has occurred and is continuing;
(b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents); provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable Law; and
114
(c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.
The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 11.1 [Modifications, Amendments or Waivers] and 9.2 [Consequences of Event of Default]) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Administrative Agent shall be deemed not to have knowledge of any Potential Default or Event of Default unless and until notice describing such Potential Default or Event of Default is given to the Administrative Agent by the Borrower, a Lender or the Issuing Lender.
The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Potential Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Section 7 [Conditions of Lending and Issuance of Letters of Credit] or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
10.4 Reliance by Administrative Agent . The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the Issuing Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender or the Issuing Lender unless the Administrative Agent shall have received notice to the contrary from such Lender or the Issuing Lender prior to the making of such Loan or the issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
115
10.5 Delegation of Duties . The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Section 10 [The Administrative Agent] shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and nonappealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.
10.6 Resignation of Administrative Agent . The Administrative Agent may at any time give notice of its resignation to the Lenders, the Issuing Lender and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, with approval from the Borrower (so long as no Event of Default has occurred and is continuing), to appoint a successor, such approval not to be unreasonably withheld or delayed. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders and the Issuing Lender, appoint a successor Administrative Agent; provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (i) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the Issuing Lender under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (ii) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the Issuing Lender directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section 10.6 [Resignation of Administrative Agent]. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Section 10 [The Administrative Agent] and Section 11.3 [Expenses; Indemnity; Damage Waiver] shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.
116
If PNC resigns as Administrative Agent under this Section 10.6 [Resignation of Administrative Agent], PNC shall also resign as an Issuing Lender. Upon the appointment of a successor Administrative Agent hereunder, such successor shall (i) succeed to all of the rights, powers, privileges and duties of PNC as the retiring Issuing Lender and Administrative Agent and PNC shall be discharged from all of its respective duties and obligations as Issuing Lender and Administrative Agent under the Loan Documents, and (ii) issue letters of credit in substitution for the Letters of Credit issued by PNC, if any, outstanding at the time of such succession or make other arrangement satisfactory to PNC to effectively assume the obligations of PNC with respect to such Letters of Credit.
10.7 Non-Reliance on Administrative Agent and Other Lenders . Each Lender and the Issuing Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and the Issuing Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
10.8 No Other Duties, Etc . Anything herein to the contrary notwithstanding, none of the bookrunners, arrangers or agents listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or an Issuing Lender hereunder.
10.9 Administrative Agent’s Fee . The Borrower shall pay to the Administrative Agent a nonrefundable fee (the “Administrative Agent’s Fee”) under the terms of that certain letter dated November 2, 2016 (the “Administrative Agent’s Letter”) between the Borrower and Administrative Agent and PNC Capital Markets LLC, as amended from time to time.
10.10 Administrative Agent May File Proofs of Claim . In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or Letter of Credit Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, Letter of Credit Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Issuing Lender and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the Issuing Lender and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the Issuing Lender and the Administrative Agent under Sections 2.9.2 [Letter of Credit Fees] and 11.3 [Expenses; Indemnity; Damage Waiver]) allowed in such judicial proceeding; and
117
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the Issuing Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders and the Issuing Lender, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 11.3 [Expenses; Indemnity; Damage Waiver].
10.11 Authorization to Release Collateral and Guarantors . (a) Each of the Secured Parties irrevocably authorizes the Administrative Agent, at its option and in its discretion,
(i) to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document (x) upon the Payment in Full of the Obligations, (y) that is sold or otherwise disposed of or to be sold or otherwise disposed of as part of or in connection with any sale or other disposition permitted under the Loan Documents, or (z) subject to Section 11.1 [Modifications; Amendment or Waivers], if approved, authorized or ratified in writing by the Required Lenders;
(ii) to release or subordinate any Lien on any property granted to or held by the Administrative Agent under any Loan Document to the holder of any Lien on such property that is permitted by clause (viii) of the definition of “Permitted Liens; and
(iii) to release any Guarantor from its obligations under the Guaranty Agreement if such Person ceases to be a Subsidiary as a result of a transaction permitted under the Loan Documents.
Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guaranty Agreement pursuant to this Section 10.11 [Authorization to Release Collateral and Guarantors].
10.12 No Reliance on Administrative Agent’s Customer Identification Program . Each Lender acknowledges and agrees that neither such Lender, nor any of its Affiliates, participants or assignees, may rely on the Administrative Agent to carry out such Lender’s, Affiliate’s, participant’s or assignee’s customer identification program, or other obligations required or imposed under or pursuant to the USA Patriot Act or the regulations thereunder, including the regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the “CIP Regulations”), or any other Anti-Terrorism Law, including any programs involving any of the following items relating to or in connection with any of the Loan Parties, their Affiliates or their agents, the Loan Documents or the transactions hereunder or contemplated hereby: (i) any identity verification procedures, (ii) any recordkeeping, (iii) comparisons with government lists, (iv) customer notices or (v) other procedures required under the CIP Regulations or such other Laws.
118
10.13 Lender Provided Interest Rate Hedges, Lender Provided Foreign Currency Hedges and Other Lender Provided Financial Service Products No Reliance on Administrative Agent’s Customer Identification Program . Except as otherwise expressly specified herein, no Cash Management Bank or Hedge Bank that obtains the benefits of Section 9.2.4 [Application of Proceeds], the Guaranty Agreement or any Collateral by virtue of the provisions hereof or of the Guaranty Agreement or any Loan Document shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and, in such case, only to the extent expressly provided in the Loan Documents. Notwithstanding any other provision of this Article 10 to the contrary, the Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, Obligations arising under Lender Provided Interest Rate Hedges, Lender Provided Foreign Currency Hedges and/or Other Lender Provided Financial Service Products unless the Administrative Agent has received written notice of such Obligations, together with such supporting documentation as the Administrative Agent may request, from the applicable Hedge Bank or Cash Management Bank, as the case may be.
11.MISCELLANEOUS
11.1 Modifications, Amendments or Waivers . With the written consent of the Required Lenders, the Administrative Agent, acting on behalf of all the Lenders, and the Borrower, on behalf of the Loan Parties, may from time to time enter into written agreements amending or changing any provision of this Agreement or any other Loan Document or the rights of the Lenders or the Loan Parties hereunder or thereunder, or may grant written waivers or consents hereunder or thereunder. Any such agreement, waiver or consent made with such written consent shall be effective to bind all the Lenders and the Loan Parties; provided, that no such agreement, waiver or consent may be made which will:
11.1.1 Increase of Commitment . Increase the amount of the Revolving Credit Commitment or Term Loan Commitment of any Lender hereunder without the consent of such Lender;
11.1.2 Extension of Payment; Reduction of Principal, Interest or Fees; Modification of Terms of Payment . Whether or not any Loans are outstanding, extend the Expiration Date, Term Loan Maturity Date or the time for payment of principal or interest of any Loan (excluding the due date of any mandatory prepayment of a Loan), the Commitment Fee or any other fee payable to any Lender, or reduce the principal amount of or the rate of interest borne by any Loan (other than as a result of waiving the applicability of any post-default increase in interest rates) or reduce the Commitment Fee or any other fee payable to any Lender, without the consent of each Lender directly affected thereby;
119
11.1.3 Release of Collateral or Guarantor . Except for sales of assets permitted by Section 8.2.7 [Dispositions of Assets or Subsidiaries], release all or substantially all of the Collateral or release all or substantially all of the value of the Guarantors from their Obligations under the Guaranty Agreement, in each case without the consent of all Lenders (other than Defaulting Lenders); or
11.1.4 Miscellaneous . Amend the definition of “Optional Currency” or Section 2.13(iii) [Requests for Additional Optional Currencies], Section 5.2 [Pro Rata Treatment of Lenders], Section 10.3 [Exculpatory Provisions], Section 5.3 [Sharing of Payments by Lenders] or Section 9.2.4 [Application of Proceeds] or this Section 11.1 [Modifications, Amendments or Waivers], alter any provision regarding the pro rata treatment of the Lenders or requiring all Lenders to authorize the taking of any action or reduce any percentage specified in the definition of Required Lenders, in each case without the consent of all of the Lenders; provided that no agreement, waiver or consent which would modify the interests, rights or obligations of the Administrative Agent, the Issuing Lender, or the Swing Loan Lender may be made without the written consent of the Administrative Agent, the Issuing Lender or the Swing Loan Lender, as applicable, and provided, further that, if in connection with any proposed waiver, amendment or modification referred to in Sections 11.1.1 through 11.1.4 above, the consent of the Required Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained (each a “Non-Consenting Lender”), then the Borrower shall have the right to replace any such Non-Consenting Lender with one or more replacement Lenders pursuant to Section 5.6.2 [Replacement of a Lender]. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender, and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender disproportionately adversely relative to other affected Lenders shall require the consent of such Defaulting Lender.
In addition, notwithstanding the foregoing, with the consent of the Borrower, the Administrative Agent may amend, modify or supplement any Loan Document without the consent of any Lender or the Required Lenders in order to (i) correct or cure any ambiguity, inconsistency or defect or correct any typographical or ministerial error in any Loan Document (provided that any such amendment, modification or supplement shall not be materially adverse to the interests of the Lenders taken as a whole) or (ii) to effectuate any increase in the Revolving Commitments and/or the incurrence of any Incremental Term Loans in accordance with Section 2.11 [Increase in Revolving Credit Commitments; Incremental Term Loans] (subject to the consent of the Lenders providing such increase or Incremental Term Loans).
120
11.2 No Implied Waivers; Cumulative Remedies . No course of dealing and no delay or failure of the Administrative Agent or any Lender in exercising any right, power, remedy or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any further exercise thereof or of any other right, power, remedy or privilege. The enumeration of the rights and remedies of the Administrative Agent and the Lenders set forth in this Agreement is not intended to be exhaustive and the exercise by the Administrative Agent and the Lenders of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder or under the other Loan Documents or that may now or hereafter exist at law or in equity or by suit or otherwise. No reasonable delay or failure to take action on the part of the Administrative Agent or any Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default.
11.3 Expenses; Indemnity; Damage Waiver .
11.3.1 Costs and Expenses . The Borrower shall pay (i) all out-of-pocket expenses incurred by PNC Capital Markets, LLC, the Administrative Agent and its Affiliates (including the reasonable out-of-pocket fees, charges and disbursements of counsel for the Administrative Agent) in connection with the syndication of the credit facilities provided for herein, the due diligence, preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all out-of-pocket expenses incurred by the Issuing Lender in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (iii) all out-of-pocket expenses incurred by the Administrative Agent, any Lender or the Issuing Lender (including the out-of-pocket fees, charges and disbursements of any counsel for the Administrative Agent, any Lender or the Issuing Lender), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit, and (iv) all reasonable out-of-pocket expenses of the Administrative Agent’s regular employees and agents engaged periodically to perform audits of the Loan Parties’ books, records and business properties.
11.3.2 Indemnification by the Borrower . The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), the Joint Lead Arrangers, the Co-Syndication Agents, each Lender and the Issuing Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of one counsel for such Indemnitees, taken as a whole and, if reasonably necessary, one local counsel in any relevant jurisdiction (which may be a single local counsel acting in multiple jurisdictions) and, solely in the event of an actual or perceived conflict of interest, one additional counsel in each relevant jurisdiction to each group of affected Persons similarly situated taken as a whole) incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance or nonperformance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the Issuing Lender to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) breach of representations, warranties or covenants of the Borrower under the Loan Documents, or (iv) any actual or prospective claim, litigation, investigation or proceeding or preparation of a defense relating to any of the foregoing, including any such items or losses relating to or arising under Environmental Laws or pertaining to environmental matters, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction. This Section 11.3.2 [Indemnification by the Borrower] shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.
121
11.3.3 Reimbursement by Lenders . To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under Sections 11.3.1 [Costs and Expenses] or 11.3.2 [Indemnification by the Borrower] to be paid by it to the Administrative Agent (or any sub-agent thereof), the Issuing Lender or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the Issuing Lender or such Related Party, as the case may be, such Lender’s Ratable Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) or the Issuing Lender in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such subagent) or Issuing Lender in connection with such capacity.
11.3.4 Waiver of Consequential Damages, Etc . To the fullest extent permitted by applicable Law, each Loan Party shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof. No Indemnitee referred to in Section 11.3.2 [Indemnification by the Borrower] shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.
11.3.5 Payments . All amounts due under this Section shall be payable not later than ten (10) days after written demand therefor (together with reasonable back-up documentation supporting such request).
122
11.3.6 Survival . Each party’s obligations under this Section 11.3 [Expenses; Indemnity; Damage Waiver] shall survive the termination of the Loan Documents and payment of the obligations hereunder.
11.4 Holidays . Whenever payment of a Loan to be made or taken hereunder shall be due on a day which is not a Business Day such payment shall be due on the next Business Day (except as provided in Section 4.2 [Interest Periods]) and such extension of time shall be included in computing interest and fees, except that the Loans shall be due on the Business Day preceding the Expiration Date or applicable Term Loan Maturity Date, as applicable, if the Expiration Date or applicable Term Loan Maturity Date, as applicable, is not a Business Day. Whenever any payment or action to be made or taken hereunder (other than payment of the Loans) shall be stated to be due on a day which is not a Business Day, such payment or action shall be made or taken on the next following Business Day, and such extension of time shall not be included in computing interest or fees, if any, in connection with such payment or action.
11.5 Notices; Effectiveness; Electronic Communication .
11.5.1 Notices Generally . Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in Section 11.5.2 [Electronic Communications]), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier (i) if to a Lender, to it at its address set forth in its administrative questionnaire, or (ii) if to any other Person, to it at its address set forth on Schedule 1.1(A).
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications to the extent provided in Section 11.5.2 [Electronic Communications], shall be effective as provided in such Section.
11.5.2 Electronic Communications . Notices and other communications to the Lenders and the Issuing Lender hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices to any Lender or the Issuing Lender if such Lender or the Issuing Lender, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications. Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement); provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.
123
11.5.3 Change of Address, Etc . Any party hereto may change its address, e-mail address or telecopier number for notices and other communications hereunder by notice to the other parties hereto.
11.5.4 Platform .
(a) Each Loan Party agrees that the Administrative Agent may, but shall not be obligated to, make the Communications (as defined below) available to the Issuing Lender and the other Lenders by posting the Communications on the Platform.
(b) The Platform is provided “as is” and “as available.” The Agent Parties (as defined below) do not warrant the adequacy of the Platform and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Communications or the Platform. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to the Borrower or the other Loan Parties, any Lender or any other Person or entity for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of the Borrower’s, any Loan Party’s or the Administrative Agent’s transmission of communications through the Platform. “Communications” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of the Borrower or any Loan Party pursuant to any Loan Document or the transactions contemplated therein which is distributed to the Administrative Agent, any Lender or any Issuing Lender by means of electronic communications pursuant to this Section, including through the Platform.
11.6 Severability . The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction.
11.7 Duration; Survival . All representations and warranties of the Loan Parties contained herein or made in connection herewith shall survive the execution and delivery of this Agreement, the completion of the transactions hereunder and Payment In Full. All covenants and agreements of the Loan Parties shall continue in full force and effect from and after the date hereof and until Payment In Full, other than Section 11.3 [Expenses; Indemnity; Damage Waiver], and any other covenant or agreement herein that relates to indemnification and expense reimbursement or that expressly survives the termination of this Agreement or Payment in Full.
124
11.8 Successors and Assigns .
11.8.1 Successors and Assigns Generally . The provisions of this Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor any other Loan Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder (including, in each case, by way of an LLC Division) except (i) to an assignee in accordance with the provisions of Section 11.8.2 [Assignments by Lenders], (ii) by way of participation in accordance with the provisions of Section 11.8.4 [Participations], or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 11.8.5 [Certain Pledges; Successors and Assigns Generally] (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in Section 11.8.4 [Participations] and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
11.8.2 Assignments by Lenders . Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that any such assignment shall be subject to the following conditions:
(i) Minimum Amounts.
(A) in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and
(B) in any case not described in clause (i)(A) of this Section 11.8.2 [Assignment by Lenders], the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption Agreement with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption Agreement, as of the Trade Date) shall not be less than $5,000,000.00, in the case of any assignment in respect of the Revolving Credit Commitment of the assigning Lender, or $5,000,000 in the case of any assignment in respect of the Term Loan Commitment or outstanding Term Loan of such assigning Lender, unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).
125
(ii) Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loan or the Commitment assigned.
(iii) Required Consents. No consent shall be required for any assignment except for the consent of the Administrative Agent (which shall not be unreasonably withheld or delayed) and:
(A) the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (x) an Event of Default has occurred and is continuing at the time of such assignment or (y) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within five (5) Business Days after having received notice thereof; and
(B) the consent of the Issuing Lender (such consent not to be unreasonably withheld or delayed) shall be required for any assignment that increases the obligation of the assignee to participate in exposure under one or more Letters of Credit (whether or not then outstanding).
(iv) Assignment and Assumption Agreement. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption Agreement, together with a processing and recordation fee of $3,500.00, and the assignee, if it is not a Lender, shall deliver to the Administrative Agent an administrative questionnaire provided by the Administrative Agent.
(v) No Assignment to Borrower. No such assignment shall be made to the Borrower or any of the Borrower’s Affiliates or Subsidiaries.
(vi) No Assignment to Natural Persons. No such assignment shall be made to a natural Person (or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural Person).
Subject to acceptance and recording thereof by the Administrative Agent pursuant to Section 11.8.3 [Register], from and after the effective date specified in each Assignment and Assumption Agreement, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption Agreement, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption Agreement, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption Agreement covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 4.4 [Rate Unascertainable; Etc.], 5.8 [Increased Costs], and 11.3 [Expenses, Indemnity; Damage Waiver] with respect to facts and circumstances occurring prior to the effective date of such assignment. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 11.8.2 [Assignments by Lenders] shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 11.8.4 [Participations].
126
11.8.3 Register . The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain a record of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time. Such register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is in such register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. Such register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
11.8.4 Participations . Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person other than a natural Person, or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural Person, or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Lenders, and the Issuing Lender shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree (other than as is already provided for herein) to any amendment, modification or waiver with respect to Sections 11.1.1 [Increase of Commitment], 11.1.2 [Extension of Payment, Etc.], or 11.1.3 [Release of Collateral or Guarantor]) that affects such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 4.4 [Rate Unascertainable, Etc.], 5.8 [Increased Costs], 5.10 [Indemnity] and 5.9 [Taxes] (subject to the requirements and limitations therein, including the requirements under Section 5.9.7 [Status of Lenders] (it being understood that the documentation required under Section 5.9.7 [Status of Lenders] shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 11.8.2 [Assignments by Lenders]; provided that such Participant (A) agrees to be subject to the provisions of Section 5.6.2 [Replacement of a Lender] and Section 5.6.3 [Designation of a Different Lending Office] as if it were an assignee under Section 11.8.2 [Assignments by Lenders]; and (B) shall not be entitled to receive any greater payment under Sections 5.8 [Increased Costs] or 5.9 [Taxes], with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 5.6.2 [Replacement of a Lender] and Section 5.6.3 [Designation of Different Lending Office] with respect to any Participant.
127
To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.2.3 [Set-off] as though it were a Lender; provided that such Participant agrees to be subject to Section 5.3 [Sharing of Payments by Lenders] as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
11.8.5 Cashless Settlement . Notwithstanding anything to the contrary contained in this Agreement, any Lender may exchange, continue or rollover all or a portion of its Loans in connection with any refinancing, extension, loan modification or similar transaction permitted by the terms of this Agreement, pursuant to a cashless settlement mechanism approved by the Borrower, the Administrative Agent and such Lender.
11.8.6 Arrangers/Bookrunners . Notwithstanding anything to the contrary contained in this Agreement, the name of any arranger and/or bookrunner listed on the cover page of this Agreement may be changed by the Administrative Agent to the name of any Lender or Lender’s broker-dealer Affiliate, upon written request to the Administrative Agent by any such arranger and/or bookrunner and the applicable Lender or Lender’s broker-deal Affiliate.
11.8.7 Certain Pledges; Successors and Assigns Generally . Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
11.9 Confidentiality .
128
11.9.1 General . Each of the Administrative Agent, the Lenders and the Issuing Lender agrees to maintain the confidentiality of the Information, except that Information may be disclosed (i) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, advisors and other representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (ii) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (iii) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process, (iv) to any other party hereto, (v) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (vi) subject to an agreement containing provisions substantially the same as those of this Section, to (A) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (B) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (vii) with the consent of the Borrower or (viii) to the extent such Information (Y) becomes publicly available other than as a result of a breach of this Section or (Z) becomes available to the Administrative Agent, any Lender, the Issuing Lender or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower or the other Loan Parties. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
11.9.2 Sharing Information With Affiliates of the Lenders . Each Loan Party acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to the Borrower or one or more of its Affiliates (in connection with this Agreement or otherwise) by any Lender or by one or more Subsidiaries or Affiliates of such Lender and each of the Loan Parties hereby authorizes each Lender to share any information delivered to such Lender by such Loan Party and its Subsidiaries pursuant to this Agreement to any such Subsidiary or Affiliate subject to the provisions of Section 11.9.1 [General].
11.10 Counterparts; Integration; Effectiveness; Electronic Execution; Electronic Records .
11.10.1 Counterparts; Integration; Effectiveness . This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents, and any separate letter agreements with respect to fees payable to the Administrative Agent, constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof including any prior confidentiality agreements and commitments. Except as provided in Section 7 [Conditions Of Lending And Issuance Of Letters Of Credit], this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or e-mail shall be effective as delivery of a manually executed counterpart of this Agreement.
129
11.10.2 Electronic Execution . The words “delivery,” “execute,” “execution,” “signed,” “signature,” and words of like import in any Loan Document or any other document executed in connection herewith shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided, that notwithstanding anything contained herein to the contrary, the Administrative Agent is under no obligation to agree to accept electronic signatures in any form or in any format unless expressly agreed to by the Administrative Agent pursuant to procedures approved by it; provided, further, without limiting the foregoing, upon the request of the Administrative Agent, any electronic signature shall be promptly followed by such manually executed counterpart. For the avoidance of doubt, the authorization under this paragraph may include, without limitation, use or acceptance by the Administrative Agent and each of the Lenders of a manually signed paper document, amendment, approval, consent, information, notice, certificate, request, statement, disclosure or authorization related to this Agreement which has been converted into electronic form (such as scanned into PDF format), or an electronically signed version of any of the foregoing converted into another format, for transmission, delivery and/or retention.
11.10.3 Electronic Records . The Borrower hereby acknowledges the receipt of a copy of this Agreement and all other Loan Documents. The Administrative Agent and each Lender may, on behalf of the Borrower, create a microfilm or optical disk or other electronic image of this Agreement and any or all of the other Loan Documents. The Administrative Agent and each Lender may store the electronic image of this Agreement and the other Loan Documents in its electronic form and then destroy the paper original as part of the Administrative Agent’s and each Lender’s normal business practices, with the electronic image deemed to be an original and of the same legal effect, validity and enforceability as the paper originals.
11.11 CHOICE OF LAW; SUBMISSION TO JURISDICTION; WAIVER OF VENUE; SERVICE OF PROCESS; WAIVER OF JURY TRIAL .
11.11.1 Governing Law . This Agreement shall be deemed to be a contract under the Laws of the State of New York without regard to its conflict of laws principles. Each standby Letter of Credit issued under this Agreement shall be subject either to the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce (the “ICC”) at the time of issuance (“UCP”) or the rules of the International Standby Practices (ICC Publication Number 590) (“ISP98”), as determined by the Issuing Lender, and each trade Letter of Credit shall be subject to UCP, and in each case to the extent not inconsistent therewith, the Laws of the State of New York without regard to its conflict of laws principles.
130
11.11.2 SUBMISSION TO JURISDICTION . THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE ISSUING LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
11.11.3 WAIVER OF VENUE . THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN THIS SECTION 11.11 [CHOICE OF LAW; SUBMISSION TO JURISDICTION; WAIVER OF VENUE; SERVICE OF PROCESS; WAIVER OF JURY TRIAL]. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AND AGREES NOT ASSERT ANY SUCH DEFENSE.
11.11.4 SERVICE OF PROCESS . EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 11.5 [NOTICES; EFFECTIVENESS; ELECTRONIC COMMUNICATION]. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
11.11.5 WAIVER OF JURY TRIAL . EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, ADMINISTRATIVE AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
131
11.12 USA Patriot Act Notice . Each Lender that is subject to the USA PATRIOT Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies Loan Parties that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies the Loan Parties, which information includes the name and address of Loan Parties and other information that will allow such Lender or Administrative Agent, as applicable, to identify the Loan Parties in accordance with the USA PATRIOT Act. The Borrower shall, promptly following a request by the Administrative Agent or any Lender, provide all documentation and other information that the Administrative Agent or such Lender requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Act.
11.13 Acknowledgment and Consent to Bail-In of Affected Financial Institutions . Notwithstanding anything to the contrary in any Loan Document, each party hereto acknowledges that any liability of any Loan Party that is an Affected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by (a) the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and (b) the effects of any Bail-In Action on any such liability, including, if applicable, (i) a reduction in full or in part or cancellation of any such liability; (ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instrument of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or (iii) the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of the applicable Resolution Authority.
11.14 Amended and Restated Credit Agreement . This Agreement amends, restates and supersedes in its entirety the Original Credit Agreement.
11.15 Acknowledgement Regarding Any Supported QFCs . To the extent that the Loan Documents provide support, through a guarantee or otherwise, for any Swap or any other agreement or instrument that is a QFC (such support, “QFC Credit Support”, and each such QFC, a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States): In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.
132
11.16 Amendment and Restatement . The parties hereto agree that, on the Closing Date, the following transactions shall be deemed to occur automatically, without further action by any party hereto: (a) the Existing Credit Agreement shall be deemed to be amended and restated in its entirety pursuant to this Agreement; and (b) all references in the other Loan Documents to the Existing Credit Agreement shall be deemed to refer without further amendment to this Agreement. The parties hereto further acknowledge and agree that this Agreement constitutes an amendment to the Existing Credit Agreement made under and in accordance with the terms of Section 11.1 [Modifications, Amendments or Waivers] of the Existing Credit Agreement. This Agreement is not a novation of the Existing Credit Agreement or the credit facilities, indebtedness and other obligations under the Existing Credit Agreement. It is the intent of the parties to amend and restate the Existing Credit Agreement and the credit facilities provided thereunder, without novation or interruption.
11.17 Erroneous Payments.
11.17.1 If the Administrative Agent notifies a Lender, Issuing Lender or Secured Party, or any Person who has received funds on behalf of a Lender, Issuing Lender or Secured Party such Lender or Issuing Lender (any such Lender, Issuing Lender, Secured Party or other recipient, a “Payment Recipient”) that the Administrative Agent has determined in its sole discretion (whether or not after receipt of any notice under immediately succeeding Section 11.17.2) that any funds received by such Payment Recipient from the Administrative Agent or any of its Affiliates were erroneously transmitted to, or otherwise erroneously or mistakenly received by, such Payment Recipient (whether or not known to such Lender, Issuing Lender, Secured Party or other Payment Recipient on its behalf) (any such funds, whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise, individually and collectively, an “Erroneous Payment”) and demands the return of such Erroneous Payment (or a portion thereof), such Erroneous Payment shall at all times remain the property of the Administrative Agent and shall be segregated by the Payment Recipient and held in trust for the benefit of the Administrative Agent, and such Lender, Issuing Lender or Secured Party shall (or, with respect to any Payment Recipient who received such funds on its behalf, shall cause such Payment Recipient to) promptly, but in no event later than two Business Days thereafter, return to the Administrative Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Payment Recipient to the date such amount is repaid to the Administrative Agent in same day funds at the greater of the Overnight Bank Funding Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect.
133
A notice of the Administrative Agent to any Payment Recipient under this Section 11.7.1 shall be conclusive, absent manifest error.
11.17.2 Without limiting immediately preceding Section 11.7.1, each Lender, Issuing Lender or Secured Party, or any Person who has received funds on behalf of a Lender, Issuing Lender or Secured Party, hereby further agrees that if it receives a payment, prepayment or repayment (whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise) from the Administrative Agent (or any of its Affiliates) (x) that is in a different amount than, or on a different date from, that specified in a notice of payment, prepayment or repayment sent by the Administrative Agent (or any of its Affiliates) with respect to such payment, prepayment or repayment, (y) that was not preceded or accompanied by a notice of payment, prepayment or repayment sent by the Administrative Agent (or any of its Affiliates), or (z) that such Lender, Issuing Lender or Secured Party, or other such recipient, otherwise becomes aware was transmitted, or received, in error or by mistake (in whole or in part) in each case:
(i) (A) in the case of immediately preceding clauses (x) or (y), an error shall be presumed to have been made (absent written confirmation from the Administrative Agent to the contrary) or (B) an error has been made (in the case of immediately preceding clause (z)), in each case, with respect to such payment, prepayment or repayment; and
(i) such Lender, Issuing Lender or Secured Party shall (and shall cause any other recipient that receives funds on its respective behalf to) promptly (and, in all events, within one Business Day of its knowledge of such error) notify the Administrative Agent of its receipt of such payment, prepayment or repayment, the details thereof (in reasonable detail) and that it is so notifying the Administrative Agent pursuant to this Section 11.17.2.
11.17.3 Each Lender, Issuing Lender or Secured Party hereby authorizes the Administrative Agent to set off, net and apply any and all amounts at any time owing to such Lender, Issuing Lender or Secured Party under any Loan Document, or otherwise payable or distributable by the Administrative Agent to such Lender, Issuing Lender or Secured Party from any source, against any amount due to the Administrative Agent under immediately preceding Section 11.17.1 or under the indemnification provisions of this Agreement.
134
11.17.4 In the event that an Erroneous Payment (or portion thereof) is not recovered by the Administrative Agent for any reason, after demand therefor by the Administrative Agent in accordance with immediately preceding Section 11.17.1, from any Lender or Issuing Lender that has received such Erroneous Payment (or portion thereof) (and/or from any Payment Recipient who received such Erroneous Payment (or portion thereof) on its respective behalf) (such unrecovered amount, an “Erroneous Payment Return Deficiency”), upon the Administrative Agent’s notice to such Lender or Issuing Lender at any time, (i) such Lender or Issuing Lender shall be deemed to have assigned its Loans (but not its Commitments) of the relevant class with respect to which such Erroneous Payment was made (the “Erroneous Payment Impacted Class”) in an amount equal to the Erroneous Payment Return Deficiency (or such lesser amount as the Administrative Agent may specify) (such assignment of the Loans (but not Commitments) of the Erroneous Payment Impacted Class, the “Erroneous Payment Deficiency Assignment”) at par plus any accrued and unpaid interest (with the assignment fee to be waived by the Administrative Agent in such instance), and is hereby (together with the Borrower) deemed to execute and deliver an Assignment and Assumption with respect to such Erroneous Payment Deficiency Assignment, and such Lender or Issuing Lender shall deliver any Notes evidencing such Loans to the Borrower or the Administrative Agent, (ii) the Administrative Agent as the assignee Lender shall be deemed to acquire the Erroneous Payment Deficiency Assignment, (iii) upon such deemed acquisition, the Administrative Agent as the assignee Lender shall become a Lender or Issuing Lender, as applicable, hereunder with respect to such Erroneous Payment Deficiency Assignment and the assigning Lender or assigning Issuing Lender shall cease to be a Lender or Issuing Lender, as applicable, hereunder with respect to such Erroneous Payment Deficiency Assignment, excluding, for the avoidance of doubt, its obligations under the indemnification provisions of this Agreement and its applicable Commitments which shall survive as to such assigning Lender or assigning Issuing Lender and (iv) the Administrative Agent may reflect in the Register its ownership interest in the Loans subject to the Erroneous Payment Deficiency Assignment. The Administrative Agent may, in its discretion, but subject to Section 11.8, sell any Loans acquired pursuant to an Erroneous Payment Deficiency Assignment and upon receipt of the proceeds of such sale, the Erroneous Payment Return Deficiency owing by the applicable Lender or Issuing Lender shall be reduced by the net proceeds of the sale of such Loan (or portion thereof), and the Administrative Agent shall retain all other rights, remedies and claims against such Lender or Issuing Lender (and/or against any recipient that receives funds on its respective behalf). For the avoidance of doubt, no Erroneous Payment Deficiency Assignment will reduce the Commitments of any Lender or Issuing Lender and such Commitments shall remain available in accordance with the terms of this Agreement. In addition, each party hereto agrees that, except to the extent that the Administrative Agent has sold a Loan (or portion thereof) acquired pursuant to an Erroneous Payment Deficiency Assignment, and irrespective of whether the Administrative Agent may be equitably subrogated, the Administrative Agent shall be contractually subrogated to all the rights and interests of the applicable Lender, Issuing Lender or Secured Party under the Loan Documents with respect to each Erroneous Payment Return Deficiency (the “Erroneous Payment Subrogation Rights”).
11.17.5 The parties hereto agree that an Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Borrower or any other Loan Party, except, in each case, to the extent such Erroneous Payment is, and solely with respect to the amount of such Erroneous Payment that is, comprised of funds received by the Administrative Agent from the Borrower or any other Loan Party for the purpose of making such Erroneous Payment.
11.17.6 To the extent permitted by applicable Law, no Payment Recipient shall assert any right or claim to an Erroneous Payment, and hereby waives, and is deemed to waive, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Erroneous Payment received, including without limitation waiver of any defense based on “discharge for value” or any similar doctrine.
11.17.7 Each party’s obligations, agreements and waivers under this Section 11.17 shall survive the resignation or replacement of the Administrative Agent, the termination of the Commitments and/or the repayment, satisfaction or discharge of all Obligations (or any portion thereof) under any Loan Document.
135
12.GUARANTY
12.1 The Guaranty . Each of the Guarantors hereby jointly and severally guarantees to the Administrative Agent, the Lenders and the other Secured Parties as hereinafter provided, as primary obligor and not as surety, the prompt payment of the Obligations (the “Guaranteed Obligations”) in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) strictly in accordance with the terms thereof. The Guarantors hereby further agree that if any of the Obligations are not paid in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise), the Guarantors will, jointly and severally, promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) in accordance with the terms of such extension or renewal.
Notwithstanding any provision to the contrary contained herein, in any other of the Loan Documents, Lender Provided Interest Rate Hedges, Lender Provided Foreign Currency Hedges, Other Lender Provided Financial Service Products or other documents relating to the Obligations, (a) the obligations of each Guarantor under this Agreement and the other Loan Documents shall be limited to an aggregate amount equal to the largest amount that would not render such obligations subject to avoidance under the Debtor Relief Laws or any comparable provisions of any applicable state law and (b) the Guaranteed Obligations of a Guarantor shall exclude any Excluded Hedge Liabilities with respect to such Guarantor.
12.2 Obligations Unconditional . The obligations of the Guarantors under Section 12.1 [The Guaranty] are joint and several, absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Loan Documents, Lender Provided Interest Rate Hedges, Lender Provided Foreign Currency Hedges or Other Lender Provided Financial Service Products, or any other agreement or instrument referred to therein, or any substitution, release, impairment or exchange of any other guarantee of or security for any of the Obligations, and, to the fullest extent permitted by applicable Law, irrespective of any law or regulation or other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 12.2 [Obligations Unconditional] that the obligations of the Guarantors hereunder shall be absolute and unconditional under any and all circumstances. Each Guarantor agrees that such Guarantor shall have no right of subrogation, indemnity, reimbursement or contribution against the Borrower or any other Guarantor for amounts paid under this Section 12 [Guaranty] until such time as the Obligations have been paid in full and the Commitments have expired or terminated. Without limiting the generality of the foregoing, it is agreed that, to the fullest extent permitted by law, the occurrence of any one or more of the following shall not alter or impair the liability of any Guarantor hereunder, which shall remain absolute and unconditional as described above:
136
(a) at any time or from time to time, without notice to any Guarantor, the time for any performance of or compliance with any of the Obligations shall be extended, or such performance or compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of any of the Loan Documents, any Lender Provided Interest Rate Hedge, any Lender Provided Foreign Currency Hedge or any Other Lender Provided Financial Service Product, or any other agreement or instrument referred to in the Loan Documents, such Lender Provided Interest Rate Hedges, such Lender Provided Foreign Currency Hedges or such Other Lender Provided Financial Service Products shall be done or omitted;
(c) the maturity of any of the Obligations shall be accelerated, or any of the Obligations shall be modified, supplemented or amended in any respect, or any right under any of the Loan Documents, any Lender Provided Interest Rate Hedge, any Lender Provided Foreign Currency Hedge or any Other Lender Provided Financial Service Product, or any other agreement or instrument referred to in the Loan Documents, such Lender Provided Interest Rate Hedges, such Lender Provided Foreign Currency Hedges or such Other Lender Provided Financial Service Products shall be waived or any other guarantee of any of the Obligations or any security therefor shall be released, impaired or exchanged in whole or in part or otherwise dealt with;
(d) any Lien granted to, or in favor of, the Administrative Agent or any Lender or Lenders as security for any of the Obligations shall fail to attach or be perfected; or
(e) any of the Obligations shall be determined to be void or voidable (including, without limitation, for the benefit of any creditor of any Guarantor) or shall be subordinated to the claims of any Person (including, without limitation, any creditor of any Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Administrative Agent or any Lender exhaust any right, power or remedy or proceed against any Person under any of the Loan Documents, any Lender Provided Interest Rate Hedge, any Lender Provided Foreign Currency Hedge or any Other Lender Provided Financial Service Product, or any other agreement or instrument referred to in the Loan Documents, such Lender Provided Interest Rate Hedges, such Lender Provided Foreign Currency Hedges or such Other Lender Provided Financial Service Products, or against any other Person under any other guarantee of, or security for, any of the Obligations.
12.3 Reinstatement . The obligations of the Guarantors under this Section 12 [Guaranty] shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Obligations is rescinded or must be otherwise restored by any holder of any of the Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor agrees that it will indemnify the Administrative Agent and each Lender on demand for all reasonable costs and expenses (including, without limitation, the fees, charges and disbursements of counsel) incurred by the Administrative Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law.
137
12.4 Certain Additional Waivers . Each Guarantor agrees that such Guarantor shall have no right of recourse to security for the Obligations, except through the exercise of rights of subrogation pursuant to Section 12.2 [Obligations Unconditional] and through the exercise of rights of contribution pursuant to Section 12.6 [Rights of Contribution].
12.5 Remedies . The Guarantors agree that, to the fullest extent permitted by law, as between the Guarantors, on the one hand, and the Administrative Agent and the Lenders, on the other hand, the Obligations may be declared to be forthwith due and payable as provided in Section 9.2 [Consequences of Event of Default] (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 9.2 [Consequences of Event of Default]) for purposes of Section 12.1 [The Guaranty] notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing the Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or the Obligations being deemed to have become automatically due and payable), the Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by the Guarantors for purposes of Section 12.1 [The Guaranty]. The Guarantors acknowledge and agree that their obligations hereunder are secured in accordance with the terms of the Collateral Documents and that the Lenders may exercise their remedies thereunder in accordance with the terms thereof.
12.6 Rights of Contribution . The Guarantors agree among themselves that, in connection with payments made hereunder, each Guarantor shall have contribution rights against the other Guarantors as permitted under applicable Law. Such contribution rights shall be subordinate and subject in right of payment to the obligations of such Guarantors under the Loan Documents and no Guarantor shall exercise such rights of contribution until all Obligations have been Paid in Full.
12.7 Guarantee of Payment; Continuing Guarantee . The guarantee in this Section 12 is a guaranty of payment and not of collection, is a continuing guarantee, and shall apply to all Obligations whenever arising.
12.8 Keepwell . Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each Specified Loan Party to honor all of such Specified Loan Party’s obligations under the Guaranty Agreement and the Collateral Documents in respect of Swap Obligations (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 12.8 [Keepwell] for the maximum amount of such liability that can be hereby incurred without rendering such Qualified ECP Guarantor’s obligations and undertakings under this Section 12 [Guaranty], voidable under applicable Debtor Relief Laws, and not for any greater amount). The obligations and undertakings of each Qualified ECP Guarantor under this Section 12.8 [Keepwell] shall remain in full force and effect until Payment in Full, or, with respect to any Guarantor, if earlier, such Guarantor is released from its Guaranteed Obligations in accordance with Section 10.11. Each Qualified ECP Guarantor intends that this Section 12.8 [Keepwell] constitute, and this Section 12.8 [Keepwell] shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each Specified Loan Party for all purposes of section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
138
12.9 Amendment and Restatement . The Guaranty in this Article XII amends, restates, supersedes and replaces that certain Amended and Restated Continuing Agreement of Guaranty and Suretyship dated as of November 22, 2016 from certain Loan Parties in favor of the Administrative Agent.
[SIGNATURE PAGES DELETED FROM EXHIBIT A TO SECOND AMENDMENT]
139
Exhibit 31.1
CERTIFICATION
I, Josef Matosevic, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended April 1, 2023, of Helios Technologies;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
Date: May 9, 2023 |
|
|
|
|
|
|
/s/ Josef Matosevic |
|
Josef Matosevic President, Chief Executive Officer |
|
|
Exhibit 31.2
CERTIFICATION
I, Tricia L. Fulton, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended April 1, 2023, of Helios Technologies;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
Date: May 9, 2023
/s/ Tricia L. Fulton |
Tricia L. Fulton |
Executive Vice President and Chief Financial Officer |
(Principle Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. § 1350
I, Josef Matosevic, the Chief Executive Officer of Helios Technologies (the “Company”), certify that (i) the Quarterly Report on Form 10-Q for the Company for the quarter ended April 1, 2023 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 9, 2023 |
|
|
|
|
|
|
/s/ Josef Matosevic |
|
Josef Matosevic President, Chief Executive Officer |
|
|
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. § 1350
I, Tricia L. Fulton, the Chief Financial Officer of Helios Technologies (the “Company”), certify that (i) the Quarterly Report on Form 10-Q for the Company for the quarter ended April 1, 2023 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 9, 2023
/s/ Tricia L. Fulton |
Tricia L. Fulton |
Executive Vice President and Chief Financial Officer |
(Principle Financial and Accounting Officer) |
|