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: JUNE 30, 2023
-OR-
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File No. 1-33145
SALLY BEAUTY HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware |
|
36-2257936 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
3001 Colorado Boulevard |
|
|
Denton, Texas |
|
76210 |
(Address of principal executive offices) |
|
(Zip Code) |
(940) 898-7500
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report): N/A
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol |
Name of each exchange on which registered |
Common Stock, $0.01 par value |
SBH |
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 Section13(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 ☒
As of July 28, 2023, there were 107,769,553 shares of the issuer’s common stock outstanding.
TABLE OF CONTENTS
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4 |
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4 |
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5 |
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6 |
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7 |
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8 |
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9 |
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Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations |
17 |
Item 3. Quantitative And Qualitative Disclosures About Market Risk |
24 |
24 |
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25 |
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25 |
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26 |
2
In this Quarterly Report, references to “the Company,” “Sally Beauty,” “our company,” “we,” “our,” “ours” and “us” refer to Sally Beauty Holdings, Inc. and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Statements in this Quarterly Report on Form 10-Q and in the documents incorporated by reference herein which are not purely historical facts or which depend upon future events may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” or similar expressions may also identify such forward-looking statements.
Readers are cautioned not to place undue reliance on forward-looking statements as such statements speak only as of the date they were made and involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in the forward-looking statements. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth in our description of risk factors in Item 1A contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.
The events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. As a result, our actual results may differ materially from the results contemplated by these forward-looking statements.
3
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except par value data)
|
|
June 30, |
|
|
September 30, |
|
||
|
|
(Unaudited) |
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
74,337 |
|
|
$ |
70,558 |
|
Trade accounts receivable, net |
|
|
32,888 |
|
|
|
34,102 |
|
Accounts receivable, other |
|
|
44,870 |
|
|
|
38,175 |
|
Inventory |
|
|
996,404 |
|
|
|
936,374 |
|
Other current assets |
|
|
50,897 |
|
|
|
53,192 |
|
Total current assets |
|
|
1,199,396 |
|
|
|
1,132,401 |
|
Property and equipment, net of accumulated depreciation of $864,429 at |
|
|
281,181 |
|
|
|
297,876 |
|
Operating lease assets |
|
|
569,103 |
|
|
|
532,177 |
|
Goodwill |
|
|
535,282 |
|
|
|
526,066 |
|
Intangible assets, excluding goodwill, net of accumulated amortization of |
|
|
49,927 |
|
|
|
50,315 |
|
Other assets |
|
|
40,516 |
|
|
|
38,032 |
|
Total assets |
|
$ |
2,675,405 |
|
|
$ |
2,576,867 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Current maturities of long-term debt |
|
$ |
20,176 |
|
|
$ |
68,658 |
|
Accounts payable |
|
|
243,976 |
|
|
|
275,717 |
|
Accrued liabilities |
|
|
140,391 |
|
|
|
161,065 |
|
Current operating lease liabilities |
|
|
154,749 |
|
|
|
157,734 |
|
Income taxes payable |
|
|
6,345 |
|
|
|
4,740 |
|
Total current liabilities |
|
|
565,637 |
|
|
|
667,914 |
|
Long-term debt |
|
|
1,064,908 |
|
|
|
1,083,043 |
|
Long-term operating lease liabilities |
|
|
450,656 |
|
|
|
424,762 |
|
Other liabilities |
|
|
22,431 |
|
|
|
22,427 |
|
Deferred income tax liabilities, net |
|
|
84,061 |
|
|
|
85,085 |
|
Total liabilities |
|
|
2,187,693 |
|
|
|
2,283,231 |
|
Stockholders’ equity: |
|
|
|
|
|
|
||
Common stock, $0.01 par value. Authorized 500,000 shares; 107,564 and |
|
|
1,076 |
|
|
|
1,070 |
|
Preferred stock, $0.01 par value. Authorized 50,000 shares; none issued |
|
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
|
17,421 |
|
|
|
4,241 |
|
Accumulated earnings |
|
|
582,191 |
|
|
|
440,172 |
|
Accumulated other comprehensive loss, net of tax |
|
|
(112,976 |
) |
|
|
(151,847 |
) |
Total stockholders’ equity |
|
|
487,712 |
|
|
|
293,636 |
|
Total liabilities and stockholders’ equity |
|
$ |
2,675,405 |
|
|
$ |
2,576,867 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net sales |
|
$ |
931,008 |
|
|
$ |
961,467 |
|
|
$ |
2,806,775 |
|
|
$ |
2,853,105 |
|
Cost of goods sold |
|
|
456,303 |
|
|
|
471,259 |
|
|
|
1,375,157 |
|
|
|
1,397,436 |
|
Gross profit |
|
|
474,705 |
|
|
|
490,208 |
|
|
|
1,431,618 |
|
|
|
1,455,669 |
|
Selling, general and administrative expenses |
|
|
384,183 |
|
|
|
390,961 |
|
|
|
1,165,420 |
|
|
|
1,156,082 |
|
Restructuring |
|
|
397 |
|
|
|
44 |
|
|
|
18,077 |
|
|
|
1,143 |
|
Operating earnings |
|
|
90,125 |
|
|
|
99,203 |
|
|
|
248,121 |
|
|
|
298,444 |
|
Interest expense |
|
|
18,654 |
|
|
|
35,977 |
|
|
|
53,262 |
|
|
|
76,113 |
|
Earnings before provision for income taxes |
|
|
71,471 |
|
|
|
63,226 |
|
|
|
194,859 |
|
|
|
222,331 |
|
Provision for income taxes |
|
|
20,650 |
|
|
|
16,659 |
|
|
|
52,840 |
|
|
|
60,117 |
|
Net earnings |
|
$ |
50,821 |
|
|
$ |
46,567 |
|
|
$ |
142,019 |
|
|
$ |
162,214 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.47 |
|
|
$ |
0.44 |
|
|
$ |
1.32 |
|
|
$ |
1.48 |
|
Diluted |
|
$ |
0.46 |
|
|
$ |
0.43 |
|
|
$ |
1.30 |
|
|
$ |
1.46 |
|
Weighted-average shares: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
107,560 |
|
|
|
106,940 |
|
|
|
107,383 |
|
|
|
109,238 |
|
Diluted |
|
|
109,668 |
|
|
|
108,526 |
|
|
|
109,519 |
|
|
|
110,907 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net earnings |
|
$ |
50,821 |
|
|
$ |
46,567 |
|
|
$ |
142,019 |
|
|
$ |
162,214 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments |
|
|
4,576 |
|
|
|
(27,384 |
) |
|
|
39,962 |
|
|
|
(34,645 |
) |
Interest rate swap, net of tax |
|
|
2,806 |
|
|
|
— |
|
|
|
2,806 |
|
|
|
— |
|
Interest rate caps, net of tax |
|
|
— |
|
|
|
2,050 |
|
|
|
(1,960 |
) |
|
|
2,328 |
|
Foreign exchange contracts, net of tax |
|
|
(10 |
) |
|
|
432 |
|
|
|
(1,937 |
) |
|
|
588 |
|
Other comprehensive income (loss), net of tax |
|
|
7,372 |
|
|
|
(24,902 |
) |
|
|
38,871 |
|
|
|
(31,729 |
) |
Total comprehensive income |
|
$ |
58,193 |
|
|
$ |
21,665 |
|
|
$ |
180,890 |
|
|
$ |
130,485 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
||||||
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Other |
|
|
Total |
|
||||||
|
Common Stock |
Paid-in |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholders’ |
|
|||||||||||
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Earnings |
|
|
Loss |
|
|
Equity |
|
||||||
Balance at September 30, 2022 |
|
106,970 |
|
|
$ |
1,070 |
|
|
$ |
4,241 |
|
|
$ |
440,172 |
|
|
$ |
(151,847 |
) |
|
$ |
293,636 |
|
Net earnings |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
50,337 |
|
|
|
— |
|
|
|
50,337 |
|
Other comprehensive income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
25,234 |
|
|
|
25,234 |
|
Share-based compensation |
|
— |
|
|
|
— |
|
|
|
5,135 |
|
|
|
— |
|
|
|
— |
|
|
|
5,135 |
|
Stock issued for equity awards |
|
404 |
|
|
|
4 |
|
|
|
78 |
|
|
|
— |
|
|
|
— |
|
|
|
82 |
|
Employee withholding taxes paid |
|
(90 |
) |
|
|
(1 |
) |
|
|
(1,125 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,126 |
) |
Balance at December 31, 2022 |
|
107,284 |
|
|
$ |
1,073 |
|
|
$ |
8,329 |
|
|
$ |
490,509 |
|
|
$ |
(126,613 |
) |
|
$ |
373,298 |
|
Net earnings |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
40,861 |
|
|
|
— |
|
|
|
40,861 |
|
Other comprehensive income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,265 |
|
|
|
6,265 |
|
Share-based compensation |
|
— |
|
|
|
— |
|
|
|
3,838 |
|
|
|
— |
|
|
|
— |
|
|
|
3,838 |
|
Stock issued for equity awards |
|
266 |
|
|
|
3 |
|
|
|
1,638 |
|
|
|
— |
|
|
|
— |
|
|
|
1,641 |
|
Employee withholding taxes paid |
|
(1 |
) |
|
|
— |
|
|
|
(15 |
) |
|
|
— |
|
|
|
— |
|
|
|
(15 |
) |
Balance at March 31, 2023 |
|
107,549 |
|
|
$ |
1,076 |
|
|
$ |
13,790 |
|
|
$ |
531,370 |
|
|
$ |
(120,348 |
) |
|
$ |
425,888 |
|
Net earnings |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
50,821 |
|
|
|
— |
|
|
|
50,821 |
|
Other comprehensive income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,372 |
|
|
|
7,372 |
|
Share-based compensation |
|
— |
|
|
|
— |
|
|
|
3,550 |
|
|
|
— |
|
|
|
— |
|
|
|
3,550 |
|
Stock issued for equity awards |
|
15 |
|
|
|
— |
|
|
|
81 |
|
|
|
— |
|
|
|
— |
|
|
|
81 |
|
Balance at June 30, 2023 |
|
107,564 |
|
|
$ |
1,076 |
|
|
$ |
17,421 |
|
|
$ |
582,191 |
|
|
$ |
(112,976 |
) |
|
$ |
487,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
Other |
|
|
|
Total |
|
|||||||||||
|
Common Stock |
|
Paid-in |
|
|
|
Accumulated |
|
|
|
Comprehensive |
|
|
|
Stockholders’ |
|
|||||||||||||||||
|
Shares |
|
|
|
Amount |
|
|
|
Capital |
|
|
|
Earnings |
|
|
|
Loss |
|
|
|
Equity |
|
|||||||||||
Balance at September 30, 2021 |
|
112,913 |
|
|
|
$ |
1,129 |
|
|
|
$ |
17,286 |
|
|
|
$ |
356,967 |
|
|
|
$ |
(94,641 |
) |
|
|
$ |
280,741 |
|
|||||
Net earnings |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
68,838 |
|
|
|
|
— |
|
|
|
|
68,838 |
|
|||||
Other comprehensive loss |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
(3,751 |
) |
|
|
|
(3,751 |
) |
|||||
Share-based compensation |
|
— |
|
|
|
|
— |
|
|
|
|
3,958 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
3,958 |
|
|||||
Stock issued for equity awards |
|
795 |
|
|
|
|
8 |
|
|
|
|
7,364 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
7,372 |
|
|||||
Employee withholding taxes paid |
|
(56 |
) |
|
|
|
(1 |
) |
|
|
|
(1,136 |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
(1,137 |
) |
|||||
Repurchases and cancellations of |
|
(3,675 |
) |
|
|
|
(36 |
) |
|
|
|
(27,472 |
) |
|
|
|
(47,492 |
) |
|
|
|
— |
|
|
|
|
(75,000 |
) |
|||||
Balance at December 31, 2021 |
|
109,977 |
|
|
|
$ |
1,100 |
|
|
|
$ |
— |
|
|
|
$ |
378,313 |
|
|
|
$ |
(98,392 |
) |
|
|
$ |
281,021 |
|
|||||
Net earnings |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
46,808 |
|
|
— |
|
|
— |
|
|
— |
|
|
46,808 |
|
Other comprehensive loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(3,076 |
) |
|
— |
|
|
(3,076 |
) |
Share-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,032 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,032 |
|
Stock issued for equity awards |
|
111 |
|
|
— |
|
|
1 |
|
|
— |
|
|
423 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
424 |
|
Employee withholding taxes paid |
|
(1 |
) |
|
|
|
— |
|
|
|
|
(15 |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
(15 |
) |
|||||
Repurchases and cancellations of |
|
(3,157 |
) |
|
|
|
(32 |
) |
|
|
|
(2,440 |
) |
|
|
|
(52,856 |
) |
|
|
|
— |
|
|
|
|
(55,328 |
) |
|||||
Balance at March 31, 2022 |
|
106,930 |
|
|
|
$ |
1,069 |
|
|
|
$ |
— |
|
|
|
$ |
372,265 |
|
|
|
$ |
(101,468 |
) |
|
|
$ |
271,866 |
|
|||||
Net earnings |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
46,567 |
|
|
— |
|
|
— |
|
|
— |
|
|
46,567 |
|
Other comprehensive loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(24,902 |
) |
|
— |
|
|
(24,902 |
) |
Share-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,113 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,113 |
|
Stock issued for stock options |
|
35 |
|
|
— |
|
|
1 |
|
|
— |
|
|
253 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
254 |
|
Repurchases and cancellations of |
|
(2 |
) |
|
|
|
— |
|
|
|
|
(27 |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
(27 |
) |
|||||
Balance at June 30, 2022 |
|
106,963 |
|
|
|
$ |
1,070 |
|
|
|
$ |
2,339 |
|
|
|
$ |
418,832 |
|
|
|
$ |
(126,370 |
) |
|
|
$ |
295,871 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
SALLY BEAUTY HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
Nine Months Ended June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
||
Net earnings |
|
$ |
142,019 |
|
|
$ |
162,214 |
|
Adjustments to reconcile net earnings to net cash provided (used) |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
75,773 |
|
|
|
73,361 |
|
Share-based compensation expense |
|
|
12,523 |
|
|
|
8,103 |
|
Amortization of deferred financing costs |
|
|
1,998 |
|
|
|
2,702 |
|
Loss on early extinguishment of debt |
|
|
601 |
|
|
|
16,439 |
|
Impairment of long-lived assets, including operating lease assets |
|
|
2,070 |
|
|
|
— |
|
Loss on disposal of equipment and other property |
|
|
3 |
|
|
|
57 |
|
Deferred income taxes |
|
|
(1,168 |
) |
|
|
7,702 |
|
Changes in (exclusive of effects of acquisitions): |
|
|
|
|
|
|
||
Trade accounts receivable |
|
|
2,364 |
|
|
|
243 |
|
Accounts receivable, other |
|
|
(5,307 |
) |
|
|
(3,034 |
) |
Inventory |
|
|
(37,310 |
) |
|
|
(160,194 |
) |
Other current assets |
|
|
3,323 |
|
|
|
(15,577 |
) |
Other assets |
|
|
286 |
|
|
|
3,547 |
|
Operating leases, net |
|
|
(14,762 |
) |
|
|
8,448 |
|
Accounts payable and accrued liabilities |
|
|
(51,581 |
) |
|
|
(34,349 |
) |
Income taxes payable |
|
|
1,959 |
|
|
|
(8,169 |
) |
Other liabilities |
|
|
(20 |
) |
|
|
(12,266 |
) |
Net cash provided by operating activities |
|
|
132,771 |
|
|
|
49,227 |
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
||
Payments for property and equipment, net of proceeds |
|
|
(63,796 |
) |
|
|
(67,234 |
) |
Acquisitions, net of cash acquired |
|
|
— |
|
|
|
(665 |
) |
Net cash used by investing activities |
|
|
(63,796 |
) |
|
|
(67,899 |
) |
Cash Flows from Financing Activities: |
|
|
|
|
|
|
||
Proceeds from issuance of long-term debt |
|
|
1,069,000 |
|
|
|
283,003 |
|
Repayments of long-term debt |
|
|
(1,133,134 |
) |
|
|
(433,383 |
) |
Debt issuance costs |
|
|
(4,788 |
) |
|
|
— |
|
Proceeds from equity awards |
|
|
1,804 |
|
|
|
8,050 |
|
Payments for common stock repurchased |
|
|
— |
|
|
|
(130,328 |
) |
Employee withholding taxes paid related to net share settlement of equity awards |
|
|
(1,141 |
) |
|
|
(1,179 |
) |
Net cash used by financing activities |
|
|
(68,259 |
) |
|
|
(273,837 |
) |
Effect of foreign exchange rate changes on cash and cash equivalents |
|
|
3,063 |
|
|
|
(7,132 |
) |
Net increase (decrease) in cash and cash equivalents |
|
|
3,779 |
|
|
|
(299,641 |
) |
Cash and cash equivalents, beginning of period |
|
|
70,558 |
|
|
|
400,959 |
|
Cash and cash equivalents, end of period |
|
$ |
74,337 |
|
|
$ |
101,318 |
|
Supplemental Cash Flow Information: |
|
|
|
|
|
|
||
Interest paid |
|
$ |
63,455 |
|
|
$ |
75,660 |
|
Income taxes paid |
|
$ |
52,123 |
|
|
$ |
73,862 |
|
Capital expenditures incurred but not paid |
|
$ |
6,319 |
|
|
$ |
7,682 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
Sally Beauty Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated interim financial statements of Sally Beauty Holdings, Inc. and its subsidiaries included herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC, although we believe that the disclosures included herein are adequate for the interim period presented. These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments that are of a normal recurring nature and which are necessary to present fairly our consolidated financial position as of June 30, 2023, and September 30, 2022, our consolidated results of operations, consolidated comprehensive income and consolidated statements of stockholders’ equity for the three and nine months ended June 30, 2023 and 2022, and our consolidated cash flows for the for the nine months ended June 30, 2023 and 2022.
Principles of Consolidation
The unaudited condensed consolidated interim financial statements include all accounts of Sally Beauty Holdings, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. All amounts are in U.S. Dollars.
Accounting Policies
We adhere to the same accounting policies in the preparation of our condensed consolidated interim financial statements as we do in the preparation of our full year consolidated financial statements. As permitted under GAAP, interim accounting for certain expenses, including income taxes, is based on full-year assumptions. For interim financial reporting purposes, income taxes are recorded based upon our estimated annual effective income tax.
Use of Estimates
In order to present our financial statements in conformity with GAAP, we are required to make certain estimates and assumptions that impact our interim financial statements and supplementary disclosures. These estimates may use forecasted financial information based on reasonable information available, however are subject to change in the future. Significant estimates and assumptions are part of our accounting for sales allowances, deferred revenue, valuation of inventory, amortization and depreciation, intangibles and goodwill, and other reserves. We believe these estimates and assumptions are reasonable; however, they are based on management’s current knowledge of events and actions, and changes in facts and circumstances may result in revised estimates and impact actual results.
2. Revenue Recognition
Substantially all of our revenue is derived through the sale of merchandise at the point-of-sale. Revenue is recognized net of estimated sales returns and sales taxes. We estimate sales returns based on historical data.
Changes to our contract liabilities, which are included in accrued liabilities in our condensed consolidated balance sheets, for the periods were as follows (in thousands):
|
|
|
|
|
|
Nine Months Ended June 30, |
|
|||||
|
|
|
|
|
|
2023 |
|
|
2022 |
|
||
Beginning Balance |
|
|
|
|
|
$ |
13,460 |
|
|
$ |
16,745 |
|
Loyalty points and gift cards issued but not redeemed, net of estimated breakage |
|
|
12,438 |
|
|
|
5,195 |
|
||||
Revenue recognized from beginning liability |
|
|
(11,669 |
) |
|
|
(8,132 |
) |
||||
Ending Balance |
|
|
|
|
|
$ |
14,229 |
|
|
$ |
13,808 |
|
See Note 10, Segment Reporting, for additional information regarding the disaggregation of our sales revenue.
9
3. Fair Value Measurements
We measure on a recurring basis and disclose the fair value of our financial instruments under the provisions of ASC Topic 820, Fair Value Measurement, as amended (“ASC 820”). We define “fair value” as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level hierarchy for measuring fair value and requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. This valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date.
The three levels of that hierarchy are defined as follows:
Level 1 - Quoted prices are available in active markets for identical assets or liabilities;
Level 2 - Pricing inputs are other than quoted prices in active markets, included in Level 1, that are either directly or indirectly observable; and
Level 3 - Unobservable pricing inputs in which little or no market activity exists, therefore requiring an entity to develop its own model with estimates and assumptions.
Financial instruments measured at fair value on recurring basis
Consistent with the fair value hierarchy, we categorized our financial assets and liabilities as follow:
(in thousands) |
|
Classification |
|
Fair Value Hierarchy Level |
|
June 30, |
|
|
September 30, |
|
||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
||
Foreign exchange contracts |
|
|
|
|
|
|
|
|
|
|
||
Non-designated cash flow hedges |
|
Other current assets |
|
Level 2 |
|
$ |
232 |
|
|
$ |
294 |
|
Interest rate swap |
|
Other assets/other current assets |
|
Level 2 |
|
|
3,443 |
|
|
|
— |
|
Interest rate caps |
|
Other current assets |
|
Level 2 |
|
|
— |
|
|
|
3,860 |
|
Total assets |
|
|
|
|
|
$ |
3,675 |
|
|
$ |
4,154 |
|
. |
|
|
|
|
|
|
|
|
|
|
||
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
||
Foreign exchange contracts |
|
|
|
|
|
|
|
|
|
|
||
Designated cash flow hedges |
|
Accrued liabilities |
|
Level 2 |
|
$ |
1,624 |
|
|
$ |
— |
|
Non-designated cash flow hedges |
|
Accrued liabilities |
|
Level 2 |
|
|
1,733 |
|
|
|
79 |
|
Total liabilities |
|
|
|
|
|
$ |
3,357 |
|
|
$ |
79 |
|
The fair value of each asset and liability were measured using widely accepted valuation techniques, such as discounted cash flow analyses and observable inputs, such as market interest rates and foreign exchange rates.
Other fair value disclosures
The carrying amounts of cash equivalents, trade and other accounts receivable and accounts payable and borrowing under our ABL facility approximate their respective fair values due to the short-term nature of these financial instruments. Carrying amounts and the related estimated fair value of our long-term debt, excluding finance lease obligations, debt issuance costs and original issue discounts, are as follows:
|
|
|
|
June 30, 2023 |
|
|
September 30, 2022 |
|
||||||||||
(in thousands) |
|
Fair Value Hierarchy Level |
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
||||
Long-term debt, excluding finance lease obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Senior notes |
|
Level 1 |
|
$ |
679,961 |
|
|
$ |
668,062 |
|
|
$ |
679,961 |
|
|
$ |
639,163 |
|
Term loan B due 2030 |
|
Level 2 |
|
|
399,000 |
|
|
|
398,501 |
|
|
|
— |
|
|
|
— |
|
Term loan B due 2024 |
|
Level 2 |
|
|
— |
|
|
|
— |
|
|
|
407,500 |
|
|
|
398,331 |
|
Total long-term debt |
|
|
|
$ |
1,078,961 |
|
|
$ |
1,066,563 |
|
|
$ |
1,087,461 |
|
|
$ |
1,037,494 |
|
The fair values of our term loans were measured using quoted market prices for similar debt securities in active markets or widely accepted valuation techniques, such as discounted cash flow analyses, using observable inputs, such as market interest rates.
10
4. Stockholders’ Equity
Share Repurchases
In August 2017, our Board of Directors (“Board”) approved a share repurchase program authorizing us to repurchase up to $1.0 billion of its common stock, subject to certain limitations governed by our debt agreements. In July 2021, our Board approved a term extension of our share repurchase program to September 30, 2025. As of June 30, 2023, we had approximately $595.8 million of additional share repurchase authorizations remaining under our share repurchase program. For the three and nine months ended June 30, 2023, and for the three months ended June 30, 2022, we did not repurchase shares under our share repurchase program. For the nine months ended June 30, 2022, we repurchased 6.8 million shares of our common stock at a total cost of $130.3 million.
Accumulated Other Comprehensive Income (Loss)
The change in accumulated other comprehensive loss (“AOCL”) was as follows (in thousands):
|
|
Foreign Currency Translation Adjustments |
|
|
Interest Rate Caps |
|
|
Interest Rate Swap |
|
|
Foreign Exchange Contracts |
|
|
Total |
|
|
|||||
Balance at September 30, 2022 |
|
$ |
(153,128 |
) |
|
$ |
1,960 |
|
|
$ |
— |
|
|
$ |
(679 |
) |
|
$ |
(151,847 |
) |
|
Other comprehensive income (loss) before |
|
|
39,962 |
|
|
|
817 |
|
|
|
3,289 |
|
|
|
(2,552 |
) |
|
|
41,516 |
|
|
Reclassification to net earnings, net of tax |
|
|
— |
|
|
|
(2,777 |
) |
|
|
(483 |
) |
|
|
615 |
|
|
|
(2,645 |
) |
|
Balance at June 30, 2023 |
|
$ |
(113,166 |
) |
|
$ |
— |
|
|
$ |
2,806 |
|
|
$ |
(2,616 |
) |
|
$ |
(112,976 |
) |
|
The tax impact for the changes in other comprehensive loss and the reclassifications to net earnings was not material.
5. Weighted-Average Shares
The following table sets forth the reconciliation of basic and diluted weighted-average shares (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Weighted-average basic shares |
|
|
107,560 |
|
|
|
106,940 |
|
|
|
107,383 |
|
|
|
109,238 |
|
Dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock option and stock award programs |
|
|
2,108 |
|
|
|
1,586 |
|
|
|
2,136 |
|
|
|
1,669 |
|
Weighted-average diluted shares |
|
|
109,668 |
|
|
|
108,526 |
|
|
|
109,519 |
|
|
|
110,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Anti-dilutive options excluded from our computation of diluted shares |
|
|
1,896 |
|
|
|
2,406 |
|
|
|
1,896 |
|
|
|
2,385 |
|
6. Goodwill and Intangible Assets
During the three months ended March 31, 2023, we completed our annual assessments for impairment of goodwill and indefinite-lived intangible assets. For our goodwill testing, we performed a qualitative analysis and determined that there was no indication of impairment requiring further quantitative testing. No material impairment losses were recognized in the current or prior periods presented in connection with our goodwill and intangible assets.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
(in thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Intangible assets amortization expense |
|
$ |
807 |
|
|
$ |
977 |
|
|
$ |
2,682 |
|
|
$ |
3,047 |
|
Additionally, during the nine months ended June 30, 2023, the changes in goodwill and other intangibles included effects of foreign currency exchange rates of $9.2 million and $2.3 million, respectively.
11
7. Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
|
|
June 30, |
|
|
September 30, |
|
||
Compensation and benefits |
|
$ |
53,918 |
|
|
$ |
58,693 |
|
Deferred revenue |
|
|
18,693 |
|
|
|
18,810 |
|
Rental obligations |
|
|
12,819 |
|
|
|
10,701 |
|
Insurance reserves |
|
|
6,977 |
|
|
|
5,742 |
|
Property and other taxes |
|
|
2,417 |
|
|
|
4,161 |
|
Interest payable |
|
|
3,830 |
|
|
|
13,445 |
|
Operating accruals and other |
|
|
41,737 |
|
|
|
49,513 |
|
Total accrued liabilities |
|
$ |
140,391 |
|
|
$ |
161,065 |
|
|
|
|
|
|
|
|
8. Short-term Borrowings and Long-term Debt
At June 30, 2023, our ABL facility had $16.0 million in outstanding borrowings and $466.7 million available for borrowing, including the Canadian sub-facility, subject to borrowing base limitation, as reduced by outstanding letters of credit. During the three months ended June 30, 2023, we entered into a fourth amendment to our ABL facility which updated the benchmark base interest rate on our borrowings from the London Interbank Offered Rate ("LIBOR") to the Term Secured Overnight Financing Rate ("Term SOFR") as of April 19, 2023. We utilized the practical expedient, provided by ASC Topic 848, Reference Rate Reform, allowing the transaction to be considered an event that does not require a contract remeasurement to occur on the modification date or a reassessment of any previous accounting determination.
On February 28, 2023, we announced that our wholly-owned subsidiaries, Sally Holdings LLC (“Sally Holdings”) and Sally Capital, Inc. (“Sally Capital” and, together with Sally Holdings, the “Borrowers”), and certain of our other direct and indirect subsidiaries entered into a credit agreement with Bank of America, N.A., as Administrative Agent and Collateral Agent, and the lenders and other parties thereto providing for a term loan B facility (“TLB 2030”) in an aggregate principal amount equal to $400.0 million, the net proceeds of which were used to repay an existing term loan B facility (“TLB 2024”). The TLB 2030 will bear interest at a floating rate equal to, at the Borrowers option, either the Adjusted Term SOFR Rate from time to time in effect plus 2.50% or an adjusted base rate plus 1.50%, payable quarterly on March 31, June 30, September 30 and December 31 of each year. The TLB 2030 matures on the earlier of (i) February 28, 2030 and (ii) the date that is 91 days prior to the stated maturity of our Senior Unsecured Notes due 2025 (the “2025 Senior Notes”) unless all amounts exceeding $200.0 million of the 2025 Senior Notes are refinanced or repaid according to certain conditions (the “Maturity Date”). The principal of the TLB 2030 is repayable in quarterly installments equal to 0.25% of the original principal amount of the TLB 2030, with a final installment equal to the entire remaining outstanding principal amount due on the Maturity Date. The TLB 2030 was issued at a discount of 0.75%, and we incurred $4.7 million in issuance costs; both of which are being amortized using the effective interest method.
The TLB 2030 is secured by a first-priority lien in and upon substantially all of the assets of the Company and its domestic subsidiaries other than the accounts, inventory (and the proceeds thereof) and other assets that secure Sally Holdings’ existing ABL facility on a first-priority basis (the “ABL Priority Collateral”). Additionally, the TLB 2030 is secured by a second-priority lien in and upon the ABL Priority Collateral. The TLB 2030 does not contain any financial maintenance covenants and is subject to a covenant package that is substantially consistent with the covenant package governing the 2025 Senior Notes. The TLB 2030 is subject to customary asset sale mandatory prepayment provisions and excess cash flow mandatory prepayment provisions. The TLB 2030 is subject to a prepayment premium of 1.0% of the principal amount thereof upon any refinancing or amendment thereof that results in a reduced effective yield (subject to certain exceptions) within six months following the closing. Thereafter, the TLB 2030 may be prepaid without penalty or premium, other than customary breakage costs for prepayments that are made prior to the last date of an interest period.
The repayment of our TLB 2024, in the aggregate outstanding principal amount of $406.1 million, was made pursuant to the terms of the credit agreement underlying our TLB 2024, at par plus interest accrued but unpaid up to, though not including, the repayment date. In connection with the repayment, we recognized a loss on the extinguishment of debt of $0.6 million within interest expense, which included the write-off of unamortized discount and deferred financing costs of $0.2 million and $0.4 million, respectively.
12
9. Derivative Instruments and Hedging Activities
During the nine months ended June 30, 2023, we did not purchase or hold any derivative instruments for trading or speculative purposes. See Note 3, Fair Value Measurements, for the classification and fair value of our derivative instruments.
Designated Cash Flow Hedges
Foreign Currency Forwards
We regularly enter into foreign currency forwards to mitigate our exposure to exchange rate changes on forecasted inventory purchases in U.S. dollars by our foreign subsidiaries. At June 30, 2023, we held forwards, which expire ratably through September 30, 2023, with a notional amount, based upon exchange rates at June 30, 2023, as follows (in thousands):
Notional Currency |
|
Notional Amount |
|
|
Mexican Peso |
|
$ |
6,639 |
|
Euro |
|
|
4,007 |
|
Canadian Dollar |
|
|
3,064 |
|
Total |
|
$ |
13,710 |
|
Quarterly, the changes in fair value related to these foreign currency forwards are recorded into AOCL. As the forwards are exercised, the realized value is recognized into cost of goods sold, based on inventory turns, in our condensed consolidated statements of earnings. For the three months ended June 30, 2023 and 2022, we recognized a loss of $0.7 million and a gain of $0.2 million, respectively. For the nine months ended June 30, 2023 and 2022, we recognized losses of $0.6 million and $0.2 million, respectively. Based on June 30, 2023, valuations and exchange rates, we expect to reclassify losses of approximately $3.1 million out of AOCL and into cost of goods sold over the next 12 months.
Interest Rate Caps
In July 2017, we purchased two interest rate caps with an initial aggregate notional amount of $550 million (the “interest rate caps”) to mitigate the exposure to higher interest rates in connection with our TLB 2024. The interest rate caps were comprised of individual caplets that were expiring ratably through June 30, 2023, and were designated as cash flow hedges. Accordingly, the changes in fair value of the interest rate caps were recorded quarterly, net of income tax, and included in AOCL.
During the three months ended March 31, 2023, we early settled both interest rate caps due to the forecasted transactions being hedged no longer occurring as a result of the repayment of our TLB 2024. In connection with the early settlement, we received approximately $2.7 million, which represented the fair value at the time of settlement. Furthermore, we released the remaining AOCL balances related to the interest rate caps into interest expense. The effects of our interest rate caps on our condensed consolidated statements of earnings were not material for the three months ended June 30, 2022. For the nine months ended June 30, 2023 and 2022, we recognized income of $2.8 million and expense of $1.3 million, respectively, into interest expense on our condensed consolidated statements of earnings related to the caps.
Interest Rate Swap
In April 2023, we entered into a three-year interest rate swap with an initial notional amount of $200 million (the “interest rate swap”) to mitigate the exposure to higher interest rates in connection with our TLB 2030. The interest rate swap involves fixed monthly payments at the contract rate of 3.705%, and in return, we will receive a floating interest payment based on the 1-month Adjusted Term SOFR Rate. The interest rate swap will mature in April 2026 and is designated as a cash flow hedge. Changes in the fair value of the interest rate swap are recorded quarterly, net of income tax, and included in AOCL.
For the three and nine months ended June 30, 2023, we recognized income of $0.5 million into interest expense on our condensed consolidated statements of earnings related to the interest rate swap. At June 30, 2023, we expect to reclassify gains of approximately $3.0 million out of AOCL and into interest expense over the next 12 months.
13
Non-Designated Derivative Instruments
We also use foreign exchange contracts to mitigate our exposure to exchange rate changes in connection with certain intercompany balances not permanently invested. At June 30, 2023, we held forwards, which settle on various dates in the first month of the next two fiscal quarters, with a notional amount, based upon exchange rates at June 30, 2023, as follows (in thousands):
Notional Currency |
|
Notional Amount |
|
|
British Pound |
|
$ |
47,105 |
|
Canadian Dollar |
|
|
22,104 |
|
Euro |
|
|
17,984 |
|
Mexican Peso |
|
|
28,220 |
|
Total |
|
$ |
115,413 |
|
We record changes in fair value and realized gains or losses related to these foreign currency forwards into selling, general and administrative expenses. For the three months ended June 30, 2023 and 2022, the effects of these foreign exchange contracts on our condensed consolidated financial statements were losses of $1.5 million and $5.0 million, respectively. For the nine months ended June 30, 2023 and 2022, the effects of these foreign exchange contracts on our condensed consolidated financial statements were losses of $2.6 million and $4.9 million, respectively.
10. Segment Reporting
Segment data for the three and nine months ended June 30, 2023 and 2022, is as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sally Beauty Supply ("SBS") |
|
$ |
534,932 |
|
|
$ |
551,725 |
|
|
$ |
1,614,650 |
|
|
$ |
1,639,040 |
|
Beauty Systems Group ("BSG") |
|
|
396,076 |
|
|
|
409,742 |
|
|
|
1,192,125 |
|
|
|
1,214,065 |
|
Total |
|
$ |
931,008 |
|
|
$ |
961,467 |
|
|
$ |
2,806,775 |
|
|
$ |
2,853,105 |
|
Earnings before provision for income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Segment operating earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
SBS |
|
$ |
88,684 |
|
|
$ |
88,792 |
|
|
$ |
279,992 |
|
|
$ |
270,355 |
|
BSG |
|
|
48,696 |
|
|
|
56,067 |
|
|
|
135,603 |
|
|
|
160,621 |
|
Segment operating earnings |
|
|
137,380 |
|
|
|
144,859 |
|
|
|
415,595 |
|
|
|
430,976 |
|
Unallocated expenses |
|
|
46,858 |
|
|
|
45,612 |
|
|
|
149,397 |
|
|
|
131,389 |
|
Restructuring |
|
|
397 |
|
|
|
44 |
|
|
|
18,077 |
|
|
|
1,143 |
|
Consolidated operating earnings |
|
|
90,125 |
|
|
|
99,203 |
|
|
|
248,121 |
|
|
|
298,444 |
|
Interest expense |
|
|
18,654 |
|
|
|
35,977 |
|
|
|
53,262 |
|
|
|
76,113 |
|
Earnings before provision for income taxes |
|
$ |
71,471 |
|
|
$ |
63,226 |
|
|
$ |
194,859 |
|
|
$ |
222,331 |
|
Sales between segments, which are eliminated in consolidation, were not material during the three and nine months ended June 30, 2023 and 2022.
14
Disaggregation of net sales by segment
The following tables disaggregate our segment revenues by merchandise category. We have reclassified certain prior year amounts within BSG to conform to current year presentation.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
SBS |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Hair color |
|
|
40.5 |
% |
|
|
38.3 |
% |
|
|
39.6 |
% |
|
|
37.7 |
% |
Hair care |
|
|
23.8 |
% |
|
|
23.5 |
% |
|
|
23.8 |
% |
|
|
23.8 |
% |
Styling tools and supplies |
|
|
17.2 |
% |
|
|
18.8 |
% |
|
|
18.2 |
% |
|
|
19.4 |
% |
Nail |
|
|
10.1 |
% |
|
|
11.3 |
% |
|
|
10.1 |
% |
|
|
10.8 |
% |
Skin and cosmetics |
|
|
7.9 |
% |
|
|
7.6 |
% |
|
|
7.6 |
% |
|
|
7.6 |
% |
Other beauty items |
|
|
0.5 |
% |
|
|
0.5 |
% |
|
|
0.7 |
% |
|
|
0.7 |
% |
Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
BSG |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Hair care |
|
|
40.8 |
% |
|
|
42.6 |
% |
|
|
42.2 |
% |
|
|
43.1 |
% |
Hair color |
|
|
41.6 |
% |
|
|
39.7 |
% |
|
|
40.1 |
% |
|
|
39.2 |
% |
Styling tools and supplies |
|
|
10.6 |
% |
|
|
11.0 |
% |
|
|
10.7 |
% |
|
|
11.2 |
% |
Skin and cosmetics |
|
|
4.0 |
% |
|
|
3.8 |
% |
|
|
4.1 |
% |
|
|
3.9 |
% |
Nail |
|
|
2.7 |
% |
|
|
2.5 |
% |
|
|
2.7 |
% |
|
|
2.3 |
% |
Other beauty items |
|
|
0.3 |
% |
|
|
0.4 |
% |
|
|
0.2 |
% |
|
|
0.3 |
% |
Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
The following tables disaggregate our segment revenue by sales channels:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
SBS |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Company-operated stores |
|
|
94.1 |
% |
|
|
94.0 |
% |
|
|
93.8 |
% |
|
|
94.0 |
% |
E-commerce |
|
|
5.9 |
% |
|
|
6.0 |
% |
|
|
6.2 |
% |
|
|
6.0 |
% |
Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
BSG |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Company-operated stores |
|
|
67.6 |
% |
|
|
66.6 |
% |
|
|
67.2 |
% |
|
|
66.9 |
% |
E-commerce |
|
|
13.0 |
% |
|
|
11.6 |
% |
|
|
13.4 |
% |
|
|
11.8 |
% |
Distributor sales consultants |
|
|
11.6 |
% |
|
|
13.9 |
% |
|
|
11.9 |
% |
|
|
13.9 |
% |
Franchise stores |
|
|
7.8 |
% |
|
|
7.9 |
% |
|
|
7.5 |
% |
|
|
7.4 |
% |
Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
15
11. Restructuring
Restructuring expenses, included in Cost of Goods Sold (“COGS”) and Restructuring for the three and nine months ended June 30, 2023 and 2022, are as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Included in COGS (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Distribution Center Consolidation and Store Optimization Plan |
|
$ |
(746 |
) |
|
$ |
— |
|
|
$ |
(5,788 |
) |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Included in Restructuring (b) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Distribution Center Consolidation and Store Optimization Plan |
|
$ |
397 |
|
|
$ |
— |
|
|
$ |
18,077 |
|
|
$ |
— |
|
Transformation Plan |
|
|
— |
|
|
|
44 |
|
|
|
— |
|
|
|
1,143 |
|
Total in Restructuring |
|
|
397 |
|
|
|
44 |
|
|
|
18,077 |
|
|
|
1,143 |
|
Total Restructuring Expenses |
|
$ |
(349 |
) |
|
$ |
44 |
|
|
$ |
12,289 |
|
|
$ |
1,143 |
|
Distribution Center Consolidation and Store Optimization Plan
In the fourth quarter of fiscal year 2022, our Board approved the Distribution Center Consolidation and Store Optimization Plan (“the Plan”) authorizing the closure of 330 SBS stores and 35 BSG stores, and the closure of two BSG distribution centers in Clackamas, Oregon and Pottsville, Pennsylvania.
We believe that consolidating the operation of these two distribution centers into our larger distribution centers will increase product availability, shorten delivery times and reduce overall costs. Stores identified for early closure were part of a strategic evaluation which included a market analysis of certain locations where we believe we will be able to recapture demand at other nearby store locations and improve overall profitability. By optimizing our store base, we are further focusing on our customers’ shopping experience and our product offerings.
As of June 30, 2023, we have closed 329 SBS stores and 32 BSG stores as part of the Plan and closed the two BSG distribution centers. The Plan will continue to be executed throughout fiscal year 2023 and into the first half of fiscal year 2024, and therefore it may include future charges related to store closures such as exit costs, lease negotiation penalties, termination benefits and adjustments to estimates.
The liability related to the Plan, which is included in accounts payable and accrued liabilities on our consolidated balance sheets, is as follows:
(in thousands) |
|
Liability at |
|
|
SBS Expense |
|
|
BSG Expense |
|
|
Cash Payments |
|
|
Non-Cash Amounts |
|
|
Liability at |
|
||||||
Closing costs - leases (a) |
|
$ |
— |
|
|
$ |
7,613 |
|
|
$ |
1,381 |
|
|
$ |
(8,251 |
) |
|
$ |
(693 |
) |
|
$ |
50 |
|
Closing costs - payroll expenses (b) |
|
|
— |
|
|
|
1,648 |
|
|
|
1,191 |
|
|
|
(2,597 |
) |
|
|
— |
|
|
|
242 |
|
Impairment - property and equipment (c) |
|
|
— |
|
|
|
1,276 |
|
|
|
213 |
|
|
|
— |
|
|
|
(1,489 |
) |
|
|
— |
|
Inventory transfer costs |
|
|
— |
|
|
|
1,156 |
|
|
|
364 |
|
|
|
(1,520 |
) |
|
|
— |
|
|
|
— |
|
Impairment - operating lease assets (c) |
|
|
— |
|
|
|
350 |
|
|
|
244 |
|
|
|
— |
|
|
|
(594 |
) |
|
|
— |
|
Other closure costs (d) |
|
|
1,291 |
|
|
|
2,803 |
|
|
|
(162 |
) |
|
|
(3,883 |
) |
|
|
— |
|
|
|
49 |
|
Total |
|
$ |
1,291 |
|
|
$ |
14,846 |
|
|
$ |
3,231 |
|
|
$ |
(16,251 |
) |
|
$ |
(2,776 |
) |
|
$ |
341 |
|
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This section discusses management’s view of the financial condition, results of operations and cash flows of Sally Beauty for the periods covered by this Quarterly Report. This section should be read in conjunction with the information contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, including the Risk Factors sections therein, and information contained elsewhere in this Quarterly Report, including the condensed consolidated interim financial statements and notes to those financial statements.
Executive Overview
For fiscal 2023, we are focusing on three key strategic initiatives to drive growth and profitability:
We believe focusing in these areas will position our company for future growth and further enhance our ability to meet our customers where they are.
Enhancing our customer centricity
During the fiscal year, SBS launched its first Studio by Sally pilot store in Denton, Texas and is expected to open additional pilot stores in our next fiscal quarter. Our Studio by Sally pilot store program has a digital-first focus, from digital check-in to digital education throughout the store and beyond, including personalized appointments at our in-store salons where licensed stylists will train and educate customers, empowering them to personally achieve their desired results. If the pilot stores are successful, we project that we will be able to expand the Studio by Sally concept to 100 locations throughout the U.S. over the next three to four years.
At the end of the quarter, we announced the launch of Happy Beauty Co., a unique new retail store concept that brings to market an engaging beauty experience at a value offering. Happy Beauty Co. offers quality beauty at great prices in an accessible, fun and expressive environment. All of the merchandise is priced under $10 with product offerings encompassing four key categories: Cosmetics & Facial Care, Bath & Body, Nails and Hair, featuring both third-party brands and the Company’s owned brands. The initial pilot store was opened in the Dallas/Ft. Worth market in late June.
Furthermore, earlier this fiscal year, BSG launched a new strategic partnership with Salon HQ to help its professional stylist customers grow their business. The platform is a customizable digital storefront platform that gives stylists the ability to curate a product selection from thousands of BSG merchandise choices, and enables their clients to purchase directly from their shops without the stylists having to finance and carry inventory. As our pilot of Salon HQ enters its next phase of maturation, we made the strategic decision to brand the platform as “Cosmo Prof Direct.” During the quarter, we expanded the platform to an additional seven states, ending the quarter with more than 1,700 digital storefronts spread over nine states. Our stylists are embracing this new tool and gaining a deeper understanding of how they can leverage this resource to profitably grow their business.
Growing high margin owned brands at Sally Beauty and amplifying innovation
We believe growing our SBS owned brands, through innovation and marketing, will provide improved margins, strengthen our long-term relationships with existing customers and help attract new customers. During the fiscal year, we have invested more into marketing of our owned brands and launched our new owned branded vegan product line – bondbar – that’s SLS/SLES-free, paraben-free, phthalate-free and cruelty-free. These initiatives have helped deliver an increase in our owned brands sales penetration, resulting in increased SBS profit margins.
For BSG, vendors have launched new and exciting product lines during the fiscal year, including new bright hues from Paul Mitchell, greys and silver tones from Matrix, and a continued focus on blonding, which is a consistent traffic driver. During the quarter, we saw strong performance from new product launches, including Amika, Wella’s Ultimate Repair, and Danger Jones, as well as expanded distribution with Color Wow.
Increasing the efficiency of our operations and optimizing our capabilities
At the end of fiscal year 2022, we announced our plan to optimize our store base and distribution network to improve overall profitability by closing 330 SBS stores, 35 BSG stores and two BSG distribution centers. During the first half of our fiscal year, we completed the majority of our planned closures. Additionally, we have further optimized our store supply chain network based on our new store fleet. As of June 30, 2023, we have closed 329 SBS stores and 32 BSG stores and the two BSG distribution centers as part of the Plan, while meeting our sales recapture expectations.
See Note 11, Restructuring, in Item 1 of this quarterly report for more information on the Plan.
17
Earlier this fiscal year, we started testing a new shipping frequency from our distribution centers to a limited population of SBS and BSG stores by leveraging investments within our supply chain systems. We believe we will be able to improve labor productivity, reduce our freight costs and lower our carbon emissions, while maintaining healthy in-stock levels. We have seen positive results from the test and will be expanding to the remaining SBS and BSG store fleet throughout the U.S. and Canada.
Financial Summary for the Three Months Ended June 30, 2023
Trends Impacting Our Business
Global inflationary pressures continued to influence consumer and stylist shopping behavior along with the cost for products and services. In the U.S. and Canada, we are seeing our SBS retail customers color their hair less frequently and reduced the size of their basket when they shop with us, while at BSG we are seeing a continuation of stylist demand trends we’ve seen over the last several quarters. These inflationary pressures have also impacted wages, especially among retail and hourly employees, as we have experienced an increase in our labor costs in order to attract and retain associates.
During the current year, these headwinds have resulted in lower traffic and conversion in our business and increases in certain operating costs. We continue to monitor these challenges and implement measures to help mitigate their impacts, including managing our inventory levels to reduce out-of-stock items, adjusting our promotional activities, optimizing our store base and expanding our partnerships with delivery service providers. Although these initiatives have helped mitigate ongoing macro-headwinds, we cannot reasonably predict the long-term effects of inflation. Furthermore, in a measure to curb inflation, the U.S. Federal Reserve has increased the federal funds effective rate. In turn, these increases have raised the cost of debt borrowings.
Comparable Sales
We believe that comparable sales is an appropriate performance indicator to measure our sales growth compared to the prior period. Our comparable sales include sales from stores that have been operating for 14 months or longer as of the last day of a month and e-commerce revenue. Additionally, comparable sales include sales to franchisees and full service sales. Our comparable sales excludes the effect of changes in foreign exchange rates and sales from stores relocated until 14 months after the relocation. Revenue from acquisitions are excluded from our comparable sales calculation until 14 months after the acquisition. Our calculation of comparable sales might not be the same as other retailers as the calculation varies across the retail industry.
18
Overview
Key Operating Metrics
The following table sets forth, for the periods indicated, information concerning key measures we rely on to evaluate our operating performance (dollars in thousands):
|
|
Three Months Ended June 30, |
|
|
Nine Months Ended June 30, |
|
||||||||||||||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
Increase (Decrease) |
|
|
2023 |
|
|
2022 |
|
|
Increase (Decrease) |
|
||||||||||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
SBS |
|
$ |
534,932 |
|
|
$ |
551,725 |
|
|
$ |
(16,793 |
) |
|
|
(3.0 |
)% |
|
$ |
1,614,650 |
|
|
$ |
1,639,040 |
|
|
$ |
(24,390 |
) |
|
|
(1.5 |
)% |
BSG |
|
|
396,076 |
|
|
|
409,742 |
|
|
|
(13,666 |
) |
|
|
(3.3 |
)% |
|
|
1,192,125 |
|
|
|
1,214,065 |
|
|
|
(21,940 |
) |
|
|
(1.8 |
)% |
Consolidated |
|
$ |
931,008 |
|
|
$ |
961,467 |
|
|
$ |
(30,459 |
) |
|
|
(3.2 |
)% |
|
$ |
2,806,775 |
|
|
$ |
2,853,105 |
|
|
$ |
(46,330 |
) |
|
|
(1.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
SBS |
|
$ |
314,474 |
|
|
$ |
322,815 |
|
|
$ |
(8,341 |
) |
|
|
(2.6 |
)% |
|
$ |
955,066 |
|
|
$ |
960,249 |
|
|
$ |
(5,183 |
) |
|
|
(0.5 |
)% |
BSG |
|
|
160,231 |
|
|
|
167,393 |
|
|
|
(7,162 |
) |
|
|
(4.3 |
)% |
|
|
476,553 |
|
|
|
495,420 |
|
|
|
(18,867 |
) |
|
|
(3.8 |
)% |
Consolidated |
|
$ |
474,705 |
|
|
$ |
490,208 |
|
|
$ |
(15,503 |
) |
|
|
(3.2 |
)% |
|
$ |
1,431,619 |
|
|
$ |
1,455,669 |
|
|
$ |
(24,050 |
) |
|
|
(1.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Segment gross margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
SBS |
|
|
58.8 |
% |
|
|
58.5 |
% |
|
30 |
|
|
bps |
|
|
|
59.2 |
% |
|
|
58.6 |
% |
|
60 |
|
|
bps |
|
||||
BSG |
|
|
40.5 |
% |
|
|
40.9 |
% |
|
(40) |
|
|
bps |
|
|
|
40.0 |
% |
|
|
40.8 |
% |
|
(80) |
|
|
bps |
|
||||
Consolidated |
|
|
51.0 |
% |
|
|
51.0 |
% |
|
— |
|
|
bps |
|
|
|
51.0 |
% |
|
|
51.0 |
% |
|
— |
|
|
bps |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Segment operating earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
SBS |
|
$ |
88,684 |
|
|
$ |
88,792 |
|
|
$ |
(108 |
) |
|
|
(0.1 |
)% |
|
$ |
279,992 |
|
|
$ |
270,355 |
|
|
$ |
9,637 |
|
|
|
3.6 |
% |
BSG |
|
|
48,696 |
|
|
|
56,067 |
|
|
|
(7,371 |
) |
|
|
(13.1 |
)% |
|
|
135,603 |
|
|
|
160,621 |
|
|
|
(25,018 |
) |
|
|
(15.6 |
)% |
Segment operating earnings |
|
|
137,380 |
|
|
|
144,859 |
|
|
|
(7,479 |
) |
|
|
(5.2 |
)% |
|
|
415,595 |
|
|
|
430,976 |
|
|
|
(15,381 |
) |
|
|
(3.6 |
)% |
Unallocated expenses and restructuring (a) |
|
|
47,255 |
|
|
|
45,656 |
|
|
|
1,599 |
|
|
|
3.5 |
% |
|
|
167,474 |
|
|
|
132,532 |
|
|
|
34,942 |
|
|
|
26.4 |
% |
Consolidated operating earnings |
|
|
90,125 |
|
|
|
99,203 |
|
|
|
(9,078 |
) |
|
|
(9.2 |
)% |
|
|
248,121 |
|
|
|
298,444 |
|
|
|
(50,323 |
) |
|
|
(16.9 |
)% |
Interest expense |
|
|
18,654 |
|
|
|
35,977 |
|
|
|
(17,323 |
) |
|
|
(48.2 |
)% |
|
|
53,262 |
|
|
|
76,113 |
|
|
|
(22,851 |
) |
|
|
(30.0 |
)% |
Earnings before provision for income taxes |
|
|
71,471 |
|
|
|
63,226 |
|
|
|
8,245 |
|
|
|
13.0 |
% |
|
|
194,859 |
|
|
|
222,331 |
|
|
|
(27,472 |
) |
|
|
(12.4 |
)% |
Provision for income taxes |
|
|
20,650 |
|
|
|
16,659 |
|
|
|
3,991 |
|
|
|
24.0 |
% |
|
|
52,840 |
|
|
|
60,117 |
|
|
|
(7,277 |
) |
|
|
(12.1 |
)% |
Net earnings |
|
$ |
50,821 |
|
|
$ |
46,567 |
|
|
$ |
4,254 |
|
|
|
9.1 |
% |
|
$ |
142,019 |
|
|
$ |
162,214 |
|
|
$ |
(20,195 |
) |
|
|
(12.4 |
)% |
|
|
. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Number of stores at end-of-period (including franchises) (b): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
SBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,141 |
|
|
|
3,468 |
|
|
|
(327 |
) |
|
|
(9.4 |
)% |
||||
BSG |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,336 |
|
|
|
1,361 |
|
|
|
(25 |
) |
|
|
(1.8 |
)% |
||||
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,477 |
|
|
|
4,829 |
|
|
|
(352 |
) |
|
|
(7.3 |
)% |
||||
Comparable sales growth (decline): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
SBS |
|
|
3.0 |
% |
|
|
(5.0 |
)% |
|
800 |
|
|
bps |
|
|
|
5.0 |
% |
|
|
(0.5 |
)% |
|
550 |
|
|
bps |
|
||||
BSG |
|
|
(2.4 |
)% |
|
|
(1.6 |
)% |
|
(80) |
|
|
bps |
|
|
|
(0.9 |
)% |
|
|
2.6 |
% |
|
(350) |
|
|
bps |
|
||||
Consolidated |
|
|
0.6 |
% |
|
|
(3.6 |
)% |
|
420 |
|
|
bps |
|
|
|
2.4 |
% |
|
|
0.8 |
% |
|
160 |
|
|
bps |
|
19
Results of Operations
The Three Months Ended June 30, 2023, compared to the Three Months Ended June 30, 2022
Net Sales
SBS. The decrease in net sales for SBS was primarily driven by the following (in thousands):
Comparable sales |
|
$ |
15,529 |
|
Sales outside comparable sales (a) |
|
|
(35,960 |
) |
Foreign currency exchange |
|
|
3,638 |
|
Total |
|
$ |
(16,793 |
) |
The increase in SBS’s comparable sales was a result of a growth in our average unit retail, primarily from inflationary impacts and pricing leverage. Comparable sales were also positively impacted by recapturing approximately half of the sales from stores closed in connection with the Plan.
BSG. The decrease in net sales for BSG was primarily driven by the following (in thousands):
Comparable sales |
|
$ |
(9,698 |
) |
Sales outside comparable sales (a) |
|
|
(2,264 |
) |
Foreign currency exchange |
|
|
(1,704 |
) |
Total |
|
$ |
(13,666 |
) |
BSG’s comparable sales faced headwinds from the from the continuation of stylist demand trends seen over the last several quarters, which resulted in fewer units per transaction, partially offset by an increase in our average unit retail.
Gross Profit
SBS. SBS’s gross profit decreased for the three months ended June 30, 2023, as a result of a decrease in net sales, partially offset by a higher gross margin. SBS’s gross margin grew as a result of pricing leverage and increased penetration of our owned brand products.
BSG. BSG’s gross profit decreased for the three months ended June 30, 2023, as a result of a decrease in net sales and a lower gross margin. BSG’s gross margin decline was driven by lower product margin resulting from an unfavorable sales channel mix between stores and lower-margin Regis e-commerce sales, and a shift in some distribution center costs from selling, general and administrative expenses into gross margin.
Selling, General and Administrative Expenses
SBS. SBS’s selling, general and administrative expenses decreased $8.2 million, or 3.5%, for the three months ended June 30, 2023, and included an unfavorable impact from foreign exchange rates of $1.4 million. As a percentage of SBS net sales, selling, general and administrative expense for the three months ended June 30, 2023, was 42.2% compared to 42.4% for the three months ended June 30, 2022. The decrease was due to cost savings resulting from the Plan as well as lower advertising expenses, partially offset by higher labor and accrued bonus expenses.
BSG. BSG’s selling, general and administrative expenses increased $0.2 million, or 0.2%, for the three months ended June 30, 2023. As a percentage of BSG net sales, selling, general and administrative expense for the three months ended June 30, 2023, was 28.2% compared to 27.2% for the three months ended June 30, 2022. The increase as a percentage of sales was driven primarily by higher labor and accrued bonus expenses, partially offset by a shift in some distribution center costs from selling, general and administrative expenses into gross margin.
Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $1.2 million, or 2.7%, for the three months ended June 30, 2023, primarily due to higher labor and accrued bonus expenses and information technology expense. These increases were partially offset by prudent cost control and the lapping of disposal costs for obsolete personal-protective equipment inventory in the prior year.
Interest Expense
The decrease in interest expense is primarily due to the lapping of debt extinguishment costs in the prior year related to the repayment of our 8.75% Senior Notes due 2025 and from fewer debt borrowings outstanding, partially offset by higher interest rates on our variable rate debt. Additionally, our interest rate swap has helped mitigate some of the additional interest costs resulting from higher interest rates.
20
Provision for Income Taxes
The effective tax rates were 28.9% and 26.3%, for the three months ended June 30, 2023, and 2022, respectively. The increase in the effective tax rate was primarily due to additional taxes and interest for the one-time transition tax on unrepatriated foreign earnings ("Repatriation Tax") related to the fiscal year ended September 30, 2018, which is currently under IRS audit.
The Nine Months Ended June 30, 2023, compared to the Nine Months Ended June 30, 2022
Net Sales
SBS. The decrease in net sales for SBS was primarily driven by the following (in thousands):
Comparable sales |
|
$ |
75,351 |
|
Sales outside comparable sales (a) |
|
|
(86,636 |
) |
Foreign currency exchange |
|
|
(13,105 |
) |
Total |
|
$ |
(24,390 |
) |
SBS’s comparable sales increase was driven by a growth in our average unit retail, primarily from inflationary impacts and pricing leverage and the lapping of Omicron and supply chain challenges. Comparable sales were also positively impacted by recapturing approximately half of the sales from stores closed in connection with the Plan.
BSG. The decrease in net sales for BSG was primarily driven by the following (in thousands):
Comparable sales |
|
$ |
(11,038 |
) |
Sales outside comparable sales (a) |
|
|
(4,489 |
) |
Foreign currency exchange |
|
|
(6,413 |
) |
Total |
|
$ |
(21,940 |
) |
BSG’s comparable sales faced headwinds from elevated demand in the prior year from the easing of COVID-19 restrictions and the continuation of stylist demand trends seen over the last several quarters, which resulted in fewer transactions and units per transaction, partially offset by an increase in our average unit retail.
Gross Profit
SBS. SBS’s gross profit decreased for the nine months ended June 30, 2023, as a result of fewer net sales, partially offset by a higher gross margin. SBS’s gross margin grew as a result of pricing leverage, increased penetration of our owned brand products and adjustments to our expected obsolescence reserve related to the Plan.
BSG. BSG’s gross profit decreased for the nine months ended June 30, 2023, as a result of fewer net sales and a lower gross margin. BSG’s gross margin decline was driven by lower product margin resulting from an unfavorable sales channel mix between stores and lower-margin Regis e-commerce sales, and a shift in some distribution center costs from selling, general and administrative expenses into gross margin, partially offset by adjustments to our expected obsolescence reserve related to the Plan.
Selling, General and Administrative Expenses
SBS. SBS’s selling, general and administrative expenses decreased $14.8 million, or 2.1%, for the nine months ended June 30, 2023, and included a favorable impact from foreign exchange rates of $5.4 million. As a percentage of SBS net sales, selling, general and administrative expense for the nine months ended June 30, 2023, was 41.8% compared to 42.1% for the nine months ended June 30, 2022. The decrease as a percentage of sales was primarily driven by cost savings from the closure of stores in connection with the Plan and lower advertising expenses, partially offset by higher labor and accrued bonus expenses.
BSG. BSG’s selling, general and administrative expenses increased $6.2 million, or 1.8%, for the nine months ended June 30, 2023, and included a favorable impact from foreign exchange rates of $2.2 million. As a percentage of BSG net sales, selling, general and administrative expense for the nine months ended June 30, 2023, was 28.6% compared to 27.6% for the nine months ended June 30, 2022. The increase was primarily driven by higher labor and accrued bonus expenses, partially offset by a shift in some distribution center costs from selling, general and administrative expense into gross margin.
Unallocated. Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $18.0 million, or 13.7%, for the nine months ended June 30, 2023, primarily due to higher labor and accrued bonus expenses and information technology expenses. These increases were partially offset by prudent cost control and the lapping of disposal costs for obsolete personal-protective equipment inventory.
21
Restructuring
For the nine months ended June 30, 2023, we incurred $18.1 million in restructuring charges related to the Plan. For the nine months ended June 30, 2022, restructuring charges in connection with our prior transformation plan were immaterial. See Note 11, Restructuring, in Item 1 of this quarterly report for more information on the Plan.
Interest Expense
The decrease in interest expense was primarily due to the lapping of debt extinguishment costs related to the repayment of our 8.75% Senior Notes due 2025 in fiscal year 2022, partially offset by higher interest rates on our variable rate debt and an increase in our average borrowings outstanding under our ABL facility. Additionally, our interest rate derivatives have helped mitigate some of the impacts from higher interest rates on a portion of our variable rate debt.
Provision for Income Taxes
The effective tax rates were 27.1% and 27.0% for the nine months ended June 30, 2023 and 2022, respectively. The increase in the effective tax rate was primarily due to Repatriation Tax related to the fiscal year ended September 30, 2018, which is currently under IRS audit, offset by greater losses in the prior year quarter for which a tax benefit could not be recognized.
Liquidity and Capital Resources
Overview
Our principal sources of liquidity are cash from operations, cash and cash equivalents and borrowings under our ABL facility. A substantial portion of our liquidity needs arise from funding the costs of our operations, working capital, capital expenditures, debt interest and principal payment. Additionally, under our share repurchase program, see below for more details, we will from time-to-time repurchase shares of our common stock on the open market to return value to our shareholders. At June 30, 2023, we had $541.0 million in our liquidity pool, which includes $466.7 million available for borrowing under our ABL facility and cash and cash equivalents of $74.3 million.
Our working capital (current assets less current liabilities) increased $169.3 million, to $633.8 million at June 30, 2023, compared to $464.5 million at September 30, 2022. The increase was driven by higher inventory balances, resulting from inflationary vendor cost increases and $24.6 million from foreign exchange rates, partially offset by optimization efforts to improve inventory stocking levels. The increase was further driven by fewer outstanding borrowings under our ABL facility, a reduction in our accounts payable, due to the timing of payments and impacts of optimization efforts around inventory purchases, and by fewer accrued liabilities, due to the timing of interest and payroll payments, partially offset by an increase in accrued bonuses.
We anticipate that existing cash balances (excluding certain amounts permanently invested in connection with foreign operations), cash expected to be generated by operations, and funds available under our ABL facility will be sufficient to fund our working capital and capital expenditure requirements over the next twelve months.
Cash Flows
|
|
Nine Months Ended June 30, |
|
|||||
(in thousands) |
|
2023 |
|
|
2022 |
|
||
Net cash provided by operating activities |
|
$ |
132,771 |
|
|
$ |
49,227 |
|
Net cash used by investing activities |
|
|
(63,796 |
) |
|
|
(67,899 |
) |
Net cash used by financing activities |
|
|
(68,259 |
) |
|
|
(273,837 |
) |
Net Cash Provided by Operating Activities
The increase in cash provided by operating activities was driven by the timing of inventory purchases, primarily from the impact of global supply chain issues in the prior year, partially offset by fewer net sales for the current year.
Net Cash Used by Investing Activities
The decrease in cash used by investing activities was driven by fewer capital expenditures related to store improvements and information technology.
Net Cash Used by Financing Activities
The decrease in cash used by financing activities was primarily due to no shares repurchased in the current year under our share repurchases program and from fewer net debt repayments in the current year.
22
Debt and Guarantor Financial Information
During the fiscal year, we entered into a seven-year term loan facility agreement in the aggregate principal amount of $400.0 million and used the proceeds to subsequently repay our previously existing term loan facility. See Note 8, Short-term Borrowings and Long-term Debt, in Item 1 of this quarterly report for more information.
At June 30, 2023, we had $1,095.0 million in outstanding debt, not including finance lease obligations, unamortized debt issuance costs and debt discounts, in the aggregate, of $9.9 million. Our debt consists of $680.0 million in 2025 Senior Notes outstanding, $399.0 million remaining on our term loan and $16.0 million in outstanding borrowings under our ABL facility.
We utilize our ABL facility for the issuance of letters of credit, certain working capital and liquidity needs, and to manage normal fluctuations in our operational cash flow. In that regard, we may from time to time draw funds under the ABL facility for general corporate purposes including funding of capital expenditures, acquisitions, paying down other debt and share repurchases. Amounts drawn on our ABL facility are generally paid down with cash provided by our operating activities. During the nine months ended June 30, 2023, the weighted average interest rate on our borrowings under the ABL facility was 5.9%.
We are currently in compliance with the agreements and instruments governing our debt, including our financial covenants.
Guarantor Financial Information
Our 2025 Senior Notes were issued by our wholly-owned subsidiaries, Sally Holdings LLC and Sally Capital Inc. (the “Issuers”). The notes are unsecured debt instruments guaranteed by us and certain of our wholly-owned domestic subsidiaries (together, the “Guarantors”) and have certain restrictions on the ability of our subsidiaries to make certain restrictive payments to Sally Beauty. The guarantees are joint and several, and full and unconditional. Certain other subsidiaries, including our foreign subsidiaries, do not serve as guarantors.
The following summarized consolidating financial information represents financial information for the Issuers and the Guarantors on a combined basis. All transactions and intercompany balances between these combined entities has been eliminated.
The following table presents the summarized balance sheets information for the Issuers and the Guarantors as of June 30, 2023, and September 30, 2022:
(in thousands) |
|
June 30, 2023 |
|
|
September 30, 2022 |
|
||
Inventory |
|
$ |
745,529 |
|
|
$ |
714,477 |
|
Intercompany receivable |
|
$ |
3,472 |
|
|
$ |
— |
|
Current assets |
|
$ |
860,569 |
|
|
$ |
827,155 |
|
Total assets |
|
$ |
2,023,626 |
|
|
$ |
1,982,982 |
|
Current liabilities |
|
$ |
451,441 |
|
|
$ |
549,415 |
|
Intercompany payable |
|
$ |
— |
|
|
$ |
4,431 |
|
Total liabilities |
|
$ |
1,986,455 |
|
|
$ |
2,085,169 |
|
The following table presents the summarized statement of earnings information for the Issuers and the Guarantors for nine months ended June 30, 2023 (in thousands):
Net sales |
|
|
|
$ |
2,273,943 |
|
Gross profit |
|
|
|
$ |
1,172,601 |
|
Earnings before provision for income taxes |
|
|
|
$ |
159,018 |
|
Net Earnings |
|
|
|
$ |
117,519 |
|
Share Repurchase Programs
Under our current share repurchase program, we may from time-to-time repurchase our common stock on the open market. During the nine months ended June 30, 2023, no shares were repurchased in connection with our share repurchase program. During the nine months ended June 30, 2022, we repurchased 6.8 million shares of our common stock for $130.3 million under our share repurchase program. See Note 4, Stockholders’ Equity, for more information about our share repurchase program.
Contractual Obligations
Other than our debt, as discussed above, there have been no material changes outside the ordinary course of our business to our contractual obligations since September 30, 2022.
Off-Balance Sheet Financing Arrangements
At June 30, 2023, and September 30, 2022, we had no off-balance sheet financing arrangements other than outstanding letters of credit related to inventory purchases and self-insurance programs.
Critical Accounting Estimates
There have been no material changes to our critical accounting estimates or assumptions since September 30, 2022.
23
Recent Accounting Pronouncements
There have been no recent accounting pronouncements issued that will have a material impact to our business.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a multinational corporation, we are subject to certain market risks including foreign currency fluctuations, interest rates and government actions. See our disclosures about market risks contained in Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in Part II of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022.
Since September 30, 2022, there have been changes to our debt structure, including amending debt terms to replace LIBOR with SOFR, and with our derivative instruments used to help mitigate the interest rate risks associated with variable-rate debt. See Note 8, Short-term Borrowings and Long-term Debt, and Note 9, Derivative Instruments and Hedging Activities, in Item 1 of this quarterly report for more information on these changes.
At June 30, 2023, we had $415.0 million in outstanding floating interest rate debt, with $200 million of SOFR denominated interest hedged under an interest rate swap agreement. As of June 30, 2023, a 1.0 percentage point interest rate increase would negatively impact our annual interest expense and cash flows by $2.2 million.
Item 4. Controls and Procedures
Controls Evaluation and Related CEO and CFO Certifications. Our management, with the participation of our principal executive officer (“CEO”) and principal financial officer (“CFO”), conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2023. The controls evaluation was conducted by our Disclosure Committee, comprised of senior representatives from our finance, accounting, internal audit, and legal departments under the supervision of our CEO and CFO.
Certifications of our CEO and our CFO, which are required in accordance with Rule 13a-14 of the Exchange Act, are attached as exhibits to this Quarterly Report. This “Controls and Procedures” section includes the information concerning the controls evaluation referred to in the certifications, and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.
Limitations on the Effectiveness of Controls. We do not expect that our disclosure controls and procedures will prevent all errors and all fraud. A system of controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are met. Because of the limitations in all such systems, no evaluation can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Furthermore, the design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how unlikely. Because of these inherent limitations in a cost-effective system of controls and procedures, misstatements or omissions due to error or fraud may occur and not be detected.
Scope of the Controls Evaluation. The evaluation of our disclosure controls and procedures included a review of their objectives and design, our implementation of the controls and procedures and the effect of the controls and procedures on the information generated for use in this Quarterly Report. In the course of the evaluation, we sought to identify whether we had any data errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process improvements, was being undertaken if needed. This type of evaluation is performed on a quarterly basis so that conclusions concerning the effectiveness of our disclosure controls and procedures can be reported in our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K. Many of the components of our disclosure controls and procedures are also evaluated by our internal audit department, by our legal department and by personnel in our finance organization. The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures on an ongoing basis and to maintain them as dynamic systems that change as conditions warrant.
Conclusions regarding Disclosure Controls. Based on the required evaluation of our disclosure controls and procedures, our CEO and CFO have concluded that, as of June 30, 2023, we maintain disclosure controls and procedures that are effective in providing reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting. During our most recent fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
24
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
We are involved, from time to time, in various claims and lawsuits incidental to the conduct of our business in the ordinary course. We carry insurance coverage in such amounts in excess of our self-insured retention as we believe to be reasonable under the circumstances and that may or may not cover any or all of our liabilities in respect of these matters. We do not believe that the ultimate resolution of these matters will have a material adverse impact on our consolidated financial position, cash flows or results of operations.
We are subject to a number of U.S., federal, state and local laws and regulations, as well as the laws and regulations applicable in each foreign country or jurisdiction in which we do business. These laws and regulations govern, among other things, the composition, packaging, labeling and safety of the products we sell, the methods we use to sell these products and the methods we use to import these products. We believe that we are in material compliance with such laws and regulations, although no assurance can be provided that this will remain true going forward.
Item 1A. Risk Factors
In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors contained in Item 1A. “Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, which could materially affect our business, financial condition or future results. There have been no material changes from the risk factors disclosed in such Annual Report. The risks described in such Annual Report and herein are not the only risks facing our company.
25
Item 6. Exhibits
Exhibit No. |
|
Description |
|
|
|
3.1 |
|
|
|
|
|
3.2 |
|
|
|
|
|
10.1 |
|
|
|
|
|
10.2 |
|
|
|
|
|
22 |
|
|
|
|
|
31.1 |
|
|
|
|
|
31.2 |
|
|
|
|
|
32.1 |
|
|
|
|
|
32.2 |
|
|
|
|
|
101 |
|
The following financial information from our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Earnings; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statements of Stockholders’ Equity; (v) the Condensed Consolidated Statements of Cash Flows; and (vi) the Notes to Condensed Consolidated Financial Statements. |
|
|
|
104 |
|
The cover page from our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023, formatted in iXBRL (contained in Exhibit 101). |
* Included herewith
26
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.
|
|
|
SALLY BEAUTY HOLDINGS, INC. |
|
|
|
(Registrant) |
|
|
|
|
Date: August 3, 2023 |
|
|
|
|
|
|
|
|
By: |
|
/s/ Marlo M. Cormier |
|
|
|
Marlo M. Cormier |
|
|
|
Senior Vice President, Chief Financial Officer |
|
|
|
For the Registrant and as its Principal Financial Officer |
27
Exhibit 10.2
FOURTH AMENDMENT TO AMENDED
AND RESTATED CREDIT AGREEMENT
This Fourth Amendment to Amended and Restated Credit Agreement (this “Fourth Amendment”) is made as of April 19, 2023 by and among:
SALLY HOLDINGS LLC, a Delaware limited liability company, BEAUTY SYSTEMS GROUP, LLC, a Virginia limited liability company, and SALLY BEAUTY SUPPLY, LLC, a Virginia limited liability company (collectively, the “Domestic Borrowers”);
BEAUTY SYSTEMS GROUP (CANADA), INC., a New Brunswick corporation (the “Canadian Borrower”);
the Guarantors undersigned below (collectively, with each other Person that from time to time becomes a “Guarantor” hereunder, the “Guarantors”);
each Lender from time to time party hereto;
BANK OF AMERICA, N.A., as Administrative Agent, and Collateral Agent;
BANK OF AMERICA, N.A. (acting through its Canada branch), as Canadian Agent; and
BANK OF AMERICA, N.A., JPMORGAN CHASE BANK, N.A. and TRUIST SECURITIES,
as Joint Lead Arrangers and Syndication Agents.
In consideration of the mutual covenants herein contained and benefits to be derived herefrom.
W I T N E S S E T H:
WHEREAS, on July 6, 2017, the Borrowers, the Guarantors, the Agents and the Lenders, entered in a certain Amended and Restated Credit Agreement (as amended pursuant to a First Amendment to Amended and Restated Credit Agreement, dated as of April 15, 2020, as amended pursuant to a Second Amendment to Amended and Restated Credit Agreement, dated as of September 2, 2020, as amended pursuant to a Third Amendment to Amended and Restated Credit Agreement, dated as of May 11, 2021 and as amended, restated, supplemented or otherwise modified and in effect on the date hereof, the “Existing Credit Agreement”, and the Existing Credit Agreement, as amended by this Fourth Amendment, and as may be further amended, amended and restated, restated, supplemented, extended or otherwise modified and in effect from time to time is referred to herein as the “Credit Agreement”);
WHEREAS, the Borrowers have requested, among other things, that the Agents and the Lenders agree to amend certain provisions of the Existing Credit Agreement, in each case, subject to the terms and conditions hereof; and
WHEREAS, the Agents and the Lenders have agreed to so amend subject to the terms and conditions hereof.
1
NOW, THEREFORE, it is hereby agreed among the Borrowers, the Agent, and the Lenders as follows:
2
(a) the legality, validity and enforceability of the remaining provisions of this Fourth Amendment shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without limiting the foregoing provisions of this Section 5(c), if and to the extent that the enforceability of any provisions in this Fourth Amendment relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Administrative Agent, the L/C Issuer or the Swing Line Lender, as applicable, then such provisions shall be deemed to be in effect only to the extent not so limited.
[signature pages follow]
3
IN WITNESS WHEREOF, the parties have hereunto caused this Fourth Amendment to be executed and their seals to be hereto affixed as of the date first above written.
DOMESTIC BORROWERS:
SALLY HOLDINGS LLC
as Domestic Borrower
/s/ Marlo Cormier
Name: Marlo Cormier
Title: Senior Vice President and Chief Financial Officer
BEAUTY SYSTEMS GROUP LLC
as Domestic Borrower
/s/ Marlo Cormier
Name: Marlo Cormier
Title: Senior Vice President and Chief Financial Officer
SALLY BEAUTY SUPPLY LLC
as Domestic Borrower
/s/ Marlo Cormier
Name: Marlo Cormier
Title: Senior Vice President and Chief Financial Officer
CANADIAN BORROWER:
BEAUTY SYSTEMS GROUP (CANADA), INC.
/s/ Marlo Cormier
Name: Marlo Cormier
Title: Senior Vice President and Chief Financial Officer
[Signature page to Fourth Amendment to Amended and Restated Credit Agreement]
GUARANTORS:
as Canadian Borrower SALLY CAPITAL INC. SALLY BEAUTY HOLDINGS, INC. SALLY INVESTMENT HOLDINGS LLC ARCADIA BEAUTY LABS LLC ARMSTRONG MCCALL HOLDINGS, INC. ARMSTRONG MCCALL HOLDINGS, L.L.C. ARMSTRONG MCCALL, L.P. ARMSTRONG MCCALL MANAGEMENT, L.C. BEAUTY HOLDING LLC DIORAMA SERVICES COMPANY, LLC INNOVATIONS – SUCCESSFUL SALON SERVICES LOXA BEAUTY LLC NEKA SALON SUPPLY, INC. PROCARE LABORATORIES, INC. SALLY BEAUTY INTERNATIONAL FINANCE LLC SALLY BEAUTY MILITARY SUPPLY LLC BANK OF AMERICA, N.A., as Administrative Agent and as Collateral Agent
/s/ Marlo Cormier
Name: Marlo Cormier
Title: Senior Vice President and Chief Financial Officer
SALON SUCCESS INTERNATIONAL, LLC
/s/ Denise Paulonis
Name: Denise Paulonis
Title: Manager
[Signature page to Fourth Amendment to Amended and Restated Credit Agreement]
/s/ Matthew Potter
Name: Matthew Potter
Title: Senior Vice President
BANK OF AMERICA, N.A. (ACTING THROUGH
ITS CANADA BRANCH), as Canadian Agent BANK OF AMERICA, N.A., as a Revolving Domestic Lender, Domestic L/C Issuer and Domestic Swing Line Lender
/s/ Sylwia Durkiewicz
Name: Sylwia Durkiewicz
Title: Vice President
[Signature page to Fourth Amendment to Amended and Restated Credit Agreement]
/s/ Matthew Potter
Name: Matthew Potter
Title: Senior Vice President
BANK OF AMERICA, N.A. (ACTING THROUGH
ITS CANADA BRANCH), as a Canadian Lender, and Canadian Swing Line Lender JPMORGAN CHASE BANK, N.A., as a Revolving Domestic Lender
/s/ Sylwia Durkiewicz
Name: Sylwia Durkiewicz
Title: Vice President
[Signature page to Fourth Amendment to Amended and Restated Credit Agreement]
/s/ Laura Woodward
Name: Laura Woodward
Title: Vice President
JPMORGAN CHASE BANK, N.A., TORONTO
BRANCH, as a Canadian Lender
/s/ Jeffrey Coleman
Name: Jeffery Coleman
Title: Executive Director
[Signature page to Fourth Amendment to Amended and Restated Credit Agreement)
TRUIST BANK, as a Revolving Domestic Lender
/s/ Kelly M. Thomas
Name: Kelly M. Thomas
Title: Vice President
TRUIST BANK, as a Canadian Lender CITIZENS BANK, N.A., as a Revolving Domestic Lender
/s/ Kelly M. Thomas
Name: Kelly M. Thomas
Title: Vice President
[Signature page to Fourth Amendment to Amended and Restated Credit Agreement]
/s/ William Boyle
Name: William Boyle
Title: AVP
CITIZENS BANK, N.A., as a Canadian Lender
/s/ William Boyle
Name: William Boyle
Title: AVP
[Signature page to fourth Amendment to Amended and Restated Credit Agreement]
REGIONS BANK, as a Revolving Domestic Lender
/s/ Alberto Casasus
Name: Alberto Casasus
Title: Director
REGIONS BANK, as a Canadian Lender U.S. BANK NATIONAL ASSOCIATION, as a
/s/ Alberto Casasus
Name: Alberto Casasus
Title: Director
[Signature page to Fourth Amendment to Amended and Restated Credit Agreement]
Revolving Domestic Lender
/s/ Carol Anderson
Name: Carol Anderson
Title: Senior Vice President
U.S. BANK NATIONAL ASSOCIATION, ACTING THROUGH ITS CANADA BRANCH, as a Canadian Dated as of July 6, 2017,
Lender
/s/ Carol Anderson
Name: Carol Anderson
Title: Senior Vice President
[Signature page to Fourth Amendment to Amended and Restated Credit Agreement]
Annex A
Composite Credit Agreement
[see attached]
Annex A
AMENDED AND RESTATED CREDIT AGREEMENT
as amended on April 15, 2020,
as amended on September 2, 2020, as amended on May 11, 2021, and as further amended on April 19, 2023
among
SALLY HOLDINGS LLC BEAUTY SYSTEMS GROUP LLC SALLY BEAUTY SUPPLY LLC
as Domestic Borrowers
BEAUTY SYSTEMS GROUP (CANADA), INC.
as Canadian Borrower
The Guarantors From Time to Time Party Hereto BANK OF AMERICA, N.A.
as Administrative Agent and Collateral Agent
BANK OF AMERICA, N.A. (acting through its Canada branch) as Canadian Agent
The Other Lenders Party Hereto
BANK OF AMERICA, N.A. JPMORGAN CHASE BANK, N.A. TRUIST SECURITIES
as Joint Lead Arrangers and Syndication Agents ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1
TABLE OF CONTENTS
Section Page
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY; APPOINTMENT OF PARENT 9593
(i)
(ii)
(3)
(4)
SCHEDULES
1.01 Guarantors
2.01 Commitments and Applicable Percentages
5.01 Loan Parties Organizational Information
5.03 Governmental Authorization; No Consents
5.06 Litigation 5.08(b)(1) Owned Real Estate 5.08(b)(2) Leased Real Estate
5.09 Environmental Matters
5.10 Insurance
5.13 Subsidiaries; Other Equity Investments
5.21(a) DDAs
5.21(b) Credit Card Arrangements
6.02 Financial and Collateral Reporting
10.02 Administrative Agent’s Office; Certain Addresses for Notices
EXHIBITS
Form of
A-1 Domestic Committed Loan Notice
A-2 Canadian Committed Loan Notice
B-1 Domestic Swing Line Loan Notice
B-2 Canadian Swing Line Loan Notice C-1 Domestic Revolving Note
C-2 Canadian Revolving Note C-3 Domestic Swing Line Note C-4 Canadian Swing Line Note This AMENDED AND RESTATED CREDIT AGREEMENT (“Agreement”) is entered into as of July 6, 2017, as amended on April 15, 2020, as amended on September 2, 2020, as amended on May 11, 2021, and as further amended on April 19, 2023, among
(5)
AMENDED AND RESTATED CREDIT AGREEMENT
SALLY HOLDINGS LLC, a Delaware limited liability company, BEAUTY SYSTEMS GROUP, LLC, a Virginia limited liability company, and SALLY BEAUTY SUPPLY, LLC, a Virginia limited liability company (collectively, the “Domestic Borrowers”);
BEAUTY SYSTEMS GROUP (CANADA), INC., a New Brunswick corporation (the “Canadian Borrower”),
the Persons named on Schedule 1.01 hereto (collectively, with each other Person that from time to time becomes a “Guarantor” hereunder, the “Guarantors”);
each Revolving Lender from time to time party hereto;
BANK OF AMERICA, N.A., as Administrative Agent and Collateral Agent; and BANK OF AMERICA, N.A. (acting through its Canada branch), as Canadian Agent.
WHEREAS, prior to the date of this Agreement, the Borrowers, the Guarantors, the lenders party thereto, Bank of America, N.A., as administrative agent and collateral agent, Bank of America, N.A. (acting through its Canada branch), as Canadian agent, Wells Fargo Capital Finance, LLC, as syndication agent, and JPMorgan Chase Bank, N.A., as documentation agent, previously entered into a Credit Agreement, dated as of November 12, 2010, as amended on June 8, 2012 and on July 26, 2013 (as so amended, the “Existing Credit Agreement”), pursuant to which the lenders party thereto provided the Borrowers with certain financial accommodations; and
WHEREAS, the undersigned desire to amend and restate the Existing Credit Agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Agreement, and for good and valuable consideration, the receipt of which is hereby acknowledged, the undersigned hereby agree that the Existing Credit Agreement shall be amended and restated in its entirety as follows (it being agreed that this Agreement shall not be deemed to evidence or result in a novation or repayment and reborrowing of the Obligations under, and as defined in, the Existing Credit Agreement):
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
“2022 Notes” has the meaning given to such term in the definition of “Notes Indenture”. “Accelerated Borrowing Base Delivery Event” means either (a) the occurrence and continuance
of any Event of Default, or (b) the failure of the Borrowers to maintain Excess Availability of at least the greater of (i) $40,000,000, or (ii) twelve and one-half percent (12.5%) of the Loan Cap. For purposes of this Agreement, the occurrence of an Accelerated Borrowing Base Delivery Event shall be deemed continuing, (A) so long as such Event of Default has not been waived, and/or (B) if the Accelerated Borrowing Base Delivery Event arises as a result of the Borrowers’ failure to achieve Excess Availability as required hereunder, until the date Excess Availability shall have been not less than the greater of (x)
$40,000,000 or (y) twelve and one-half percent (12.5%) of the Loan Cap for forty-five (45) consecutive days. The termination of an Accelerated Borrowing Base Delivery Event as provided herein shall in no way limit, waive or delay the occurrence of a subsequent Accelerated Borrowing Base Delivery Event in the event that the conditions set forth in this definition again arise.
“Accommodation Payment” as defined in Section 10.22(d).
“Account” means “accounts” as defined in the UCC and in the PPSA, (or to the extent governed by the Civil Code of Québec, defined as “claims” for the purposes of the Civil Code of Québec) and also means a right to payment of a monetary obligation, whether or not earned by performance, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, or (c) arising out of the use of a credit or charge card or information contained on or for use with the card.
“Accounts Receivable Reporting Requirement” means, at the time of determination (i) Excess Availability is less than 40% of the Loan Cap or (ii) Eligible Trade Receivables multiplied by the Receivables Advance Rate comprise greater than 12.5% of the Combined Borrowing Base.
“ACH” means automated clearing house transfers.
“Acquisition” means, with respect to any Person (a) an Investment in, or a purchase of a Controlling interest in, the Equity Interests of any other Person, (b) a purchase or other acquisition of all or substantially all of the assets or properties of, another Person or of any business unit of another Person, (c) any merger, amalgamation or consolidation of such Person with any other Person or other transaction or series of transactions resulting in the acquisition of all or substantially all of the assets, or a Controlling interest in the Equity Interests, of any Person, or (d) any acquisition of any Store locations of any Person, in each case in any transaction or group of transactions which are part of a common plan (other than the acquisition of any Store locations of any franchisees in the ordinary course of business).
“Acquisition/Investment/Debt Payment Conditions” means, at the time of determination with respect to any specified transaction or payment, that (a) no Default or Event of Default then exists or would arise as a result of entering into such transaction or the making of such payment, and (b) if after giving pro forma effect to such transaction or payment, Excess Availability for the 30-day period immediately preceding, and on the date of, such transaction or payment was equal to or greater than 15% of the Loan Cap. If after giving pro forma effect to such transaction or payment, Excess Availability would be equal to or less than 40% of the Loan Cap, the Parent shall furnish the Administrative Agent with prior notice of any such transaction or payment which is subject to the Acquisition/Investment/Debt Payment Conditions, together with supporting documentation evidencing the satisfaction of the Excess Availability requirements, no less than five (5) Business Days prior to the consummation of any such transaction or payment.
“Additional Commitment Lender” shall have the meaning provided in Section 2.15. “Adjustment” has the meaning specified in Section 3.03(b).
“Adjustment Date” means the first day of each Fiscal Quarter.
-2-
“Administrative Agent” means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent, or any of their respective branches or Affiliates.
“Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify the Parent and the Lenders.
“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.
“Affected Financial Institution” means any EEA Financial Institution or UK Financial Institution.
“Affiliate” means, with respect to any Person, (i) another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified, (ii) any director, officer, managing member, partner, trustee, or beneficiary of that Person, (iii) any other Person directly or indirectly holding 10% or more of any class of the Equity Interests of that Person, and (iv) any other Person 10% or more of any class of whose Equity Interests is held directly or indirectly by that Person.
“Agent(s)” means, individually, the Administrative Agent or the Canadian Agent, and collectively means all of them.
“Agent Parties” shall have the meaning specified in Section 10.02(c).
“Aggregate Total Commitments” means, at any time of calculation, without duplication, the sum of the Commitments. As of the Third Amendment Effective Date, the Aggregate Total Commitments are
$500,000,000.
“Agreement” means this Credit Agreement.
“Allocable Amount” has the meaning specified in Section 10.22(d).
“Applicable Lenders” means the Required Lenders, Required Revolving Lenders, all affected Lenders, or all Lenders, as the context may require.
“Applicable Margin” means, on each Adjustment Date , the Applicable Margin as determined from the following pricing grid based upon the Average Daily Availability as of the Fiscal Quarter ended immediately preceding such Adjustment Date; provided, however, that notwithstanding anything to the contrary set forth herein, upon the occurrence of an Event of Default, the Administrative Agent may, and at the direction of the Required Lenders shall, immediately increase the Applicable Margin to that set forth in Level II (even if the Average Daily Availability requirements for a different Level have been met) and interest shall accrue at the Default Rate; provided further if any Borrowing Base Certificates are at any time restated or otherwise revised (including as a result of an audit) or if the information set forth in any Borrowing Base Certificates otherwise proves to be false or incorrect such that the Applicable Margin would have been higher than was otherwise in effect during any period, without constituting a waiver of any Default or Event of Default arising as a result thereof, interest due under this Agreement shall be immediately and retroactively recalculated at such higher rate for any applicable periods and shall be due and payable on demand.
-3-
Level |
Average Daily Availability |
Applicable Margin for Revolving Loans that are Term SOFR Loans/BA Rate Loans |
Applicable Margin for Revolving Loans that are Domestic Prime Rate Loans /US Index Rate Loans Canadian Prime Rate Loans |
I |
Greater than or equal to 50% of the Loan Cap |
1.25% |
0.25% |
II |
Less than 50% of the Loan Cap |
1.50% |
0.50% |
“Applicable Percentage” means with respect to (a) any Revolving Domestic Lender at any time, the percentage (carried out to the ninth decimal place) of the Revolving Domestic Total Commitments represented by such Revolving Domestic Lender’s Revolving Domestic Commitment at such time and
(b) any Canadian Lender at any time, the percentage (carried out to the ninth decimal place) of the Canadian Total Commitments represented by such Canadian Lender’s Canadian Commitment at such time. If the commitment of each Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 2.06 or Section 8.02 or if the Aggregate Total Commitments have expired, then the Applicable Percentages of each Lender shall be determined based on the Applicable Percentages of such Lender most recently in effect, giving effect to any subsequent assignments. The initial Applicable Percentages of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.
“Applicable Rate” means, at any time of calculation, the Applicable Margin for Loans which are Term SOFR Loans.
“Appraised Value” means the appraised orderly liquidation value, net of costs and expenses to be incurred in connection with any such liquidation, which value is expressed as a percentage of Cost of Eligible Inventory as set forth in the inventory stock ledger of the Domestic Loan Parties and the Canadian Borrower, which value shall be determined from time to time by the most recent appraisal undertaken by an independent appraiser engaged by the Administrative Agent.
“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender (c) an entity or an Affiliate of an entity that administers or manages a Lender, or
(d) the same investment advisor or an advisor under common control with such Lender, Affiliate or advisor, as applicable.
“Arrangers” mean Bank of America, JPMorgan Chase Bank, N.A. and Truist Securities, in their capacities as joint lead arrangers and syndication agents.
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“Assignee Group” means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.06(b)), and accepted by the Administrative Agent, in substantially the form of Exhibit D or any other form approved by the Administrative Agent.
“Attributable Indebtedness” means, on any date, (a) in respect of any Capital Lease Obligation of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease or similar payments under the relevant lease or other applicable agreement or instrument that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease, agreement or instrument were accounted for as a capital lease.
“Audited Financial Statements” means the audited Consolidated balance sheet of the Parent and its Subsidiaries for the Fiscal Year ended September 30, 2020, and the related Consolidated statements of income or operations, Shareholders’ Equity and cash flows for such Fiscal Year of the Parent and its Subsidiaries, including the notes thereto.
“Auto-Extension Letter of Credit” shall have the meaning specified in Section 2.03(b)(iii).
“Available Canadian Tenor” means, as of any date of determination and with respect to the then-current Canadian Benchmark, as applicable, (a) if the then-current Canadian Benchmark is a term rate, any tenor for such Canadian Benchmark that is or may be used for determining the length of an Interest Period or (b) otherwise, any payment period for interest calculated with reference to such Canadian Benchmark, as applicable, pursuant to this Agreement as of such date.
“Availability Period” means the period from and including the Effective Date to the earliest of
(a) the Maturity Date, (b) the date of termination of the Aggregate Total Commitments pursuant to Section 2.06, and (c) the date of termination of the Commitment of each Lender to make Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02.
“Availability Reserves” means such reserves as the Administrative Agent from time to time determines in its Permitted Discretion as being appropriate (a) to reflect the impediments to the Agents’ ability to realize upon the Collateral, (b) to reflect claims and liabilities that the Administrative Agent determines will need to be satisfied in connection with the realization upon the Collateral, (c) to reflect criteria, events, conditions, contingencies or risks which adversely affect any component of the Domestic Borrowing Base, Canadian Borrowing Base or the assets, business, financial performance or financial condition of any Loan Party, or (d) to reflect that a Default or an Event of Default then exists. Without limiting the generality of the foregoing, Availability Reserves may include, in the Administrative Agent’s Permitted Discretion, (but are not limited to) reserves based on: (i) (A) rent for any Store locations, and
(B) for each distribution center leased by a Loan Party unless the applicable lessor has delivered to the Collateral Agent or the Canadian Agent, as applicable, a Collateral Access Agreement; (ii) customs duties, and other costs to release Inventory which is being imported into the United States or Canada; (iii) outstanding Taxes and other governmental charges, including, without limitation, ad valorem, real estate, personal property, sales, claims of the PBGC and other Taxes which may have priority over the interests of the Collateral Agent or the Canadian Agent in any Collateral; (iv) salaries, wages, vacation pay and benefits due and owing to employees of any Loan Party, (v) Customer Credit Liabilities, (vi) customer deposits, (viii) reserves for reasonably anticipated changes in the Appraised Value of Eligible Inventory between appraisals, (viii) warehousemen’s, carrier’s or bailee’s charges and other Permitted Encumbrances which may have priority over the interests of the Collateral Agent or the Canadian Agent in any Collateral, (ix) amounts due to vendors on account of consigned goods (x) the Agents’ estimate of Canadian Priority Payable Reserves, (xi) reserves to reflect the liabilities and obligations of the Loan Parties with respect to Bank Products then provided or outstanding, and (xii) reserves to reflect the reasonably anticipated liabilities and obligations of the Loan Parties with respect to Cash Management Services then provided or outstanding.
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The amount of any Reserve established by the Administrative Agent hereunder shall have a reasonable relationship to the event, condition or other matter which is the basis for such Reserve. All such Reserves shall be established in good faith and without duplication for items already excluded from “Eligible Credit Card Receivables”, “Eligible Inventory” and “Eligible Trade Receivables” as set forth in the lettered clauses in the definitions thereof or reserves or criteria deducted in computing the Appraised Value of Eligible Inventory or the imposition of Inventory Reserves. To the extent required pursuant to Section 2.01(e), the Administrative Agent shall give the Borrowers three (3) Business Days prior written notice of the imposition of any Reserve and, upon delivery of such notice, the Administrative Agent shall be available to discuss the proposed Availability Reserves and the Borrowers may take such action as may be required so that the event, condition or other matter that is the basis for the Availability Reserve no longer exists or has been otherwise adequately addressed by the Borrowers to the reasonable satisfaction of the Administrative Agent.
Available Tenor
“Average Daily Availability” shall mean the average daily Excess Availability for the immediately preceding Fiscal Quarter.
“BA Equivalent Loan” means any Canadian Loan in CD$ bearing interest at a rate determined by reference to the BA Rate in accordance with the provisions of Article II.
“BA Rate” means, for the Interest Period of each BA Equivalent Loan, the higher of:
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
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“Bail-In Legislation” means with respect to (a) 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, or (b) 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).
“Bank of America” means Bank of America, N.A. and its successors.
“Bank of America-Canada Branch” means Bank of America, N.A. (acting through its Canada branch), a banking corporation carrying on business under the Bank Act (Canada).
“Bank of Canada Overnight Rate” means, on any date of determination, the rate of interest charged by the Bank of Canada on one-day Canadian dollar loans to financial institutions, for such date.
“Bank Products” means any services or facilities provided to the Parent or any of its Subsidiaries by any Person that, at the time such Person enters into a definitive agreement to provide such services or facilities, is the Administrative Agent, the Canadian Agent, any Lender, or any of their respective branches or Affiliates, including, without limitation, on account of (a) Swap Contracts and (b) leasing, but excluding Cash Management Services.
Benchmark provided Section 3.03(b)
Benchmark Replacement:
provided
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provided
provided that to the extent such market practice is not administratively feasible for the Administrative
Benchmark Replacement Conforming Changes Replacement, any technical, administrative or operational changes (including changes to the definition 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 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 such 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
Benchmark Transition Event ,
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
“Blocked Account” has the meaning specified in Section 6.12(a)(ii).
“Blocked Account Agreement” means, with respect to an account established by a Loan Party, an agreement, in form and substance satisfactory to the Administrative Agent and (if a party thereto) the Canadian Agent, establishing control (as defined in the UCC or other applicable Law) of such Blocked Account by the Administrative Agent (for the benefit of itself and the other Credit Parties) or the Canadian Agent (for the benefit of itself and the other Canadian Credit Parties) and whereby the bank maintaining such account agrees, upon the occurrence and during the continuance of a Trigger Event, to comply only with the instructions originated by the Administrative Agent or the Canadian Agent, as applicable, without the further consent of any Loan Party.
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“Blocked Account Bank” means each bank with whom deposit accounts are maintained in which any funds of any of the Loan Parties from one or more DDAs are concentrated and with whom a Blocked Account Agreement has been, or is required to be, executed in accordance with the terms hereof.
“Board” means the Board of Governors of the Federal Reserve System of the United States of America.
“Borrower Materials” has the meaning specified in Section 6.02.
“Borrowers” means, collectively, the Domestic Borrowers and the Canadian Borrower.
“Borrowing” means a Committed Borrowing or a Swing Line Borrowing, as the context may
require.
“Borrowing Base Certificate” means a certificate substantially in the form of Exhibit E hereto (with such changes therein as may be required by the Administrative Agent to reflect the components of and reserves against the Domestic Borrowing Base as provided for hereunder from time to time, and as may be required by the Canadian Agent to reflect the components of and reserves against the Canadian Borrowing Base as provided for hereunder from time to time), executed and certified as being accurate and complete, by a Responsible Officer of the Parent (with respect to the Domestic Borrowing Base) and the Canadian Borrower (with respect to the Canadian Borrowing Base) which shall include appropriate exhibits, schedules, supporting documentation, and additional reports as reasonably requested in advance by the Administrative Agent (with respect to the Domestic Borrowing Base) or the Canadian Agent (with respect to the Canadian Borrowing Base).
“Business Day” means (a) any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent’s Office is located , and (b) with respect to any Loan to be made in an Optional Currency, a day on which dealings in the relevant Optional Currency can be carried on in the principal financial center of the country in which such currency is legal tender, provided that when used in connection with any Loan by a Canadian Lender, the term “Business Day” shall also exclude any day on which banks are authorized or required by law to be closed in Toronto, Ontario, Canada.
“Canadian Agent” means Bank of America- Canada Branch, for its own benefit and the benefit of the other Canadian Credit Parties, or any successor Canadian agent.
“Canadian Agent’s Office” means the Canadian Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Canadian Agent may from time to time notify the Canadian Borrower and the Canadian Lenders.
“Canadian Availability” means, as of any date of determination thereof, the result, if a positive number, of:
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minus
In calculating Canadian Availability at any time and for any purpose under this Agreement any amount calculated or referenced in Dollars shall also refer to the Equivalent Amount in CD$.
“Canadian Benchmark” means, initially, the BA Rate; provided that if a replacement of the Canadian Benchmark has occurred pursuant to Section 3.03(i), then “Canadian Benchmark” means the applicable Canadian Benchmark Replacement to the extent that such Canadian Benchmark Replacement has replaced such prior benchmark rate. Any reference to “Canadian Benchmark” shall include, as applicable, the published component used in the calculation thereof.
“Canadian Benchmark Replacement” means, for any Available Canadian Tenor:
and
provided that, if the Canadian Benchmark Replacement as determined pursuant to clause (a) or (b) above would be less than the Rate Floor, the Canadian Benchmark Replacement will be deemed to be the Rate Floor for the purposes of this Agreement and the other Loan Documents.
Any Canadian Benchmark Replacement shall be applied in a manner consistent with market practice; provided, that, to the extent such market practice is not administratively feasible for the Administrative Agent, such Canadian Benchmark Replacement shall be applied in a manner as otherwise reasonably determined by the Administrative Agent.
“Canadian Benchmark Replacement Conforming Changes” means, with respect to any Canadian Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Canadian Prime Rate”, the definition of “Business Day”, the
definition of “Interest Period”, timing and frequency of determining rates and making payments of
interest, timing of borrowing requests or prepayment, conversion or continuation notices, the
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applicability and length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Administrative Agent decides, in consultation with the Canadian Borrower, may be appropriate to reflect the adoption and implementation of such Canadian 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 such Canadian Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides, in consultation with the Canadian Borrower, is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Canadian Benchmark Transition Event” means, with respect to any then-current Canadian Benchmark other than the BA Rate, the occurrence of a public statement or publication of information by or on behalf of the administrator of the then-current Canadian Benchmark, the regulatory supervisor for the administrator of such Canadian Benchmark, any Governmental Authority with jurisdiction over such administrator for such Canadian Benchmark, or the Bank of Canada, announcing or stating that (a) such administrator has ceased or will cease on a specified date to provide all Available Canadian Tenors of such Canadian Benchmark, 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 Canadian Tenor of such Canadian Benchmark or (b) all Available Canadian Tenors of such Canadian Benchmark are or will no longer be representative of the underlying market and economic reality that such Canadian Benchmark is intended to measure and that representativeness will not be restored.
“Canadian Borrower” has the meaning specified in the introductory paragraph hereto.
“Canadian Borrowing” means a Canadian Committed Borrowing made to the Canadian Borrower or a Swing Line Borrowing made to the Canadian Borrower, as the context may require.
“Canadian Borrowing Base” means, at any time of calculation, an Equivalent Amount in Dollars equal to:
plus
plus
minus
“Canadian Committed Borrowing” means a borrowing consisting of simultaneous Canadian Committed Loans of the same Type and, in the case of BA Equivalent Loans or Term SOFR Loans, having the same Interest Period made by each of the Canadian Lenders pursuant to Section 2.01.
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“Canadian Committed Loan” means any loan at any time made by any Canadian Lender pursuant to Section 2.01.
“Canadian Commitments” means, as to each Canadian Lender, its obligation to (a) make Canadian Committed Loans to the Canadian Borrower pursuant to Section 2.01(b), (b) purchase participations in Canadian L/C Obligations, and (c) purchase participations in Swing Line Loans made to the Canadian Borrower, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Canadian Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Canadian Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.
“Canadian Concentration Account” has the meaning specified in Section 6.12(c).
“Canadian Credit Extensions” mean each of the following: (a) a Canadian Borrowing and (b) a Canadian L/C Credit Extension.
“Canadian Credit Party” or “Canadian Credit Parties” means (a) individually, (i) each Canadian Lender and its branches and Affiliates, (ii) the Canadian Agent and its Affiliates, (iii) each L/C Issuer of any Canadian Letter of Credit, (iv) the Arrangers, (v) each beneficiary of any indemnification obligation undertaken by any Loan Party under any Loan Document with respect to the Canadian Liabilities,
(vi) each holder of any Other Canadian Liabilities, and (vii) the successors and assigns of each of the foregoing, and (b) collectively, all of the foregoing.
“Canadian L/C Borrowing” means an extension of credit resulting from a drawing under any Canadian Letter of Credit which has not been reimbursed on or prior to the date required to be reimbursed by the Canadian Borrower, pursuant to Section 2.03(c)(i) or refinanced as a Canadian Committed Borrowing.
“Canadian L/C Credit Extension” means, with respect to any Canadian Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.
“Canadian L/C Obligations” means, as at any date of determination and without duplication, the aggregate Stated Amount of all outstanding Canadian Letters of Credit plus the aggregate of all Unreimbursed Amounts under Canadian Letters of Credit, including all Canadian L/C Borrowings.
“Canadian Lenders” means the Lenders having Canadian Commitments from time to time or at any time. Any Person may be a Canadian Lender only if it is a financial institution that is listed on Schedule I, II or III of the Bank Act (Canada), has received an approval to have a financial establishment in Canada pursuant to Section 522.21 of the Bank Act (Canada), is not a foreign bank for purposes of the Bank Act (Canada), or is not prohibited by applicable law, including the Bank Act (Canada), from having a Canadian Commitment or making any Canadian Loans or having any LC Exposure with respect to Canadian Letters of Credit under this Agreement.
“Canadian Letter of Credit” means each Letter of Credit issued hereunder for the account of the Canadian Borrower.
“Canadian Letter of Credit Sublimit” means an amount equal to $10,000,000. The Canadian Letter of Credit Sublimit is part of, and not in addition to, the Canadian Total Commitments. A permanent reduction of the Canadian Total Commitments shall not require a corresponding pro rata reduction in the Canadian Letter of Credit Sublimit; provided, however, that if the Canadian Total Commitments are reduced to an amount less than the Canadian Letter of Credit Sublimit, then the
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Canadian Letter of Credit Sublimit shall be reduced to an amount equal to (or, at the Canadian Borrower’s option, less than) the Canadian Total Commitments.
“Canadian Liabilities” means (a) all advances to, and debts (including principal, interest, fees, costs, and expenses), liabilities, obligations, covenants, indemnities, and duties of, any Canadian Loan Party arising under any Loan Document or otherwise with respect to any Canadian Loan or Canadian Letter of Credit (including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral therefor), whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest, fees, costs, expenses and indemnities that accrue after the commencement by or against any Canadian Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding and (b) any Other Canadian Liabilities.
“Canadian Loan” means an extension of credit by a Canadian Lender to the Canadian Borrower under Article II in the form of a Committed Loan or a Swing Line Loan.
“Canadian Loan Cap” means, at any time of determination, the lesser of (a) the Canadian Total Commitments and (b) the Canadian Borrowing Base.
“Canadian Loan Parties” means, collectively, the Canadian Borrower, and each Canadian Subsidiary that is a Guarantor of the Canadian Liabilities. “Canadian Loan Party” means any one of such Persons.
“Canadian Note” means a promissory note made by the Canadian Borrower in favor of a Canadian Lender evidencing Canadian Loans made by such Canadian Lender, substantially in the form of Exhibit C-1.
“Canadian Overadvance” means a Canadian Credit Extension to the extent that, immediately after the making of such Canadian Credit Extension, the aggregate principal balance of all Canadian Total Outstandings exceeds the Canadian Loan Cap as then in effect.
“Canadian Pension Plan” means a pension plan that is registered under the Pension Benefits Act (Ontario) or other applicable pension benefits standards legislation of another Canadian province or territory and the Income Tax Act (Canada) and that is (a) maintained or sponsored by any Canadian Loan Party or any Canadian Subsidiary for its employees, (b) maintained pursuant to a collective bargaining agreement, or other arrangement under which more than one employer makes contributions and to which any Canadian Loan Party or any Canadian Subsidiary is making or accruing an obligation to make contributions, or (c) a plan with respect to which any Canadian Loan Party has incurred or may incur liability, including contingent liability either to such plan or to any Person or Governmental Authority, including the FSRA. For purposes of clarity, “Canadian Pension Plan” shall not include the group registered retirement savings plan in which the employees of any Canadian Loan Party or any Canadian Subsidiary participate and which is not subject to any pension benefits standards legislation or the registered pension plan provisions of the Income Tax Act (Canada).
“Canadian Prime Rate” means, for any day, the greater of (i) a fluctuating rate of interest per annum equal to the rate of interest in effect for such day as publicly announced from time to time by Bank of America-Canada Branch as its reference rate of interest for loans made in CD$ and designated as its “prime” rate being a rate set by Bank of America-Canada Branch based upon various factors, including Bank of America-Canada Branch’s costs and desired return, general economic conditions and other factors and is used as a reference point for pricing some loans; provided that in the event that the Bank of America-Canada Branch (including any successor or assignor) does not at any time publicly announce a prime rate, such rate shall be the “prime rate” publicly announced by a Schedule 1 chartered bank in Canada selected by the Canadian Agent, (ii) plus [reserved], and (iii) the BA Rate for a one month Interest Period as determined on such day, plus 1.0%; and provided, further, in all events, such Canadian Prime Rate shall not be less than 0%.
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Any change in the prime rate announced by Bank of America-Canada Branch shall take effect at the opening of business on the day specified in the public announcement of such change. Each interest rate based on the Canadian Prime Rate hereunder, shall be adjusted simultaneously with any change in the Canadian Prime Rate.
“Canadian Prime Rate Loan” means a Revolving Loan that bears interest based on the Canadian Prime Rate.
“Canadian Priority Payable Reserves” means, at any time, without duplication, the obligations, liabilities and indebtedness at such time which have, or would in any proceeding have, a trust, deemed trust, right of garnishment, right of distress, charge or statutory Lien imposed to provide for payment or Liens ranking or capable of ranking senior to or pari passu with Liens securing the Canadian Liabilities on any of the Collateral under federal, provincial, state, county, territorial, municipal, or local law including, to the extent that there is such a trust, statutory Liens or Liens in respect of the specified item that has or is capable of having such rank, claims for unremitted and accelerated rents, utilities, taxes (including sales taxes and goods and services taxes (“GST”) and harmonized sales taxes (“HST”), value added taxes, amounts deducted or withheld or not paid and remitted when due under the Income Tax Act (Canada), excise taxes, taxes payable pursuant to Part IX of the Excise Tax Act (Canada) or similar provincial or territorial Law), the claims of a clerk, servant, travelling salesperson, labourer or worker (whether full-time or part-time) who is owed wages (including any amounts protected by the Wage Earner Protection Program Act (Canada)), salaries, commissions, disbursements, compensation or other amounts (such as union dues payable on behalf of employees) by the Loan Parties (but only to the extent that the claims of such parties may rank or be capable of ranking senior to or pari passu with Liens securing the Obligations on any of the Collateral), vacation pay, severance pay, employee source deductions, workers’ compensation obligations, government royalties or pension fund obligations (including claims of FSRA and all amounts currently or past due and not contributed, remitted or paid with respect to any Canadian Pension Plan or under the Canada Pension Plan or the Pension Benefits Act of Ontario (or other applicable pension benefits standards legislation of another Canadian province or territory), and any amounts representing any unfunded liability, solvency deficiency or wind up deficiency with respect to any Canadian Pension Plan) (but only to the extent ranking or capable of ranking senior to or pari passu with Liens securing the Obligations on any of the Collateral), together with the aggregate value, determined in accordance with GAAP, of all Eligible Inventory which may be or may become subject to a right of a supplier to recover possession thereof or to exercise rights of revendication with respect thereto under any federal, provincial, state, county, municipal, territorial or local law, where such supplier’s right may have priority over Liens securing the Obligations including Eligible Inventory subject to a right of a supplier to repossess goods pursuant to Section 81.1 of the BIA or the Civil Code of Québec.
“Canadian Security Documents” means each General Security Agreement, any deed of hypothec granted pursuant to the laws of the Province of Québec and each other security agreement or other instrument or document governed by the laws of any Canadian province and executed and delivered by any Canadian Loan Party to the Canadian Agent pursuant to this Agreement or any other Loan Document granting a Lien on assets of any Canadian Loan Party for the benefit of the Canadian Credit Parties, as security for the Canadian Liabilities.
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“Canadian Subsidiary” means any Subsidiary that is organized under the laws of Canada or any province or territory thereof.
“Canadian Swing Line Note” means the promissory note of the Canadian Borrower substantially in the form of Exhibit C-3, payable to the order of the applicable Swing Line Lender, evidencing the Swing Line Loans made by the Swing Line Lender to the Canadian Borrower.
“Canadian Swing Line Sublimit” means an amount equal to the lesser of (a) $10,000,000 and
(b) the Canadian Total Commitments. The Canadian Swing Line Sublimit is part of, and not in addition to, the Canadian Total Commitments.
“Canadian Total Commitments” means the aggregate of the Canadian Commitments of all Canadian Lenders. On the Third Amendment Effective Date, the Canadian Total Commitments are
$40,000,000.
“Canadian Total Outstandings” means, without duplication, the aggregate Outstanding Amount of all Canadian Loans and all Canadian L/C Obligations.
“Capital Expenditures” means, with respect to any Person for any period, (a) all expenditures made (whether made in the form of cash or other property) or costs incurred for the acquisition or improvement of fixed or capital assets of such Person (excluding normal replacements and maintenance which are properly charged to current operations), in each case that are (or should be) set forth as capital expenditures in a Consolidated statement of cash flows of such Person for such period, in each case prepared in accordance with GAAP, and (b) Capital Lease Obligations incurred by a Person during such period.
“Capital Lease Obligations” means, with respect to any Person for any period, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as liabilities on a balance sheet of such Person under GAAP and the amount of which obligations shall be the capitalized amount thereof determined in accordance with GAAP.
“Cash Collateral Account” means (i) in the case of the Domestic L/C Obligations, an account established by one or more of the Domestic Borrowers with the Administrative Agent, for its own benefit and the benefit of the other Domestic Credit Parties, at Bank of America under the sole and exclusive dominion and control of the Administrative Agent, in the name of the Administrative Agent or as the Administrative Agent shall otherwise direct, in which deposits are required to be made by the Domestic Borrowers in respect of the Domestic L/C Obligations in accordance with Section 2.03(g) or 8.02(c); and
(ii) in the case of the Canadian L/C Obligations, an account established by the Canadian Borrower with the Canadian Agent, for its own benefit and the benefit of the other Canadian Credit Parties, at Bank of America-Canada Branch under the sole and exclusive dominion and control of the Canadian Agent, in the name of the Canadian Agent or as the Canadian Agent shall otherwise direct, in which deposits are required to be made by the Canadian Borrower in respect of the Canadian L/C Obligations in accordance with Section 2.03(g) or 8.02(c).
“Cash Collateralize” has the meaning specified in Section 2.03(g). Derivatives of such term have corresponding meanings.
“Cash Management Services” means any cash management services or facilities provided to the Parent or any of its Subsidiaries by the Administrative Agent, the Canadian Agent or any Lender or any of their respective branches or Affiliates, including, without limitation, on account of: (a) ACH transactions, (b) controlled disbursement services, treasury, depository, overdraft, and electronic funds transfer services, (c) foreign exchange facilities, (d) credit card processing services, (e) purchase cards
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(f) electronic payables, and (g) credit or debit cards.
“CD$” or “Canadian Dollars” means lawful money of Canada.
“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq.
“CERCLIS” means the Comprehensive Environmental Response, Compensation, and Liability Information System maintained by the United States Environmental Protection Agency.
“CFC” means a Person that is a controlled foreign corporation under Section 957 of the Code. “Change in Law” means the occurrence, after the Effective Date, of any of the following: (a) the
adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation
or treaty or in the administration, interpretation or application thereof by any Governmental Authority or
(c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided however, notwithstanding anything herein to the contrary,
(x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.
“Change of Control” means an event or series of events by which:
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“CME” means CME Group Benchmark Administration Limited.
“Code” means the Internal Revenue Code of 1986, and the regulations promulgated thereunder, as amended and in effect.
“Collateral” means any and all “Collateral” as defined in any applicable Security Document and all other property of any Loan Party that is or is intended under the terms of the Security Documents to be subject to Liens in favor of the Collateral Agent (for the benefit of itself and the other Credit Parties) or the Canadian Agent (for the benefit of itself and the other Canadian Credit Parties), as applicable.
“Collateral Access Agreement” means an agreement reasonably satisfactory in form and substance to the Agents executed by (a) a bailee or other Person in possession of Collateral, or (b) any landlord of Real Estate leased by any Loan Party, pursuant to which such Person (i) acknowledges the Collateral Agent’s or Canadian Agent’s, as applicable, Lien on the Collateral, (ii) releases or subordinates such Person’s Liens in the Collateral held by such Person or located on such Real Estate,
(iii) provides the applicable Agent with access to the Collateral held by such bailee or other Person or located in or on such Real Estate, (iv) as to any landlord, provides the applicable Agent with a reasonable time to sell and dispose of the Collateral from such Real Estate, and (v) makes such other agreements with the Agents as the Agents may reasonably require.
“Collateral Agent” means Bank of America, acting in such capacity for its own benefit and the ratable benefit of the other Domestic Credit Parties.
“Combined Borrowing Base” means the sum of the Domestic Borrowing Base and the Canadian Loan Cap.
“Commercial Letter of Credit” means any letter of credit or similar instrument (including, without limitation, bankers’ acceptances) issued for the purpose of providing the primary payment mechanism in connection with the purchase of any materials, goods or services by a Loan Party in the ordinary course of business of such Loan Party.
“Commitment” means, as to each Lender, its Revolving Domestic Commitment and its Canadian Commitment.
“Commitment Increase” shall have the meaning provided in Section 2.15.
“Committed Borrowing” means each Canadian Committed Borrowing and each Domestic Committed Borrowing.
“Committed Loan” means any loan at any time made by any Revolving Domestic Lender and any Canadian Lender (including, without limitation, any Domestic Committed Loan and any Canadian Committed Loan) pursuant to Section 2.01.
“Committed Loan Notice” means a notice of (a) a Committed Borrowing, (b) a Conversion of Committed Loans from one Type to the other, or (c) a continuation of Term SOFR Loans or BA Equivalent Loans, pursuant to Section 2.02(b), which, if in writing, shall be substantially in the form of Exhibit A-1 (Domestic Committed Loan Notice) or Exhibit A-2 (Canadian Committed Loan Notice), as applicable.
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.).
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“Communication” has the meaning specified in Section 10.06.
“Compliance Certificate” means a certificate substantially in the form of Exhibit F.
“Conforming Changes” means, with respect to the use, administration of or any conventions associated with SOFR or any proposed Successor Rate or Term SOFR, as applicable, any conforming changes to the definitions of “U.S. Prime Rate”, “SOFR”, “Term SOFR” and “Interest Period”, timing and frequency of determining rates and making payments of interest and other technical, administrative or operational matters (including, for the avoidance of doubt, the definitions of “Business Day” and “U.S. Government Securities Business Day”, timing of borrowing requests or prepayment, conversion or continuation notices and length of lookback periods) as may be appropriate, in the discretion of the Administrative Agent in consultation with the Domestic Borrowers, to reflect the adoption and implementation of such applicable rate(s) and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent determines that adoption of any portion of such market practice is not administratively feasible or that no market practice for the administration of such rate exists, in such other manner of administration as the Administrative Agent determines, in consultation with the Domestic Borrowers, is reasonably necessary in connection with the administration of this Agreement and any other Loan Document).
“Concentration Accounts” means, collectively, the Canadian Concentration Account and the Domestic Concentration Account.
“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“Consolidated” means, when used to modify a financial term, test, statement, or report of a Person, the application or preparation of such term, test, statement or report (as applicable) based upon the consolidation, in accordance with GAAP, of the financial condition or operating results of such Person and its Subsidiaries.
“Consolidated EBITDA” means, at any date of determination, an amount equal to Consolidated Net Income of Holdings and its Subsidiaries on a Consolidated basis for the most recently completed Measurement Period, plus (a) the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Interest Charges, (ii) the provision for Federal, state, local and foreign income Taxes, (iii) depreciation and amortization expense and, (iv) all other non-cash charges and non-cash losses, including all non-cash compensation to officers, directors and employees paid in the form of Equity Interests and all write-downs of assets and goodwill, (v) all cash expenses incurred in connection with (A) any capital markets transaction (including any merger or acquisition transaction) for the issuance of debt, equity or convertible security, and (B) the issuance of any Indebtedness (including the Obligations), (vi) losses incurred in any Disposition, (vii) fees, cash and expenses incurred in the early extinguishment of Indebtedness, (viii) non-cash losses or non-cash reserves incurred from or by discontinued operations, (ix) any loss accounted for by the equity method of accounting, net of any Investments made by Holdings or any of its Subsidiaries in the Person which has incurred such loss during such Measurement Period, (x) non-cash fees and expense reimbursements paid to members of the Board of Directors in connection with their service on such Board of Directors, and (xi) only with respect to determining compliance with Section 7.13 hereof, any Specified Equity Contribution, minus (b) the following to the extent included in calculating such Consolidated Net Income: (i) Federal, state, provincial, territorial, municipal, local and foreign income tax credits and (ii) all non-cash items increasing Consolidated Net Income (in each case of or by the Holdings and its Subsidiaries for such Measurement Period), all as determined on a Consolidated basis in accordance with GAAP.
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“Consolidated Fixed Charge Coverage Ratio” means, at any date of determination, the ratio of
“Consolidated Funded Indebtedness” means, as of any date of determination, for Holdings and its Subsidiaries on a Consolidated basis, without duplication, the sum of (a) the outstanding principal amount of all obligations, whether current or long-term, for borrowed money (including Obligations hereunder) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, (b) all purchase money Indebtedness, (c) all direct obligations arising under letters of credit (including standby and commercial), bankers’ acceptances and bank guaranties, (d) all obligations in respect of the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business), (e) all Attributable Indebtedness, and (f) all Indebtedness of the types referred to in clauses (a) through (f) above of any partnership (other than a joint venture that is itself a corporation or limited liability company) in which Holdings or any of its Subsidiaries is a general partner or joint venturer, unless such Indebtedness is expressly made non-recourse to the Holdings and such Subsidiary. For the avoidance of doubt, “Consolidated Funded Indebtedness” shall not include undrawn commitments for Obligations hereunder.
“Consolidated Interest Charges” means, for any Measurement Period, the sum of (a) all interest, premium payments, debt discount, fees, charges and related expenses in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and net costs under Swap Contracts, but excluding any non-cash or deferred interest financing costs and expense, and (b) the portion of rent expense with respect to such period under Capital Lease Obligations that is treated as interest in accordance with GAAP, minus interest income (accrued and received or receivable in cash for such period), in each case of or by Holdings and its Subsidiaries for the most recently completed Measurement Period, all as determined on a Consolidated basis in accordance with GAAP.
“Consolidated Net Income” means, as of any date of determination, the net income of Holdings and its Subsidiaries for the most recently completed Measurement Period, all as determined on a Consolidated basis in accordance with GAAP, provided, however, that there shall be excluded (a) all extraordinary and/or non-recurring and/or unusual gains, losses, items, credits and expenses for such Measurement Period, (b) the income (or loss) of any Person during such Measurement Period in which any Person (other than any Subsidiary of Holdings) has a joint interest, except to the extent of the amount of cash dividends or other distributions actually paid in cash to Holdings and its Subsidiaries during such period, (c) the income (or loss) of any Person during such Measurement Period and accrued prior to the date it becomes a Subsidiary of Holdings or any of its Subsidiaries or is merged into or consolidated with Holdings or any of its Subsidiaries or that Person’s assets are acquired by Holdings or any of its Subsidiaries, and (d) the income of any direct or indirect Subsidiary of Holdings and its Subsidiaries to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its Organization Documents or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, except that Holdings’ and its Subsidiaries’ equity in any net loss of any such Subsidiary for such Measurement Period shall be included in determining Consolidated Net Income.
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“Continuing Directors” means the directors of Holdings on the Effective Date and each other director if, in each case, such other director’s nomination for election to the board of directors of Holdings is recommended by at least a majority of the then Continuing Directors.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.
“Convert”, “Conversion” and “Converted” each refers to a conversion of Committed Loans of one Type into Committed Loans of the other Type.
“CORRA” means, with respect to any applicable determination date, the Canadian Overnight Repo Rate Average administered and published on the second Business Day preceding such date by the Bank of Canada (or any successor administrator satisfactory to the Administrative Agent); provided however that if such determination date is not a Business Day, then CORRA means such rate that applied on the first Business Day immediately prior thereto.
“Cost” means the lower of cost or market value of Inventory, based upon the Borrowers’ accounting practices, known to the Administrative Agent, which practices are in effect on the Effective Date as such calculated cost is determined from invoices received by the Borrowers, the Borrowers’ purchase journals or the Borrowers’ stock ledger. “Cost” does not include inventory capitalization costs or other non-purchase price charges (such as freight) used in the Borrowers’ calculation of cost of goods sold.
“Covenant Compliance Event” means either (a) that an Event of Default has occurred and is continuing, or (b) Excess Availability is less than the greater of (i) 10% of the Loan Cap, or (ii)
$40,000,000. For purposes hereof, the occurrence of a Covenant Compliance Event shall be deemed continuing (A) so long as such Event of Default has not been waived, and/or (B) if the Covenant Compliance Event arises as a result of the Borrowers’ failure to achieve Excess Availability as required hereunder, until Excess Availability has exceeded the greater of (x) 10% of the Loan Cap, or (y)
$40,000,000 for thirty (30) consecutive Business Days, in which case a Covenant Compliance Event shall no longer be deemed to be continuing for purposes of this Agreement. The termination of a Covenant Compliance Event as provided herein shall in no way limit, waive or delay the occurrence of a subsequent Covenant Compliance Event in the event that the conditions set forth in this definition again arise.
“Covered Entity” means any of the following: (i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
“Covered Party” has the meaning specified in Section 10.31.
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“Credit Card Notifications” has the meaning specified in Section 6.12(a)(i).
“Credit Card Receivables” means each “payment intangible” (as defined in the UCC) and each Account, together with all income, payments and proceeds thereof, owed by a major credit or debit card issuer (including, but not limited to, Visa, MasterCard and American Express and such other issuers approved by the Administrative Agent) to a Domestic Loan Party or to the Canadian Borrower resulting from charges by a customer of such Loan Party on credit or debit cards issued by such issuer in connection with the sale of goods by such Loan Party, or services performed by such Loan Party, in each case in the ordinary course of its business.
“Credit Extension” means each of (a) a Canadian Credit Extension and (b) a Domestic Credit Extension.
“Credit Party” or “Credit Parties” means collectively, each Canadian Credit Party and each Domestic Credit Party.
“Credit Party Expenses” means: (a) all reasonable and documented out-of-pocket expenses incurred by any of the Agents and their respective Affiliates, in connection with this Agreement and the other Loan Documents, including, without limitation (but in any event subject to the limitations described below), (i) the reasonable and documented actual fees, charges and disbursements of (A) counsel for any of the Agents and their Affiliates (limited to not more than one primary counsel and one Canadian counsel and necessary local counsel (limited to one local counsel for each other jurisdiction)),
(B) outside consultants for any of the Agents (solely after the occurrence of an Event of Default), (C) appraisers (but only to the extent expressly provided to be paid by the Borrowers as set forth in this Agreement or the other Loan Documents), (D) commercial finance examinations (but only to the extent expressly provided to be paid by the Borrowers as set forth in this Agreement or the other Loan Documents), and (E) all such out-of-pocket expenses incurred during any workout or restructuring negotiations in respect of the Obligations, and (ii) all reasonable and documented out-of-pocket expenses incurred in connection with (A) the syndication of the credit facility provided for herein, (B) the preparation, negotiation, administration, management, execution and delivery of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (C) the enforcement or protection of their rights in connection with this Agreement or the other Loan Documents or efforts to preserve, protect, collect, or enforce the Collateral or in connection with any proceeding under any Debtor Relief Laws, or (D) any workout or restructuring negotiations in respect of any Obligations; and
“Current Assets Collateral” means all the “ABL Priority Collateral” as defined in the Intercreditor Agreement.
“Customer Credit Liabilities” means at any time, the aggregate remaining value at such time of
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“Daily Simple CORRA” means the rate per annum equal to CORRA determined for any day pursuant to the definition thereof. Any change in Daily Simple CORRA shall be effective from and including the date of such change without further notice. If the rate as so determined would be less than zero, such rate shall be determined to be zero for purposes of this Agreement.
“Daily Simple SOFR” with respect to any applicable determination date means SOFR as published on such date , on the Federal Reserve Bank of New York’s website (or any successor source).
“DDA” means each checking, savings or other demand deposit account maintained by any of the Loan Parties. All funds in each DDA shall be conclusively presumed to be Collateral and proceeds of Collateral and the Agents and the Lenders shall have no duty to inquire as to the source of the amounts on deposit in any DDA.
“Debt Service Charges” means for any Measurement Period, the sum of (a) Consolidated Interest Charges paid or required to be paid for such Measurement Period, plus (b) principal payments required to be made on account of Indebtedness (excluding the Obligations, any Synthetic Lease Obligations and any Indebtedness which has been refinanced at its maturity, but including, without limitation, Capital Lease Obligations), all payments of excess cash flow on account of any Indebtedness, and the full amount of any non-recourse Indebtedness, and scheduled mandatory payments on account of Disqualified Stock (whether in the nature of dividends, redemption, repurchase or otherwise) required to be made during such period for such Measurement Period, in each case determined on a Consolidated basis in accordance with GAAP.
“Debtor Relief Laws” means each of (i) the Bankruptcy Code of the United States, (ii) the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) and the Winding-up and Restructuring Act (Canada), and (iii) 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, Canada (including corporate statutes), or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.
“Default Rate” means (a) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Rate plus two percent (2%) per annum, and (b) otherwise, when used with respect to Obligations, the Canadian Liabilities, an interest rate two percent (2%) per annum in excess of the rate then applicable to such Obligation or Canadian Liability.
“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.
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“Defaulting Lender” means, subject to Section 2.16(b), 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 (other than as a result of a good faith dispute), or (ii) pay to the Agents, the L/C Issuer, the Swing Line 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 Line Loans) within two Business Days of the date when due (other than as a result of a good faith dispute), (b) has notified any Borrower, any Agent, the L/C Issuer or the Swing Line Lender in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect, (c) has failed, within two Business Days after written request by the Administrative Agent or any Borrower, to confirm in writing to the Administrative Agent and the Borrowers 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 Borrowers), 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, or (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) has become the subject of a Bail-In Action, unless, in the case of any Lender subject to this clause (d), the Administrative Agent shall have determined that such Lender intends, and has all approvals required to enable it, to continue to perform its obligations as a Lender hereunder; 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 a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above, and of the effective date of such status, shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.16(b)) as of the date established therefor by the Administrative Agent in a written notice of such determination, which shall be delivered by the Administrative Agent to the Borrowers, the L/C Issuer, the Swing Line Lender and each other Lender promptly following such determination.
“Designated Jurisdiction” means any country or territory to the extent that such country or territory is the subject of any Sanction.
“Determination Date” shall mean the date upon which each of the following has occurred:
“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction and any sale, transfer, license or other disposition of (whether in one transaction or in a series of transactions and whether effected pursuant to a Division or otherwise)) of any property (including, without limitation, any Equity Interests) by any Person (or the granting of any option or other right to do any of the foregoing), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.
“Disqualified Stock” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is ninety-one (91) days after the date on which the Loans mature.
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The amount of Disqualified Stock deemed to be outstanding at any time for purposes of this Agreement will be the maximum amount that Holdings and its Subsidiaries may become obligated to pay upon maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock or portion thereof, plus accrued dividends.
“Dividing Person” has the meaning assigned to it in the definition of “Division.”
“Division” means the division of the assets, liabilities and/or obligations of a Person (the “Dividing Person”) among two or more Persons (whether pursuant to a “plan of division” or similar arrangement), which may or may not include the Dividing Person and pursuant to which the Dividing Person may or may not survive.
“Dollars” and “$” mean lawful money of the United States.
“Domestic Availability” means, as of any date of determination thereof by the Administrative Agent, the result, if a positive number, of:
Minus
Borrowers.
“Domestic Borrowers” means each of Sally Holdings LLC, Beauty Systems Group LLC and Sally Beauty Supply LLC.
“Domestic Borrowing” means a Domestic Committed Borrowing or a Swing Line Borrowing made to the Domestic Borrowers, as the context may require.
“Domestic Borrowing Base” means, at any time of calculation, an amount equal to:
plus
plus
minus
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“Domestic Committed Borrowing” means a borrowing consisting of simultaneous Domestic Committed Loans of the same Type and, in the case of Term SOFR Loans, having the same Interest Period made by each of the Revolving Domestic Lenders pursuant to Section 2.01.
“Domestic Committed Loan” means any loan at any time made by any Revolving Domestic Lender pursuant to Section 2.01.
“Domestic Concentration Account” has the meaning specified in Section 6.12(c).
“Domestic Credit Extensions” mean each of the following: (a) a Domestic Borrowing and (b) a Domestic L/C Credit Extension.
“Domestic Credit Party” or “Domestic Credit Parties” means (a) individually, (i) each Domestic Lender and its Affiliates, (ii) the Administrative Agent and its Affiliates, (iii) each L/C Issuer of any Domestic Letter of Credit, (iv) the Arrangers, (v) each beneficiary of any indemnification obligation undertaken by any Loan Party under any Loan Document with respect to the Obligations, (vi) each holder of any Other Domestic Liabilities, and (vii) the successors and assigns of each of the foregoing, and
(b) collectively, all of the foregoing.
“Domestic L/C Borrowing” means an extension of credit resulting from a drawing under any Domestic Letter of Credit which has not been reimbursed on or prior to the date required to be reimbursed by the Domestic Borrowers pursuant to Section 2.03(c)(i) or refinanced as a Domestic Committed Borrowing.
“Domestic L/C Credit Extension” means, with respect to any Domestic Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.
“Domestic L/C Obligations” means, as at any date of determination and without duplication, the aggregate Stated Amount of all outstanding Domestic Letters of Credit plus the aggregate of all Unreimbursed Amounts under Domestic Letters of Credit, including all Domestic L/C Borrowings.
“Domestic Lenders” means the Revolving Domestic Lenders.
“Domestic Letter of Credit” means each Letter of Credit issued hereunder for the account of the Domestic Borrowers.
“Domestic Letter of Credit Sublimit” means an amount equal to $70,000,000. The Domestic Letter of Credit Sublimit is part of, and not in addition to, the Revolving Domestic Total Commitments. A permanent reduction of the Revolving Domestic Total Commitments shall not require a corresponding pro rata reduction in the Domestic Letter of Credit Sublimit; provided, however, that if the Revolving Domestic Total Commitments are reduced to an amount less than the Domestic Letter of Credit Sublimit, then the Domestic Letter of Credit Sublimit shall be reduced to an amount equal to (or, at Parent’s option, less than) the Revolving Domestic Total Commitments.
“Domestic Loan Parties” means, collectively, the Domestic Borrowers and each Domestic Subsidiary that is a Guarantor of the Obligations. “Domestic Loan Party” means any one of such Persons.
“Domestic Note” means a promissory note made by the Domestic Borrowers in favor of a Revolving Domestic Lender evidencing Revolving Domestic Loans made by such Revolving Domestic Lender, substantially in the form of Exhibit C-2.
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“Domestic Overadvance” means a Domestic Credit Extension to the extent that, immediately after the making of such Domestic Credit Extension, the aggregate principal balance of all Domestic Credit Extensions then outstanding exceeds the Revolving Domestic Loan Cap as then in effect.
“Domestic Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by a Loan Party or any ERISA Affiliate or to which a Loan Party or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.
“Domestic Prime Rate Loan” means a Loan that bears interest based on the U.S. Prime Rate. “Domestic Swing Line Note” means the promissory note of the Domestic Borrowers
substantially in the form of Exhibit C-4, payable to the order of the applicable Swing Line Lender,
evidencing the Swing Line Loans made by such Swing Line Lender to the Domestic Borrowers.
“Domestic Swing Line Sublimit” means an amount equal to the lesser of (a) $50,000,000 and
(b) the Revolving Domestic Total Commitments. The Domestic Swing Line Sublimit is part of, and not in addition to, the Revolving Domestic Total Commitments.
“Domestic Subsidiary” means any Subsidiary that is not a Foreign Subsidiary.
Early Opt-In Effective Date .
Early Opt-in Election
“EEA Financial Institution” means (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” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
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“EEA Resolution Authority” means 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” means the first date all the conditions precedent in Section 4.01 were satisfied or waived in accordance with Section 10.01.
“Electronic Copy” has the meaning specified in Section 10.06. “Electronic Record” has the meaning specified in Section 10.06. “Electronic Signature” has the meaning specified in Section 10.06.
“Eligible Assignee” means (a) a Credit Party or any of its Affiliates; (b) a bank, insurance company, or Person engaged in the business of making commercial loans, which Person, together with its Affiliates, has a combined capital and surplus in excess of $250,000,000; (c) an Approved Fund; (d) any Person to whom a Credit Party assigns its rights and obligations under this Agreement as part of an assignment and transfer of such Credit Party’s rights in and to a material portion of such Credit Party’s portfolio of asset based credit facilities, and (e) any other Person (other than a natural person) approved by (i) the Administrative Agent, and (ii) unless an Event of Default has occurred and is continuing, the Parent (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include a Permitted Holder, a Loan Party or any of the Loan Parties’ or Permitted Holders Affiliates or Subsidiaries.
“Eligible Credit Card Receivables” means at the time of any determination thereof, each Credit Card Receivable that satisfies the following criteria at the time of creation and continues to meet the same at the time of such determination: such Credit Card Receivable (i) has been earned by performance and represents the bona fide amounts due to a Domestic Loan Party or the Canadian Borrower, as applicable, from a credit card payment processor and/or credit card issuer, and in each case originated in the ordinary course of business of such Domestic Loan Party or Canadian Borrower, and (ii) is not ineligible for inclusion in the calculation of the Domestic Borrowing Base or the Canadian Borrowing Base, as applicable, pursuant to any of clauses (a) through (j) below. Without limiting the foregoing, to qualify as an Eligible Credit Card Receivable, a Credit Card Receivable shall indicate no Person other than a Domestic Loan Party or the Canadian Borrower as payee or remittance party. In determining the amount to be so included, the face amount of a Credit Card Receivable shall be reduced by, without duplication, to the extent not reflected in such face amount, (i) the amount of all accrued and actual discounts, claims, credits or credits pending, promotional program allowances, price adjustments, finance charges or other allowances (including any amount that a Borrower may be obligated to rebate to a customer, a credit card payment processor, or credit card issuer pursuant to the terms of any agreement or understanding (written or oral)) and (ii) the aggregate amount of all cash received in respect of such Credit Card Receivable but not yet applied by the applicable Loan Parties to reduce the amount of such Credit Card Receivable. Except as otherwise agreed by the Administrative Agent, any Credit Card Receivable included within any of the following categories shall not constitute an Eligible Credit Card Receivable:
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(ii) with respect to which a Domestic Loan Party or the Canadian Borrower does not have good, valid and marketable title thereto, free and clear of any Lien (other than Liens granted to the Collateral Agent or Canadian Agent, as applicable, pursuant to the Security Documents and Permitted Encumbrances);
“Eligible Inventory” means, as of the date of determination thereof, without duplication, items of Inventory of a Domestic Loan Party or the Canadian Borrower that are finished goods, merchantable and readily saleable to the public in the ordinary course of business, in each case that, (A) complies with each of the representations and warranties respecting Inventory made by the Loan Parties in the Loan Documents, and (B) is not excluded as ineligible by virtue of one or more of the criteria set forth below. The following items of Inventory shall not be included in Eligible Inventory:
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hereof;
Notwithstanding the foregoing, the Administrative Agent may, from time to time, in the exercise of its Permitted Discretion, on not less than three (3) Business Days’ prior notice to the Parent, change the criteria for Eligible Inventory as reflected on the Borrowing Base Certificate which the Administrative Agent has determined in the exercise of its Permitted Discretion could adversely affect, or would reasonably be expected to adversely affect, Eligible Inventory in any material respect. Any such change in criteria shall have a reasonable relationship to the event, condition or other circumstance that is the basis for such change. Upon delivery of the notice of such change pursuant to the foregoing sentence, the Administrative Agent shall be available to discuss the proposed change, and the applicable Borrower may take such action as may be required so that the event, condition or circumstance that is the basis for such change no longer exists, in a manner and to the extent reasonably satisfactory to the Administrative Agent in the exercise of its Permitted Discretion.
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Any Inventory of the Loan Parties that is not Eligible Inventory shall nevertheless be part of the Collateral as and to the extent provided in the Security Documents.
“Eligible Trade Receivables” means Accounts arising from the sale of the Domestic Loan Parties’ or the Canadian Borrower’s Inventory (other than those consisting of Credit Card Receivables) that satisfies the following criteria at the time of creation and continues to meet the same at the time of such determination: such Account (i) has been earned by performance and represents the bona fide amounts due to a Domestic Loan Party or the Canadian Borrower from an account debtor, and in each case originated in the ordinary course of business, and (ii) in each case is acceptable to the Administrative Agent in its Permitted Discretion, and is not ineligible for inclusion in the calculation of the Domestic Borrowing Base or the Canadian Borrowing Base, as applicable, pursuant to any of clauses
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(k) Accounts acquired in a Permitted Acquisition, unless and until the Agents (i) have completed due diligence with respect to such Accounts as the Agents may require, all of the results of the foregoing to be reasonably satisfactory to the Agents, and (ii) establish Receivables Reserves (if applicable) therefor.
Notwithstanding the foregoing, the Administrative Agent may, from time to time, in the exercise of its Permitted Discretion, on not less than three (3) Business Days’ prior notice to the Parent, change the criteria for Eligible Trade Receivables as reflected on the Borrowing Base Certificate which the Administrative Agent has determined in the exercise of its Permitted Discretion could adversely affect, or would reasonably be expected to adversely affect, Eligible Trade Receivables in any material respect. Any such change in criteria shall have a reasonable relationship to the event, condition or other circumstance that is the basis for such change. Upon delivery of the notice of such change pursuant to the foregoing sentence, the Administrative Agent shall be available to discuss the proposed change, and the applicable Borrower may take such action as may be required so that the event, condition or circumstance that is the basis for such change no longer exists, in a manner and to the extent reasonably satisfactory to the Administrative Agent in the exercise of its Permitted Discretion. Any Accounts of the Loan Parties that are not Eligible Trade Receivables shall nevertheless be part of the Collateral as and to the extent provided in the Security Documents.
Notwithstanding the foregoing, if the Accounts Receivable Reporting Requirement is not then in effect and the Borrowers have not elected to provide detailed reporting of Accounts, then 20% of all Accounts (whether or not eligible) as set forth in the most recent Borrowing Base Certificate delivered to the Administrative Agent shall be deemed ineligible and, other than the requirement that in all events the determination of eligibility shall require compliance with subsections (f), (h) and (t) above, no further determination of eligibility (including any adjustments or determinations of eligibility using the Administrative Agent’s Permitted Discretion) set forth in this definition or otherwise shall be made, except that the foregoing shall in no way limit the right of the Administrative Agent to establish and maintain the Dilution Reserve (as defined in the definition of Reserves). Any calculation or report made pursuant to this paragraph will be on the same basis that the Administrative Agent and the Loan Parties’ utilized prior to the Effective Date in agreeing to the foregoing provision.
“Environmental Laws” means any and all federal, state, provincial, territorial, municipal, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to Hazardous Materials, air emissions and discharges to waste or public systems.
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“Environmental Liability” means any liability, obligation, damage, loss, claim, action, suit, judgment, order, fine, penalty, fee, expense, or cost, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of any Borrower, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon
(a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal or presence of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
“Equipment” shall mean “equipment”, as defined in the UCC or in the PPSA, and shall also mean all furniture, store fixtures, motor vehicles, rolling stock, machinery, office equipment, plant equipment, tools, dies, molds, and other goods, property, and assets which are used and/or were purchased for use in the operation or furtherance of a Loan Party’s business, and any and all accessions or additions thereto, and substitutions therefor.
“Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.
“Equivalent CD$ Amount” means, on any date, the rate at which Canadian Dollars may be exchanged into Dollars on the basis of the Spot Rate. In the event that such rate does not appear on such Reuters page, “Equivalent Amount” shall mean, on any date, the amount of Dollars into which an amount of Canadian Dollars may be converted or the amount of Canadian Dollars into which an amount of Dollars may be converted, in either case, at, in the case of the Canadian Borrower, the Canadian Agent’s spot buying rate in Toronto as at approximately 12:00 noon (Toronto time) on such date and, in the case of a Domestic Borrower, the Administrative Agent’s spot buying rate in New York as at approximately 12:00 noon (New York City time) on the immediately preceding Business Day.
“Equivalent Amount” means, as applicable, (a) the Equivalent CD$ Amount, and (b) with respect to any other Optional Currency, the equivalent amount thereof determined by the Administrative Agent at such time on the basis of the Spot Rate.
“ERISA” means the Employee Retirement Income Security Act of 1974.
“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Loan Parties within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).
“ERISA Event” means (a) a Reportable Event with respect to a Domestic Pension Plan; (b) a withdrawal by a Loan Party or any ERISA Affiliate from a Domestic Pension Plan subject to Section
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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 a Loan Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Domestic Pension Plan or Multiemployer Plan; (e) the institution by the PBGC of proceedings to terminate a Domestic Pension Plan; (f) any event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Domestic Pension Plan; (g) the determination that any Domestic Pension 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 (h) 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 a Loan Party or any ERISA Affiliate.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
Eurocurrency Interbank Market
“Event of Default” has the meaning specified in Section 8.01. An Event of Default shall be deemed to be continuing unless and until that Event of Default has been duly waived as provided in Section 10.01 hereof.
“Excess Availability” means the difference between (a) the Loan Cap and (b) the outstanding Credit Extensions to the Borrowers.
“Excluded Swap Obligation” means, with respect to any Loan Party, any Swap Obligation if, and to the extent that, all or a portion of the guaranty of such Loan Party under the Facility Guaranty of, or the grant under a Loan Document by such Loan Party of a security interest to secure, such Swap Obligation (or any guaranty thereof) is or becomes illegal under the Commodity Exchange Act (or the application or official interpretation thereof) by virtue of such Loan Party’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act (determined after giving effect to Section 10.26 hereof and any and all guarantees of such Loan Party’s Swap Obligations by other Loan Parties) at the time the guaranty of such Loan Party, or grant by such Loan Party of a security interest, becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a Master Agreement governing more than one Swap Contract, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to Swap Contracts for which such guaranty or security interest becomes illegal.
“Excluded Taxes” means with respect to any Agent, any Lender, the L/C Issuer or any other Recipient, any of the following Taxes imposed on or with respect to any Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes (in lieu of net income taxes), and branch profits Taxes, in each case, (i) 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 Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender,
U.S.
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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 (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrowers under Section 10.13) or (ii) such Lender changes its Lending Office, except in each case to the extent that, pursuant to Section 3.01(a)(ii) or (c), 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, (c) Taxes attributable to such Recipient’s failure to comply with Section 3.01(e), (d) in the case of a Foreign Lender (other than a Canadian Lender or an assignee pursuant to a request by the Parent under Section 10.13) or L/C Issuer, any withholding tax that is imposed on amounts payable to such Foreign Lender or L/C Issuer at the time such Foreign Lender or L/C Issuer becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s or L/C Issuer’s failure or inability (other than as a result of a Change in Law after such Foreign Lender or L/C Issuer becomes a party hereto) to comply with Section 3.01(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Loan Parties with respect to such withholding tax pursuant to Section 3.01(a), (e) in the case of a Canadian Lender (other than an assignee pursuant to a request by the Canadian Borrower under Section 10.13) (i) any tax that is imposed as a result of such Canadian Lender being a “specified shareholder” of any Canadian Loan Party for purposes of subsection 18(5) of the Income Tax Act (Canada) or not dealing at arm’s length with any such specified shareholder, and (ii) any tax that is imposed as a result of such Canadian Lender not dealing at arm’s length (within the meaning the Income Tax Act (Canada)) with any Canadian Loan Party except, in the case of (i) or (ii) of this clause (e), where such non-arm’s length relationship arises or where such Canadian Lender is a specified shareholder of any Canadian Loan Party or does not deal at arm's length with any such specified shareholder, on account of entering into, receiving payments under, performing of obligations under, receiving or perfecting a security interest under or enforcing of rights under, any Loan Document, and (f) any Taxes imposed pursuant to FATCA. For the avoidance of doubt, any Participant that is entitled to the benefits of Section 3.01(a) shall be treated as a Lender for purposes of this defined term.
“Executive Order” has the meaning specified in Section 10.18.
“Existing Credit Agreement” has the meaning specified in the preamble hereto. “Existing Obligations” has the meaning specified in Section 10.23.
“Facility Guaranty” means (a) a Guarantee of the Obligations (including, without limitation, for clarity, the Canadian Liabilities) made by a Guarantor which is a Domestic Loan Party in favor of the Administrative Agent and the other Credit Parties, in form reasonably satisfactory to the Administrative Agent and (b) a Guarantee of the Canadian Liabilities made by a Guarantor which is a Canadian Loan Party in favor of the Canadian Agent and the other Canadian Credit Parties, in form reasonably satisfactory to the Administrative Agent.
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (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.
“Federal Funds Rate” means, for any day, the rate per annum calculated by the Federal Reserve Bank of New York based on such day’s federal funds transactions by depository institutions (as determined in such manner as the Federal Reserve Bank of New York shall set forth on its public website from time to time) and published on the next succeeding Business Day by the Federal Reserve Bank of New York as the federal funds effective rate; provided that if the Federal Funds Rate as so determined would be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
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“Fee Letter” means, the First Amendment Fee Letter and the Third Amendment Fee Letter, as may be amended, supplemented or replaced and in effect from time to time.
“First Amendment Effective Date” means April 15, 2020.
“First Amendment Fee Letter” means the letter entitled “First Amendment Fee Letter” among the Borrowers and the Administrative Agent dated as of the First Amendment Effective Date.
“Fiscal Month” means any fiscal month of any Fiscal Year, which month shall generally end on the last day of each calendar month in accordance with the fiscal accounting calendar of the Loan Parties.
“Fiscal Quarter” means any fiscal quarter of any Fiscal Year, which quarters shall generally end on the last day of each March, June, September or December of such Fiscal Year in accordance with the fiscal accounting calendar of the Loan Parties.
“Fiscal Year” means any period of twelve (12) consecutive months ending on September 30 of each calendar year.
“Foreign Assets Control Regulations” has the meaning specified in Section 10.18.
“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Parent is resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.
“Foreign Plan” means any pension plan, benefit plan, fund (including any superannuation fund) or other similar program established, maintained or contributed to by the Parent or any Subsidiary for the benefit of employees of the Parent or any Subsidiary employed and residing outside the United States or Canada (other than any plans, funds or other similar programs that are maintained exclusively by a Governmental Authority), which plan, fund or other similar program provides, or results in, retirement income or a deferral of income in contemplation of retirement, and which plan is not subject to ERISA or is not a Canadian Pension Plan.
“Foreign Subsidiary” means each Subsidiary of the Parent (i) which is organized and existing under the laws of any jurisdiction outside of the United States of America or (ii) that is a Foreign Subsidiary Holdco, or (iii) that is a direct Subsidiary of a Foreign Subsidiary. For the avoidance of doubt, any Subsidiary of the Parent that is organized and existing under the laws of Puerto Rico shall be a Foreign Subsidiary.
“Foreign Subsidiary Holdco” means any Subsidiary of the Parent, so long as such Subsidiary has no material assets other than securities or Indebtedness of one or more Foreign Subsidiaries (or Subsidiaries thereof), and intellectual property relating to such Foreign Subsidiaries (or Subsidiaries thereof) and other assets relating to an ownership interest in any such securities, Indebtedness or Subsidiaries.
“Fourth Amendment” means that certain Fourth Amendment to Amended and Restated Credit Agreement by and among the Loan Parties, the Lenders party thereto, and the Agents, dated as of the Fourth Amendment Effective Date.
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“Fourth Amendment Effective Date” means April 19, 2023.
“FRB” means the Board of Governors of the Federal Reserve System of the United States.
“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with respect to the L/C Issuer, such Defaulting Lender’s Applicable Percentage of the outstanding L/C Obligations other than L/C 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 the Swing Line Lender, such Defaulting Lender’s Applicable Percentage of Swing Line Loans other than Swing Line Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders in accordance with the terms hereof.
“Fronting Fee” has the meaning specified in Section 2.03(j).
“FSRA” means the Financial Services Regulatory Authority of Ontario and any Person succeeding to the functions thereof and includes the Chief Executive Officer of such body and any other Governmental Authority empowered or created by the Pension Benefits Act (Ontario) or any Governmental Authority of any other Canadian jurisdiction exercising similar functions in respect of any Canadian Pension Plan of any Canadian Loan Party and any Governmental Authority succeeding to the functions thereof.
“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied; provided that, with respect to Foreign Subsidiaries of Parent organized under the laws of Canada, or any province or territory thereof, unless GAAP is being applied, “GAAP” shall mean principles which are consistent with those promulgated or adopted by the Canadian Institute of Chartered Accountants and its predecessors (or successors) in effect and applicable to the accounting period in respect of which reference to GAAP is being made.
“General Security Agreements” means (a) the Second Amended and Restated General Security Agreement dated as of the Effective Date among the Canadian Borrower and the Canadian Agent for the benefit of the Canadian Credit Parties and (b) any other general security agreement governed by the laws of any Canadian province or territory entered into after the Effective Date by any Canadian Loan Party that is a Guarantor of the Canadian Liabilities, in form and substance satisfactory to the Administrative Agent.
“Governmental Authority” means the government of the United States, Canada, or any other nation, or any political subdivision thereof, whether state, local, provincial, territorial or municipal and any agency, authority, instrumentality, regulatory body, court, tribunal, 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).
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“Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation,
(iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning.
“Guarantor” means (a) with respect to the Obligations (including, without limitation, the Canadian Liabilities), the Persons named on Schedule 1.01 hereof as Guarantors and each other Person that shall be required to execute and deliver a Facility Guaranty of the Obligations pursuant to Section 6.11(a), (b) with respect to the Canadian Liabilities, the Persons named on Schedule 1.01 hereof as Canadian Guarantors and each other Person that shall be required to execute and deliver a Facility Guaranty of the Canadian Liabilities pursuant to Section 6.11(b), and (c) with respect to any Swap Obligation of a Specified Loan Party (determined before giving effect to Section 10.26) under the Facility Guaranty, each Borrower.
“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
“Holdings” means Sally Beauty Holdings, Inc., a Delaware corporation, the ultimate parent of the Loan Parties, and any successor thereto.
“Honor Date” has the meaning specified in Section 2.03(c)(i).
“Increase Effective Date” shall have the meaning provided therefor in Section 2.15(f). “Indebtedness” means, as to any Person at a particular time, without duplication, all of the
following, whether or not included as indebtedness or liabilities in accordance with GAAP:
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For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person. The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date.
“Indemnified Taxes” means (a) 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
(b) to the extent not otherwise described in (a), Other Taxes. “Indemnitees” has the meaning specified in Section 10.04(b). “Information” has the meaning specified in Section 10.07.
“Intellectual Property” means all present and future: trade secrets, know-how and other proprietary information; trademarks, trademark applications, internet domain names, service marks, trade dress, trade names, business names, designs, logos, slogans (and all translations, adaptations, derivations and combinations of the foregoing) indicia and other source and/or business identifiers, and all registrations or applications for registrations which have heretofore been or may hereafter be issued thereon throughout the world; copyrights and copyright applications; (including copyrights for computer programs) and all tangible and intangible property embodying the copyrights, unpatented inventions (whether or not patentable); patents and patent applications; industrial design applications and registered industrial designs; license agreements related to any of the foregoing and income therefrom; books, records, writings, computer tapes or disks, flow diagrams, specification sheets, computer software, source codes, object codes, executable code, data, databases and other physical manifestations, embodiments or incorporations of any of the foregoing; all other intellectual property; and all common law and other rights throughout the world in and to all of the foregoing.
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“Intercreditor Agreement” means that certain Intercreditor Agreement, dated as of the Effective Date, by and between the Administrative Agent and the Term Agent and acknowledged and agreed to by the applicable Loan Parties, as amended and in effect from time to time, as the same may be amended, amended and restated, modified, supplemented or replaced in accordance therewith and herewith.
“Interest Payment Date” means, (a) as to any Term SOFR Loan or BA Equivalent Loan, the last day of each Interest Period applicable to such Term SOFR Loan or BA Equivalent Loan and the Maturity Date; provided, however, that if any Interest Period for a Term SOFR Loan exceeds three months, the date that falls every three months after the beginning of such Interest Period shall also be an Interest Payment Date; and (b) as to any Prime Rate Loan (including a Swing Line Loan), the first calendar day of each April, July, October and January and the Maturity Date.
“Interest Period” means, as to each Term SOFR Loan or BA Equivalent Loan, the period commencing on the date such Committed Borrowing is disbursed, converted into or continued as such Type of Committed Borrowing and ending on the date one, three or, as regards a Term SOFR Loan, six months thereafter, as selected by the Parent or the Canadian Borrower, as applicable, in its Committed Loan Notice; provided that:
For purposes hereof, the date of a Committed Borrowing initially shall be the date on which such Committed Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Committed Borrowing.
“Intermediate Holdco” means Sally Investment Holdings LLC, a Delaware limited liability company, the direct parent of the Parent, or any successor thereto.
“Internal Control Event” means a material weakness in, or fraud that involves management or other employees who have a significant role in, Holdings and/or its Subsidiaries’ internal controls over financial reporting, in each case as described in the Securities Laws.
“Inventory” means all “inventory” as defined in the UCC or the PPSA, as applicable, and shall also include, without limitation, all: (a) goods which (i) are leased by a Person as lessor, (ii) are held by a Person for sale or lease or to be furnished under a contract of service, (iii) are furnished by a Person under a contract of service, or (iv) consist of raw materials, work in process, or materials used or consumed in a business; (b) goods of said description in transit; (c) goods of said description which are returned, repossessed or rejected; and (d) packaging, advertising, and shipping materials related to any of the foregoing.
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“Inventory Advance Rate” means during the period beginning June 1st and ending September 30th of each year, 92.5%, and at all other times, 90%.
“Inventory Reserves” means such reserves as may be established from time to time by the Administrative Agent in its Permitted Discretion with respect to the determination of the saleability, at retail, of the Eligible Inventory or which reflect such other factors as affect the market value of the Eligible Inventory. Without limiting the generality of the foregoing, Inventory Reserves may, in the Administrative Agent’s Permitted Discretion, include (but are not limited to) reserves based on:
The amount of any Reserve established by the Administrative Agent hereunder shall have a reasonable relationship to the event, condition or other matter which is the basis for such Reserve. All such Reserves shall be established in good faith and without duplication for items already excluded from “Eligible Credit Card Receivables”, “Eligible Inventory” and “Eligible Trade Receivables” as set forth in the lettered clauses in the definitions thereof or Reserves or criteria deducted in computing the Appraised Value of Eligible Inventory or the imposition of Availability Reserves. To the extent required pursuant to Section 2.01(e), the Administrative Agent shall give the Borrowers three (3) Business Days prior written notice of the imposition of any Reserve and, upon delivery of such notice, the Administrative Agent shall be available to discuss the proposed Inventory Reserves and the Borrowers may take such action as may be required so that the event, condition or other matter that is the basis for the Inventory Reserve no longer exists or has been otherwise adequately addressed by the Borrowers to the reasonable satisfaction of the Administrative Agent; provided that upon such notice, the Borrowers will not be permitted to borrow so as to exceed the Domestic Borrowing Base, Canadian Borrowing Base or Combined Borrowing Base after giving effect to such new or modified Reserves.
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“Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests of another Person,
(b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or interest in, another Person, or (c) any Acquisition. 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.
“IRS” means the United States Internal Revenue Service.
“ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance).
“Issuer Documents” means with respect to any Letter of Credit, the Letter Credit Application, and any other document, agreement and instrument entered into by the L/C Issuer and any Borrower (or any Subsidiary) or in favor the L/C Issuer and relating to any such Letter of Credit.
“Joinder Agreement” means an agreement, in form satisfactory to the Administrative Agent pursuant to which, among other things, a Person becomes a party to, and bound by the terms of, this Agreement and/or the other Loan Documents in the same capacity and to the same extent as either a Borrower or a Guarantor, as the Administrative Agent may determine.
“Laws” means each international, foreign, federal, state, provincial, territorial, municipal and local statute, treaty, rule, guideline, regulation, ordinance, code and administrative or judicial precedent or authority, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and each applicable administrative order, directed duty, request, license, authorization and permit of, and agreement with, any Governmental Authority, in each case whether or not having the force of law.
“L/C Advance” means, (a) with respect to each Revolving Domestic Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Applicable Percentage of all Revolving Domestic Lenders, and (b) with respect to each Canadian Lender, such funding of its participation in any L/C or Borrowing in accordance with Applicable Percentage of all Canadian Lenders.
“L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when due or refinanced as a Committed Borrowing.
“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.
“L/C Issuer” means Bank of America, in its capacity as the issuer of Letters of Credit hereunder, and any other Lender as requested by the Parent and acceptable to the Administrative Agent. The L/C Issuer may, in its reasonable discretion, arrange for one or more Letters of Credit to be issued by Affiliates or branches of the L/C Issuer, in which case the term “L/C Issuer” shall include any such Affiliate or branch with respect to Letters of Credit issued by such Affiliate or branch.
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“L/C Obligations” means, collectively, the Canadian L/C Obligations and the Domestic L/C Obligations. For purposes of computing the amounts available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.
“Lease” means any agreement, whether written or oral, no matter how styled or structured, pursuant to which a Loan Party is entitled to the use or occupancy of any real property for any period of time.
“Lender” means each Revolving Lender and, as the context requires, includes the Swing Line Lender. Any Lender may, in its reasonable discretion, arrange for one or more Loans to be made by Affiliates or branches of such Lender, in which case the term “Lender” shall include any such Affiliate or branch with respect to Loans made by such Affiliate or branch.
“Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Parent and the Administrative Agent and the Canadian Agent, as applicable
“Letter of Credit” means each Standby Letter of Credit and each Commercial Letter of Credit issued hereunder. Letters of Credit issued hereunder may be denominated in the same currencies as Loans may be denominated, as elected by the Borrowers.
“Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer.
“Letter of Credit Expiration Date” means the day that is seven (7) days prior to the Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business Day).
“Letter of Credit Fee” has the meaning specified in Section 2.03(i).
LIBOR Borrowing
LIBOR Rate
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LIBOR Rate Loan
LIBOR” LIBOR Rate “Lien” means (a) any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale, Capital Lease Obligation, Synthetic Lease Obligation, or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing) and, with respect to the Canadian Loan Parties, also includes any deemed trust or prior claim in, on or of such asset and
(b) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.
“Liquidation” means the exercise by the Agents or the Collateral Agent of those rights and remedies accorded to such Agents under the Loan Documents and applicable Laws as a creditor of the Loan Parties with respect to the realization on the Collateral, including (after the occurrence and during the continuation of an Event of Default) the conduct by the Loan Parties acting with the consent of the Administrative Agent, of any public, private or “going-out-of-business”, “store closing” or other similar sale or any other disposition of the Collateral for the purpose of liquidating the Collateral. Derivations of the word “Liquidation” (such as “Liquidate”) are used with like meaning in this Agreement.
“Liquidation Percentage” shall mean, for any Lender, a fraction, the numerator of which is the sum (without duplication) of such Lender’s Revolving Domestic Commitment and Canadian Commitment on the Determination Date and the denominator of which is the Aggregate Total Commitments of all Lenders on the Determination Date.
“Loan” means a Revolving Loan.
“Loan Account” has the meaning assigned to such term in Section 2.11(a).
“Loan Cap” means, at any time of determination, the lesser of (a) the Aggregate Total Commitments or (b) the Combined Borrowing Base.
“Loan Documents” means this Agreement, each Note, each Issuer Document, the Fee Letter, all Borrowing Base Certificates, the Blocked Account Agreements, the Credit Card Notifications, the Security Documents, each Facility Guaranty, the Intercreditor Agreement and any other instrument or agreement now or hereafter executed and delivered in connection herewith, or in connection with any transaction arising out of any Cash Management Services and Bank Products provided by any Lender or any of its Affiliates, each as amended and in effect from time to time; provided that for purposes of Section 8.01, Section 9.01(a) and (b), Section 10.01 (other than clause (j)), the second paragraph of Section 10.03, and Section 10.06, the term “Loan Documents” shall not include any instrument or agreement now or hereafter executed and delivered in connection with any transaction arising out of any Cash Management Services and Bank Products provided by any Lender or any of its Affiliates.
“Loan Parties” means, collectively, the Domestic Loan Parties and the Canadian Loan Parties. “Loan Party” means any one of such Persons.
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London Banking Day
“Management Investors” means the collective reference to the officers, directors, employees and other members of the management of Holdings or any of its Subsidiaries, or family members or relatives thereof or trusts, partnerships or limited liability companies for the benefit of any of the foregoing, or any of their heirs, executors, successors and legal representatives, who at any particular date shall beneficially own or have the right to acquire, directly or indirectly, common stock of Holdings.
“Master Agreement” means any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement, together with any related schedules thereto.
“Material Adverse Effect” means a material adverse effect on (a) the business, operations, property or condition (financial or otherwise) of Holdings and its Subsidiaries taken as a whole, or (b) the legality, validity, binding effect, or enforceability as to any Loan Party thereto of this Agreement or any of the other Loan Documents or the rights or remedies of the Agents and the Lenders under the Loan Documents or with respect to the Collateral comprising the Domestic Borrowing Base, and the Canadian Borrowing Base, in each case taken as a whole.
“Material Indebtedness” means Indebtedness (other than the Obligations) of the Loan Parties in an aggregate principal amount exceeding $20,000,000. For purposes of determining the amount of Material Indebtedness at any time, (a) the amount of the obligations in respect of any Swap Contract at such time shall be calculated at the Swap Termination Value thereof, and (b) all amounts owing to all creditors under any combined or syndicated credit arrangement shall be included. In all events, Indebtedness under the Term Loan Documents and the Notes Indenture constitutes Material Indebtedness.
“Material Subsidiary” means, as of the end of any Fiscal Quarter, any Subsidiary of Holdings (a) whose Consolidated EBITDA for the period of (4) consecutive Fiscal Quarters ending on such date exceeds five percent (5%) of Consolidated EBITDA of Holdings for such period or (b) that owns five percent (5%) of consolidated total assets of Holdings on a Consolidated basis.
“Maturity Date” means the earliest to occur of (x) May 11, 2026, (y) the date which is ninety-one
(91) days prior to the maturity date of any Indebtedness arising under the Term Loan Documents and any Refinancing thereof, and (z) the date which is ninety-one (91) days prior to the maturity date of any Indebtedness arising under the Notes Indenture and any Refinancing thereof.
“Maximum Rate” has the meaning specified in Section 10.09.
“Measurement Period” means, at any date of determination, the most recently completed twelve Fiscal Months of Holdings and its Subsidiaries for which financial statements have been or, if a Default under Section 6.01 then exists, were required to have been, delivered.
“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto. “Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA that is subject to ERISA, to which a Loan Party or any ERISA Affiliate
makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.
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“Net Proceeds” means (a) with respect to any Disposition by any Loan Party or any of its Subsidiaries, the excess, if any, of (i) the sum of cash and cash equivalents received in connection with such transaction (including any cash or cash equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) over (ii) the sum of (A) the principal amount of any Indebtedness that is secured by the applicable asset by a Lien permitted hereunder which is senior to the Collateral Agent’s Lien on such asset and that is required to be repaid (or to establish an escrow for the future repayment thereof) in connection with such transaction (other than Indebtedness under the Loan Documents), (B) the reasonable and customary out-of-pocket expenses incurred by such Loan Party or such Subsidiary in connection with such transaction (including, without limitation, appraisals, and brokerage, legal, title and recording or transfer tax expenses and commissions) paid by any Loan Party to third parties (other than Affiliates), and (C) unless a Trigger Event is then continuing, taxes paid or reasonably estimated to be payable as a result thereof; and
(b) with respect to the incurrence or issuance of any Indebtedness by any Loan Party or any of its Subsidiaries, the excess of (i) the sum of the cash and cash equivalents received in connection with such transaction over (ii) the underwriting discounts and commissions, and other reasonable and customary out-of-pocket expenses, incurred by such Loan Party or such Subsidiary in connection therewith.
“Non-Consenting Lender” has the meaning specified in Section 10.01.
“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such
time.
“Non-Extension Notice Date” has the meaning specified in Section 2.03(b)(iii). “Note” means either a Domestic Note or a Canadian Note, as the context may require.
“Notes Indenture” means that certain Indenture dated as of May 18, 2012 by Sally Holdings, LLC and Sally Capital Inc., as Issuers (collectively, the “Issuers”) in favor of Wells Fargo Bank, National Association, as Trustee (the “Trustee”), as supplemented by Supplemental Indenture dated as of May 18, 2012 by the Issuers, the Guarantors set forth therein, and the Trustee, pursuant to which the Issuers issued their 5.75% Senior Notes due 2022 (the “2022 Notes”), as further supplemented by Second Supplemental Indenture dated as of October 29, 2013, pursuant to which the Issuers issued their 5.50% Senior Notes due 2023, and as further supplemented by Supplemental Indenture dated as of December 3, 2015, pursuant to which the Issuers issued their 5.625% Senior Notes due 2025, and any Permitted Refinancing thereof.
“NPL” means the National Priorities List under CERCLA.
“Obligations” means (a) all advances to, and debts (including principal, interest, fees, costs, and expenses), liabilities, obligations, covenants, indemnities, and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan (including Loans incurred pursuant to Section 2.15 hereof) or Letter of Credit (including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral therefor), whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest, fees, costs, expenses and indemnities that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest, fees costs, expenses and indemnities are allowed claims in such proceeding, and (b) any Other Liabilities; provided that Obligations of a Loan Party shall exclude any Excluded Swap Obligations with respect to such Loan Party.
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Without limiting the foregoing, for purposes of clarity, whenever used herein the term “Obligations” shall include all Canadian Liabilities.
“OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury.
“Optional Currency” means Canadian dollars.
“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity, (d) with respect to any unlimited liability company, the memorandum of association and articles of association (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); and (e) in each case, all shareholder or other equity holder agreements, voting trusts and similar arrangements to which such Person is a party or which is applicable to its Equity Interests and all other arrangements relating to the Control or management of such Person.
“Original Closing Date” means November 12, 2010.
“Other Canadian Liabilities” means any obligation on account of (a) any Cash Management Services furnished to any of the Canadian Loan Parties or any of their Canadian Subsidiaries and/or
(b) any transaction which arises out of any Bank Product entered into with any Canadian Loan Party.
“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising 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 Domestic Liabilities” means any obligation on account of: (a) any Cash Management Services furnished to any of the Domestic Loan Parties or any of their Domestic Subsidiaries and/or
(b) any transaction which arises out of any Bank Product entered into with any Domestic Loan Party.
“Other Liabilities” means, collectively, all Other Canadian Liabilities and all Other Domestic Liabilities.
Other Rate Early Opt-in
“Other Taxes” means 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 3.06).
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“Outstanding Amount” means (i) with respect to Committed Loans and Swing Line Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Committed Loans and Swing Line Loans, as the case may be, occurring on such date and (ii) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements by any Borrower of Unreimbursed Amounts.
“Overadvance” means either a Canadian Overadvance or a Domestic Overadvance.
“Parent” means Sally Holdings LLC, a Delaware limited liability company, or any successor
thereto.
“Participant” has the meaning specified in Section 10.06(d).
“Participant Register” has the meaning provided therefor in Section 10.06(d).
“Payment Conditions” means, at the time of determination with respect to any Restricted Payment, that (a) no Default or Event of Default then exists or would arise as a result of the making of such Restricted Payment, and (b) if after giving pro forma effect to such Restricted Payment, either (i) (x) Excess Availability for the 30-day period immediately preceding, and on the date of, such Restricted Payment was equal to or greater than 15% of the Loan Cap, and (y) the Consolidated Fixed Charge Coverage Ratio, for the most recent Measurement Period, is equal to or greater than 1.0:1.0, or (ii) Excess Availability for the 30-day period immediately preceding, and on the date of, such Restricted Payment was equal to or greater than 20% of the Loan Cap. If after giving pro forma effect to such Restricted Payment, Excess Availability would be equal to or less than 40% of the Loan Cap, the Parent shall furnish the Administrative Agent with prior notice of any such Restricted Payment which is subject to the Payment Conditions, together with supporting documentation evidencing the satisfaction of the Excess Availability requirements and the satisfaction of the required Consolidated Fixed Charge Coverage Ratio, no less than five (5) Business Days prior to the consummation of any such Restricted Payment.
“Payment in Full” means the payment in full in cash of all Obligations (or with respect to the Canadian Borrower, all Canadian Liabilities), including, without limitation, with respect to amounts available to be drawn under outstanding Letters of Credit, the cancellation of such Letters of Credit or the delivery or provision of money or backstop irrevocable letters of credit, in form, on terms, and issued by a financial institution reasonably acceptable to the Administrative Agent, in respect thereof in an amount equal to 105% of the L/C Obligations.
“PBGC” means the Pension Benefit Guaranty Corporation. “PCAOB” means the Public Company Accounting Oversight Board.
“Permitted Acquisition” means an Acquisition in which all of the following conditions are satisfied:
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“Permitted Canadian Overadvance” means a Canadian Overadvance made by the Canadian Agent, in its discretion, which:
provided, that the foregoing shall not (i) modify or abrogate any of the provisions of Section 2.03 regarding each Canadian Lender’s obligations with respect to Canadian Letters of Credit, or (ii) result in any claim or liability against the Canadian Agent (regardless of the amount of any Canadian Overadvance) for Unintentional Canadian Overadvances and such Unintentional Canadian Overadvances shall not reduce the amount of Permitted Canadian Overadvances allowed hereunder, and provided further, that in no event shall the Canadian Agent make a Canadian Overadvance, if after giving effect thereto, the principal amount of the Canadian Credit Extensions would exceed the Canadian Total Commitments (as in effect prior to any termination of the Canadian Commitments pursuant to Section 2.06 hereof).
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“Permitted Cure Securities” means common equity securities or other equity securities of Holdings, Intermediate Holdco or the Parent that do not constitute Disqualified Capital Stock and the issuance of which does not result in a Change of Control.
“Permitted Discretion” means the commercially reasonable judgment of the Administrative Agent exercised in good faith in accordance with customary business practices for comparable asset-based lending transactions. In exercising such judgment, the Administrative Agent may consider any factors which it reasonably determines (a) with respect to any Collateral issues, will or reasonably could be expected to adversely affect in any material respect the value of the Collateral, the enforceability or priority of the applicable Agent’s Liens thereon or the amount which any Agent, the Lenders or any L/C Issuer would be likely to receive (after giving consideration to delays in payment and costs of enforcement) in the liquidation of such Collateral, or (b) is evidence that any collateral report or financial information delivered to such Agent by any Person on behalf of the applicable Borrower is incomplete, inaccurate or misleading in any material respect, or (c) creates or reasonably could be expected to create a Default or Event of Default. In exercising such judgment, the Administrative Agent may also consider, without duplication, such factors already included in or tested by the definition of Eligible Inventory or Eligible Trade Receivables, as well as any of the following: (i) changes after the Effective Date in any material respect in demand for, pricing of, or product mix of Inventory; (ii) changes after the Effective Date in any material respect in any concentration of risk with respect to Accounts; (iii) any other factors or circumstances that will or would reasonably be expected to have a Material Adverse Effect and (iv) any other factors arising after the Effective Date that change in any material respect the credit risk of lending to the Borrowers on the security of the Collateral.
“Permitted Domestic Overadvance” means a Domestic Overadvance made by the Administrative Agent, in its discretion, which:
provided, that the foregoing shall not (i) modify or abrogate any of the provisions of Section 2.03 regarding each Revolving Domestic Lender’s obligations with respect to Domestic Letters of Credit, or (ii) result in any claim or liability against the Administrative Agent (regardless of the amount of any Domestic Overadvance) for Unintentional Domestic Overadvances, and such Unintentional Domestic Overadvances shall not reduce the amount of Permitted Domestic Overadvances allowed hereunder, and provided further, that in no event shall the Administrative Agent make a Domestic Overadvance, if after giving effect thereto, the principal amount of the Revolving Domestic Total Outstandings would exceed the Revolving Domestic Total Commitments (as in effect prior to any termination of the Revolving Domestic Commitments pursuant to Section 2.06 hereof).
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“Permitted Encumbrances” means:
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and (ii) any Person acting in the capacity of an underwriter in connection with a public or private offering of Equity Interests of Holdings. In addition, any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) whose status as a “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) constitutes or results in a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of the Notes Indenture, together with its Affiliates, shall thereafter constitute Permitted Holders.
“Permitted Investments” means each of the following:
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(30) days for securities described in clause (a) above (without regard to the limitation on maturity contained in such clause) and entered into with a financial institution satisfying the criteria described in clause (c) above or with any primary dealer and having a market value at the time that such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such counterparty entity with whom such repurchase agreement has been entered into;
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provided, however, that notwithstanding the foregoing, (i) after the occurrence and during the continuance of a Trigger Event, no such Investments specified in clauses (a) through (e) and clauses (n) and (o) shall be permitted to be made unless either (A) no Revolving Loans are then outstanding, or (B) the Investment is a temporary Investment pending expiration of an Interest Period for a Revolving Loan that is a Term SOFR Loan, the proceeds of which Investment will be applied to the Obligations after the expiration of such Interest Period.
“Permitted Overadvance” means either a Permitted Canadian Overadvance or a Permitted Domestic Overadvance.
“Permitted Pro Forma Adjustments” as applied to any Person or business unit acquired or disposed of on or after the Effective Date means any adjustment to the actual results of operations of such Person or business unit (a) that are permitted to be recognized in pro forma financial statements prepared in accordance with Regulation S-X of the Securities Act of 1933 or (b) that otherwise reflect verifiable and adequately documented severance payments and reductions in, among other items, officer and employee compensation, insurance expenses, interest expense, rental expense, and other overhead expense, and other quantifiable expenses which are not anticipated to be incurred on an ongoing basis following consummation of such acquisitions or dispositions, in each case, with respect to this clause (b) only, as approved by the Administrative Agent in its Permitted Discretion.
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“Permitted Refinancing” means, with respect to any Person, any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, to “Refinance”), the Indebtedness being Refinanced (or previous refinancings thereof constituting a Permitted Refinancing); provided, that (a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so Refinanced (plus unpaid accrued interest and premiums thereon and underwriting discounts, defeasance costs, fees, commissions and expenses), (b) the weighted average life to maturity of such Permitted Refinancing is greater than or equal to the weighted average life to maturity of the Indebtedness being Refinanced, (c) if the Indebtedness being Refinanced is subordinated in right of payment to the Obligations under this Agreement, such Permitted Refinancing shall either be (i) unsecured or (ii) subordinated in right of payment to such Obligations on terms at least as favorable to the Credit Parties as those contained in the documentation governing the Indebtedness being Refinanced,
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, limited partnership, Governmental Authority or other entity.
“Plan” means, collectively, each Domestic Pension Plan and each Canadian Pension Plan. “Platform” has the meaning specified in Section 6.02.
“PPSA” means the Personal Property Security Act of Ontario (or any successor statute) or similar legislation of any other Canadian jurisdiction, including, without limitation, the Civil Code of Quebec, the laws of which are required by such legislation to be applied in connection with the issue, perfection, enforcement, opposability, priority, validity or effect of security interests or other applicable Liens.
“Pre-Adjustment Successor Rate” has the meaning specified in Section 3.03(b). “Prepayment Event” means:
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“Prime Rate Loan” means a Canadian Prime Rate Loan, a US Index Rate Loan, or a Domestic Prime Rate Loan, as the context may require.
“Public Lender” has the meaning specified in Section 6.02. “QFC Credit Support” has the meaning specified in Section 10.31.
“Qualified ECP Guarantor” means, at any time, each Loan Party with total assets exceeding
$10,000,000 or that qualifies at such time as an “eligible contract participant” under the Commodity Exchange Act and can cause another Person to qualify as an “eligible contract participant” at such time under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
“Rate Floor” means 0% per annum.
“Real Estate” means all Leases and all land, together with the buildings, structures, parking areas, and other improvements thereon, now or hereafter owned or leased by any Loan Party, including all easements, rights-of-way, and similar rights relating thereto and all leases, tenancies, and occupancies thereof.
“Receivables Advance Rate” means (i) 80% if the Accounts Receivable Reporting Requirement is not then in effect, and (ii) 85% if either (x) the Accounts Receivable Reporting Requirement is then in effect or (y) the Borrowers elect at their option to provide the detailed accounts receivables reporting as required by Section 6.02(c) as if the Account Receivable Reporting Requirement was in effect at such time.
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“Receivables Reserves” means such Reserves as may be established from time to time by the Administrative Agent in the Administrative Agent’s Permitted Discretion with respect to the determination of the collectability in the ordinary course of Eligible Trade Receivables.
“Recipient” means (a) the Administrative Agent, (b) any Lender or (c) any L/C Issuer, as applicable.
“Register” has the meaning specified in Section 10.06(c).
“Registered Public Accounting Firm” has the meaning specified by the Securities Laws and shall be independent of the Parent and its Subsidiaries as prescribed by the Securities Laws.
“Related Parties” means, 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.
“Relevant Canadian Governmental Body” means the Bank of Canada, or a committee officially endorsed or convened by the Bank of Canada, or any successor thereto.
“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or any successor thereto.
“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.
“Reports” has the meaning specified in Section 9.12(b).
“Request for Credit Extension” means (a) with respect to a Borrowing, Conversion or continuation of Committed Loans, a Committed Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.
“Required Lenders” means, as of any date of determination, Lenders holding more than 50% of Applicable Percentage of all Lenders of the Aggregate Total Commitments or, if the commitment of each Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02, Lenders holding in the aggregate more than 50% of the Total Outstandings (with the aggregate amount of each Lender’s risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed “held” by such Lender for purposes of this definition); provided that the Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.
“Required Revolving Lenders” means, as of any date of determination, Lenders holding more than 50% of Applicable Percentage of all Lenders of the Aggregate Total Commitments or, if the commitment of each Revolving Lender to make Revolving Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02, Lenders holding in the aggregate more than 50% of the Total Revolving Outstandings (with the aggregate amount of each Revolving Lender’s risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed “held” by such Lender for purposes of this definition); provided that the Revolving Commitment of, and the portion of the Total Revolving Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Revolving Lenders.
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“Rescindable Amount” has the meaning defined in Section 2.12(c)(ii).
“Reserves” means all (if any) Inventory Reserves, Availability Reserves and Receivables Reserves. Borrowing Base Certificates shall include detailed reporting of Trade Receivables that are not Eligible Trade Receivables if the Accounts Receivable Reporting Requirement is then in effect. Borrowing Base Certificates shall include a deemed Trade Receivables that are not Eligible Trade Receivables amount of 20% of reported Accounts (as set forth in the definition of Eligible Trade Receivables) and a deemed Dilution Reserve of 8.1% of reported Accounts (in each case, without detailed reporting of Trade Receivables that are not Eligible Trade Receivables) if the Accounts Receivable Reporting Requirement is not in effect; provided, however, that the Borrowers may, at their election at any time, provide detailed reporting of Accounts (and report actual ineligibility and dilution for purposes of determining the applicable Reserves and the Combined Borrowing Base) even if the Accounts Receivable Reporting Requirement is not then in effect.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer or assistant treasurer of a Loan Party or any of the other individuals designated in writing to the Administrative Agent by an existing Responsible Officer of a Loan Party as an authorized signatory of any certificate or other document to be delivered hereunder. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.
“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of any Person or any of its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to such Person’s stockholders, partners or members (or the equivalent of any thereof), or any option, warrant or other right to acquire any such dividend or other distribution or payment. Without limiting the foregoing, “Restricted Payments” with respect to any Person shall also include all payments made by such Person with any proceeds of a dissolution or liquidation of such Person.
“Revolving Commitment” means, as to each Lender, its Revolving Domestic Commitment and its Canadian Commitment.
“Revolving Domestic Commitments” means, as to each Revolving Domestic Lender, its obligation to (a) make Domestic Committed Loans to the Domestic Borrowers pursuant to Section 2.01,
(b) purchase participations in Domestic L/C Obligations, and (c) purchase participations in Swing Line Loans made to the Domestic Borrowers, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Revolving Domestic Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Revolving Domestic Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.
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“Revolving Domestic Lenders” means the Lenders having Revolving Domestic Commitments from time to time or at any time.
“Revolving Domestic Loan” means an extension of credit by a Revolving Domestic Lender to the Domestic Borrowers under Article II in the form of a Committed Loan or a Swing Line Loan.
“Revolving Domestic Loan Cap” means, at any time of determination, the lesser of (a) the Revolving Domestic Total Commitments or (b) the Domestic Borrowing Base.
“Revolving Domestic Total Commitments” means the aggregate of the Revolving Domestic Commitments of all Revolving Domestic Lenders. On the Third Effective Date, the Revolving Domestic Total Commitments are $500,000,000.
“Revolving Domestic Total Outstandings” means, without duplication, the aggregate Outstanding Amount of all Revolving Domestic Loans and all Domestic L/C Obligations.
“Revolving Lenders” means the Revolving Domestic Lenders and the Canadian Lenders. “Revolving Loan” means a Revolving Domestic Loan and a Canadian Loan.
“Revolving Loan Cap” means, at any time of determination, the lesser of (a) the Aggregate Total Commitments or (b) the Domestic Borrowing Base plus the Canadian Borrowing Base.
“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.
“Sanction(s)” means any sanction administered or enforced by the United States Government (including, without limitation, OFAC), the Canadian government, the United Nations Security Council, the European Union, Her Majesty’s Treasury (“HMT”) or other relevant sanctions authority.
“Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.
“Scheduled Unavailability Date” has the meaning specified in Section 3.03(b).
“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
“Secured Funded Indebtedness” means Consolidated Funded Indebtedness that is secured by Liens on the property or assets of the Borrowers and the Loan Parties (other than property or assets held in a defeasance or similar trust or arrangement for the benefit of the Indebtedness secured thereby).
“Secured Leverage Ratio” means, as of any date of determination, the ratio of (a) Secured Funded Indebtedness (net of unrestricted cash and cash equivalents of Holdings and its Subsidiaries in an aggregate amount not to exceed $100,000,000) to (b) Consolidated EBITDA, in each case of Holdings and its Subsidiaries for the most recently completed Measurement Period, all as determined on a Consolidated basis in accordance with GAAP.
“Securities Laws” means, collectively, the Securities Act of 1933, the Securities Exchange Act of 1934, Sarbanes-Oxley, and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the PCAOB; and all applicable securities laws in each province and territory of Canada and the respective regulations, rules regulations, blanket
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orders and blanket rulings under such laws together with applicable published policy statements and notices of the securities regulator of each such province and territory.
“Security Agreement” means the Second Amended and Restated Security Agreement dated as of the Effective Date among the Domestic Loan Parties and the Collateral Agent.
“Security Documents” means the Security Agreement, the Canadian Security Documents, the Blocked Account Agreements, the Credit Card Notifications, and each other security agreement or other instrument or document executed and delivered by or on behalf of any Loan Party to the Collateral Agent or the Canadian Agent pursuant to this Agreement or any other Loan Document granting a Lien to secure any of the Obligations or the Canadian Liabilities, as applicable.
“Settlement Date” has the meaning specified in Section 2.14(a).
“Shareholders’ Equity” means, as of any date of determination, Consolidated shareholders’ equity of Holdings and its Subsidiaries as of that date determined in accordance with GAAP.
“Shrink” means Inventory which has been lost, misplaced, stolen, or is otherwise unaccounted
for.
“Single Employer Plan” means any Plan, but excluding any Multiemployer Plan.
“SOFR” means the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York (or a successor administrator).
“SOFR-Based RateSOFR Adjustment” means 0.10% (10.00 basis points) per annum.
SOFR Early Opt-in Section 3.03(b)(i)
“Solvent” and “Solvency” means, with respect to any Person on a particular date, that on such date (a) at fair valuation, all of the properties and assets of such Person are greater than the sum of the debts, including contingent liabilities, of such Person, (b) the present fair saleable value of the properties and assets of such Person is not less than the amount that would be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person is able to realize upon its properties and assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts beyond such Person’s ability to pay as such debts mature, (e) such Person is not engaged in a business or a transaction, and is not about to engage in a business or transaction, for which such Person’s properties and assets would constitute unreasonably small capital after giving due consideration to the prevailing practices in the industry in which such Person is engaged, and (f) such Person is not “insolvent” within the meaning of Section 101(32) of the Bankruptcy Code and, in the case of any Canadian Loan Party, is not an “insolvent person” within the meaning of such term in the Bankruptcy and Insolvency Act (Canada), as applicable. The amount of all guarantees or other contingent liabilities at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, can reasonably be expected to become an actual or matured liability.
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“Specified Equity Contribution” means any cash equity contribution made to Holdings, Intermediate Holdings or Parent in exchange for Permitted Cure Securities; provided that (a)(i) such cash equity contribution and (ii) the contribution of any proceeds therefrom to Holdings, Intermediate Holdings or Parent occur (x) after the Effective Date and (y) on or prior to the date that is 10 days after the date on which the financial statements are required to be delivered for a Fiscal Quarter (or Fiscal Year), (b) the Parent identifies such equity contribution as a “Specified Equity Contribution”, (c) in each four (4) Fiscal Quarter period, there shall exist a period of at least two (2) consecutive Fiscal Quarters in respect of which no Specified Equity Contribution shall have been made, (d) the amount of any Specified Equity Contribution included in the calculation of Consolidated EBITDA hereunder shall be limited to the amount required to effect compliance with Section 7.13 hereof, and (e) the Specified Equity Contribution shall not be included for purposes of any calculation under this Agreement other than for the calculation of Consolidated EBITDA for purposes of compliance with Section 7.13 only.
“Specified Loan Party” means any Loan Party that is not then an “eligible contract participant” under the Commodity Exchange Act (determined prior to giving effect to Section 10.26).
“Spot Rate” means the rate determined by the Administrative Agent to be the rate quoted as the spot rate for purchase by the Administrative Agent of such Optional Currency with Dollars through its principal foreign exchange trading office at approximately 11:00 a.m. on the date two (2) Business Days prior to the date of such determination; provided that the Administrative Agent may obtain such spot rate from another financial institution designated by it.
“Standby Letter of Credit” means any Letter of Credit that is not a Commercial Letter of Credit and that (a) is used in lieu or in support of performance guaranties or performance, surety or similar bonds, (b) is used in lieu or in support of stay or appeal bonds, (c) supports the payment of insurance premiums for reasonably necessary casualty insurance carried by any of the Loan Parties, or (d) supports payment or performance for identified purchases or exchanges of products or services.
“Stated Amount” means at any time the maximum amount for which a Letter of Credit may be honored.
“Store” means any retail store (which may include any real property, fixtures, equipment, inventory and other property related thereto) operated, or to be operated, by any Loan Party.
“Subordinated Indebtedness” means Indebtedness which is expressly subordinated in right of payment to the prior Payment in Full of the Obligations and termination of the Aggregate Total Commitments and which is in form and on terms approved in writing by the Administrative Agent.
“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company, unlimited liability company or other business entity of which a majority of the shares of Equity Interests having ordinary voting power for the election of directors or other governing body are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of a Loan Party.
“Substantial Liquidation” means either (a) the Liquidation of substantially all of the Collateral, or (b) the sale or other disposition of substantially all of the Collateral by the Loan Parties.
“Successor Rate” has the meaning specified in Section 3.03(b).
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“Supported QFC” has the meaning specified in Section 10.31.
“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and
(b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any Master Agreement, including any such obligations or liabilities under such Master Agreement.
“Swap Obligations” means with respect to any Loan Party any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.
“Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).
“Swing Line” means the revolving credit facility made available by the Swing Line Lender pursuant to Section 2.04.
“Swing Line Borrowing” means a borrowing of a Swing Line Loan pursuant to Section 2.04. “Swing Line Lender” means Bank of America, in its capacity as provider of Swing Line Loans to
the Domestic Borrowers, and Bank of America-Canada Branch, in its capacity as provider of Swing Line
Loans to the Canadian Borrower, or any successor swing line lender hereunder.
“Swing Line Loan” has the meaning specified in Section 2.04(a), and shall include all such Loans made by the Swing Line Lender to the Domestic Borrowers or the Canadian Borrower.
“Swing Line Loan Notice” means a notice of a Swing Line Borrowing pursuant to Section 2.04(b), which, if in writing, shall be substantially in the form of Exhibit B-1 (Domestic Swing Line Loan Notice) or Exhibit B-2 (Canadian Swing Line Loan Notice), as applicable.
“Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property (including sale and leaseback transactions), in each case, creating obligations that do not appear on the balance sheet of such Person but which, upon the application of any Debtor Relief Laws to such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).
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“Target Amount” means with respect to any DDA, an amount which, when aggregated with all other Target Amounts remaining on deposit in all DDAs at any one time, does not exceed $7,500,000 (such aggregate amount to be determined no less frequently than on a monthly basis).
“Tax Sharing Agreement” means the Tax Sharing Agreement among Holdings and the Parent dated as of November 16, 2006, as the same may be amended, supplemented, waived or otherwise modified from time to time.
“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including back up withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Term Agent” means JPMorgan Chase Bank, N.A., as administrative agent and collateral agent under the Term Loan Agreement and any successor thereto.
“Term CORRA” means, for the applicable corresponding tenor, the forward-looking term rate based on CORRA that has been selected or recommended by the Relevant Canadian Governmental Body, and that is published by an authorized benchmark administrator and is displayed on a screen or other information service, as identified or selected by the Administrative Agent in its reasonable discretion at approximately a time and as of a date prior to the commencement of an Interest Period determined by the Administrative Agent in its reasonable discretion in a manner substantially consistent with market practice.
“Term CORRA Notice” means the notification by the Administrative Agent to the Canadian Lenders and the Canadian Borrower of the occurrence of a Term CORRA Transition Event.
“Term CORRA Transition Date” means, in the case of a Term CORRA Transition Event, the date that is set forth in the Term CORRA Notice provided to the Canadian Lenders and the Canadian Borrower, for the replacement of the then-current Canadian Benchmark with the Canadian Benchmark Replacement described in clause (a)(i) of such definition, which date shall be at least thirty (30) Business Days from the date of the Term CORRA Notice.
“Term CORRA Transition Event” means the determination by the Administrative Agent that
(a) Term CORRA has been recommended for use by the Relevant Canadian Governmental Body, and is determinable for any Available Canadian Tenor, (b) the administration of Term CORRA is administratively feasible for the Administrative Agent, (c) a Canadian Benchmark Replacement, other than Term CORRA, has replaced the BA Rate in accordance with Section 3.03(i), and (d) Canadian Borrower has provided a written request to the Administrative Agent to transition to Term CORRA.
“Term Loan Agreement” means that certain Credit Agreement, dated as of July 6, 2017, by and among Holdings, Intermediate Holdco, Sally Holdings LLC, Sally Capital Inc., the lenders party thereto and the Term Agent, as the same may be amended, restated, modified, supplemented, extended, renewed, refunded, replaced or refinanced from time to time in one or more agreements (in each case with the same or new lenders, institutional investors or agents), including any agreement extending the maturity thereof or otherwise restructuring all or any portion of the Indebtedness thereunder or increasing the amount loaned or issued thereunder or altering the maturity thereof, in each case as and to the extent permitted by this Agreement and the Intercreditor Agreement.
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“Term Loan Documents” means, collectively, the Term Loan Agreement and all security agreements, guarantees, pledge agreements and other agreements or instruments executed in connection therewith.
“Term SOFR” means:
provided that if the Term SOFR determined in accordance with either of the foregoing provisions (a) or (b) of this definition would otherwise be less than the Rate Floor, the Term SOFR shall be deemed the Rate Floor for purposes of this Agreement.
“Term SOFR Loan” means a Loan that bears interest at a rate based on clause (a) of the definition of Term SOFR.
“Term SOFR Replacement Date” has the meaning specified in Section 3.03(b).
“Term SOFR Screen Rate” means the forward-looking SOFR term rate .administered by CME (or any successor administrator satisfactory to the Administrative Agent) and published on the applicable Reuters screen page (or such other commercially available source providing such quotations as may be designated by the Administrative Agent from time to time).
“Termination Date” means the earliest to occur of (i) the Maturity Date, (ii) the date on which the maturity of the Obligations is accelerated (or deemed accelerated) and the Commitments are irrevocably terminated (or deemed terminated) in accordance with Article VIII, or (iii) the termination of the Aggregate Total Commitments in accordance with the provisions of Section 2.06 hereof.
“Third Amendment” means that certain Third Amendment to Amended and Restated Credit Agreement by and among the Loan Parties, the Lenders party thereto, and the Agents, dated as of the Third Amendment Effective Date.
“Third Amendment Effective Date” means May 11, 2021.
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“Third Amendment Fee Letter” means the letter entitled “Fee Letter” among the Borrowers and the Administrative Agent dated as of April 22, 2021.
“Total Outstandings” means the aggregate of all Total Revolving Outstandings.
“Total Revolving Outstandings” means the aggregate of all Canadian Total Outstandings and all Revolving Domestic Total Outstandings.
“Trading with the Enemy Act” has the meaning specified in Section 10.18.
“Trigger Event” means either (a) the occurrence and continuance of any Event of Default, or (b) the failure of the Borrowers to maintain Excess Availability of at least the greater of (i) $50,000,000, or
(ii) twelve and one-half percent (12.5%) of the Loan Cap. For purposes of this Agreement, the occurrence of a Trigger Event shall be deemed continuing, (A) so long as such Event of Default has not been waived, and/or (B) if the Trigger Event arises as a result of the Borrowers’ failure to achieve Excess Availability as required hereunder, until the date Excess Availability shall have been not less than the greater of (x) $50,000,000 or (y) twelve and one-half percent (12.5%) of the Loan Cap for forty-five (45) consecutive days; provided that for the purposes of Section 6.12 a Trigger Event may be discontinued only three (3) times during the term of this Agreement notwithstanding that the Event of Default has been waived or that Excess Availability shall have been not less than the amounts required above for forty-five
(45) consecutive days. The termination of a Trigger Event as provided herein shall in no way limit, waive or delay the occurrence of a subsequent Trigger Event in the event that the conditions set forth in this definition again arise.
“Type” means, with respect to a Committed Loan, its character as a Prime Rate Loan, a Term SOFR Loan or a BA Equivalent Loan.
“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time in the State of New York; provided, however, that if a term is defined in Article 9 of the Uniform Commercial Code differently than in another Article thereof, the term shall have the meaning set forth in Article 9; provided further that, if by reason of mandatory provisions of law, perfection, or the effect of perfection or non-perfection, of a security interest in any Collateral or the availability of any remedy hereunder is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “Uniform Commercial Code” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or availability of such remedy, as the case may be.
“UFCA” has the meaning specified in Section 10.22(d). “UFTA” has the meaning specified in Section 10.22(d).
“UK Financial Institution” means any BRRD Undertaking (as defined under the PRA Rulebook (as amended from 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” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
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“Unfunded Pension Liability” means the excess of a Domestic Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Domestic Pension Plan’s assets, determined in accordance with the assumptions used for funding the Domestic Pension Plan pursuant to Section 412 of the Code for the applicable plan year.
“Unintentional Canadian Overadvance” means a Canadian Overadvance which, to the Agents’ knowledge, did not constitute a Canadian Overadvance when made but which has become a Canadian Overadvance resulting from changed circumstances beyond the control of the Credit Parties, including, without limitation, a reduction in the Appraised Value of property or assets included in the Canadian Borrowing Base or misrepresentation by the Canadian Loan Parties.
“Unintentional Domestic Overadvance” means a Domestic Overadvance which, to the Administrative Agent’s knowledge, did not constitute a Domestic Overadvance when made but which has become a Domestic Overadvance resulting from changed circumstances beyond the control of the Credit Parties, including, without limitation, a reduction in the Appraised Value of property or assets included in the Domestic Borrowing Base or misrepresentation by the Loan Parties.
“U.S. Government Securities Business Day” means any Business Day, except any Business Day on which any of the Securities Industry and Financial Markets Association, the New York Stock Exchange or the Federal Reserve Bank of New York is not open for business because such day is a legal holiday under the federal laws of the United States or the laws of the State of New York, as applicable.
“U.S. Special Resolution Regimes” has the meaning specified in Section 10.31. “United States” and “U.S.” mean the United States of America.
“USA PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended.
“Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).
“US Index Rate” means, for any day, a floating rate equal to the annual rate of interest determined by the Canadian Agent which is equal to the greatest of (a) the annual rate of interest announced from time to time by Bank of America-Canada Branch, as being its reference rate in effect on such date (or if such date is not a Business Day, on the Business Day immediately preceding such date) for determining interest rates on Dollar denominated commercial loans made by it in Canada, in each case regardless of whether such bank actually charges such rate of interest in connection with extensions of credit in Dollars to debtors, (b) the Federal Funds Rate for such day plus one-half of one percent (0.50%) or (c) Term SOFR for a thirty (30) day interest period as determined on such day, plus 1.0%; provided that such US Index Rate shall not be less than 0%. Each change in any interest rate provided for in the Agreement based upon the US Index Rate shall take effect at the time of such change in the US Index Rate.
“US Index Rate Loan” means a Loan or portion thereof made to the Canadian Borrower denominated in US Dollars bearing interest at a rate based on the US Index Rate.
“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.
“U.S. Prime Rate” means for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 1/2 of 1%, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate,” and (c) Term SOFR plus 1.00% (which rate, for the avoidance of doubt, shall not be less than the Rate Floor).
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The “prime rate” is a rate set by Bank of America based upon various factors including Bank of America’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such prime rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. If the U.S. Prime Rate is being used as an alternate rate of interest pursuant to Section 3.03 hereof, then the U.S. Prime Rate shall be the greater of clauses (a) and (b) above and shall be determined without reference to clause (c) above.
“U.S. Tax Compliance Certificate” has the meaning specified in Section 3.01(e)(ii)(B)(III). “Voting Stock” means Equity Interests entitled to vote generally in the election of directors (or
Persons performing similar functions).
“Write-Down and Conversion Powers” means (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; or (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.
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(b) “real property” or “real estate” shall include “immovable property”, (c) “tangible property” shall include “corporeal property”, (d) “intangible property” shall include “incorporeal property”, (e) “security interest”, “mortgage” and “security” shall include a “hypothec”, “right of retention”, “prior claim” and a resolutory clause, (f) all references to filing, perfection, priority, remedies, registering or recording under the UCC or a PPSA shall include publication under the Civil Code of Québec, (g) all references to “perfection” of or “perfected” security or security interest shall include a reference to an “opposable” or “set up” hypothec, security or security interest as against third parties, (h) any “right of offset”, “right of setoff” or similar expression shall include a “right of compensation”, (i) “goods” shall include “corporeal movable property” other than chattel paper, documents of title, instruments, money and securities, (j) an “agent” shall include a “mandatary”, (k) “construction security” shall include “legal hypothecs”,
(l) “joint and several” shall include “solidary”, (m) “gross negligence or willful misconduct” shall be deemed to be “intentional or gross fault”, (n) “beneficial ownership” shall include “ownership on behalf of another as mandatary”; (o) “easement” shall include “servitude”, (p) “priority” shall include “prior claim”, (q) “survey” shall include “certificate of location and plan”, (r) “state” shall include “province”,
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(s) “fee simple title” shall include “absolute ownership”, (t) “accounts” shall include “claims”, and (u) “foreclosure” shall include “the exercise of a hypothecary right”.
ARTICLE II
THE COMMITMENTS AND CREDIT EXTENSIONS
Within the limits of the Revolving Domestic Commitment for each Revolving Domestic Lender, and subject to the other terms and conditions hereof, the Domestic Borrowers may borrow under this Section 2.01, prepay under Section 2.05, and reborrow under this Section 2.01.
(y) the Applicable Percentage of the Canadian Borrowing Base for such Canadian Lender; subject in each case to the following limitations:
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Within the limits of the Canadian Commitment for each Canadian Lender, and subject to the other terms and conditions hereof, the Canadian Borrower may borrow under this Section 2.01, prepay under Section 2.05, and reborrow under this Section 2.01.
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$1,000,000 in excess thereof (or the Equivalent Amount thereof). Except as provided in Sections
2.03(c) and 2.04(c), each Committed Borrowing of or conversion to Canadian Prime Rate Loan, US Index Rate Loans, or Domestic Prime Rate Loans, as applicable, shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof (or the Equivalent Amount thereof). Each Committed Loan Notice (whether telephonic or written) shall specify (i) whether the request is for a Committed Borrowing, a conversion of Committed Loans from one Type to the other, or a continuation of Term SOFR Loans or BA Equivalent Loans,
(ii) the requested date of the Committed Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Committed Loans to be borrowed, converted or continued, (iv) the Type of Committed Loans to be borrowed or to which existing Committed Loans are to be converted, (v) whether such Committed Loan is to be made in Dollars, Canadian Dollars or another Optional Currency, and (vi) if applicable, the duration of the Interest Period with respect thereto, provided that any request for Optional Currency shall comply with the provisions of Section 2.02(b) hereof. If (x) the request fails to specify a Type of Committed Loan in a Committed Loan Notice or the currency in which such Committed Loan is to be made or if the Parent or the Canadian Borrower, as the case may be, fails to give a timely notice of a conversion or continuation of a Term SOFR Loan or a BA Equivalent Loan, then the applicable Committed Loans shall be made as, or converted to, Domestic Prime Rate Loans or US Index Rate Loans, as applicable, made in Dollars or Canadian Prime Rate Loans made in CD$, as applicable. Any such automatic conversion to Prime Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Term SOFR Loans or BA Equivalent Loans, or (y) fails to specify an Interest Period for a Term SOFR Loan or a BA Equivalent Loan, it will be deemed to have specified an Interest Period of one month. Notwithstanding anything to the contrary herein, a Swing Line Loan may not be converted to a Term SOFR Loan or a BA Equivalent Loan.
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Each Revolving Domestic Lender and each Canadian Lender shall make the amount of its applicable Committed Loan available to the Administrative Agent or the Canadian Agent, as the case may be, in immediately available funds at the applicable Agent’s Office not later than 1:00 p.m. on the Business Day specified in the applicable Committed Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Committed Borrowing is the initial Credit Extension, Section 4.01), the applicable Agent shall use reasonable efforts to make all funds so received available to the applicable Borrowers in like funds by no later than 4:00 p.m. on the day of receipt by the applicable Agent, either by (i) crediting either the account of the Parent or the Canadian Borrower, as applicable, on the books of Bank of America or Bank of America-Canada Branch, as applicable, with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the applicable Agent by the Parent or the Canadian Borrower; provided, however, that (A) if, on the date a Committed Loan Notice with respect to a Canadian Committed Borrowing is given by the Canadian Borrower there are Canadian L/C Borrowings outstanding, then the proceeds of such Canadian Committed Borrowing, first, shall be applied to the payment in full of any such Canadian L/C Borrowings, and second, shall be made available to the Canadian Borrower as provided above; or
(B) if, on the date a Committed Loan Notice with respect to a Domestic Committed Borrowing is
given by the Parent on behalf of the Domestic Borrowers, there are Domestic L/C Borrowings outstanding, then the proceeds of such Domestic Committed Borrowing, first, shall be applied to the payment in full of any such Domestic L/C Borrowings, and second, shall be made available to the Domestic Borrowers as provided above.
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At any time that Prime Rate Loans are outstanding, the applicable Agent shall promptly notify the Parent, the Canadian Borrower and the applicable Lenders of any change in the U.S. Prime Rate, US Index Rate or Canadian Prime Rate promptly following the public announcement of such change.
Subject to the terms and conditions set forth herein, (A) each L/C Issuer agrees, in reliance upon the agreements of the Revolving Lenders set forth in this Section 2.03, (1) from time to time on any Business Day during the period from the Original Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of any Borrower (provided that any Canadian Letter of Credit may only be for the benefit of any Canadian Loan Party), and to amend or extend Letters of Credit previously issued by it, in accordance with Section 2.03(b) below, and (2) to honor drawings under the Letters of Credit, (B) each Revolving Domestic Lender severally agrees to participate in Domestic Letters of Credit and any drawings thereunder; provided that, after giving effect to any L/C Credit Extension with respect to any Domestic Letter of Credit, the provisions of Section 2.01(a) shall not have been breached, and (C) each Canadian Lender severally agrees to participate in Canadian Letters of Credit and any drawings thereunder; provided that, after giving effect to any Canadian L/C Credit Extension, the provisions of Section 2.01(a) shall not have been breached.
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Each request by a Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by all Borrowers that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence. Within the foregoing limits, and subject to the terms and conditions hereof, each Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly such Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed. Any L/C Issuer (other than Bank of America or any of its branches or Affiliates) shall notify the applicable Agent in writing on each Business Day of all Letters of Credit issued on the prior Business Day by such L/C Issuer, provided that (i) until the applicable Agent advises any such L/C Issuer that the provisions of Section 4.02 are not satisfied, or (ii) the aggregate amount of the Letters of Credit issued in any such week exceeds such amount as shall be agreed by the Agents and the L/C Issuer, such L/C Issuer shall be required to so notify the Agents in writing only once each week of the Letters of Credit issued by such L/C Issuer during the immediately preceding week as well as the daily amounts outstanding for the prior week, such notice to be furnished on such day of the week as the Agents and such L/C Issuer may agree.
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(C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; (G) the identity of the Borrower for the account of which such Letter of Credit is requested to be issued; and (H) such other matters as the L/C Issuer may reasonably require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail reasonably satisfactory to the L/C Issuer: (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the L/C Issuer may require.
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Additionally, the applicable Borrower shall furnish to the L/C Issuer and the Administrative Agent and, if applicable, the Canadian Agent, such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the L/C Issuer, the Administrative Agent or the Canadian Agent may require.
(5) Business Days before the Non-Extension Notice Date (1) from the Administrative Agent that the
Required Revolving Lenders have elected not to permit such extension or (2) from the Administrative Agent, the Canadian Agent, or any Revolving Lender that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, and in each such case directing the L/C Issuer not to permit such extension.
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In such event, each Revolving Lender’s payment to the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Revolving Lender in satisfaction of its participation obligation under this Section 2.03.
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The Parent or the Canadian Borrower, as applicable, shall promptly examine a copy of each Domestic Letter of Credit or each Canadian Letter of Credit, as applicable, and each amendment thereto that is delivered to such Person and, in the event of any claim of noncompliance with the Parent’s or the Canadian Borrower’s, as applicable, instructions or other irregularity, the Parent or the Canadian Borrower, as applicable, will promptly notify the L/C Issuer. The Borrowers shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid.
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For purposes of this Section 2.03, Section 2.05 and Section 8.02(c), “Cash Collateralize” means to pledge and deposit into the applicable Cash Collateral Account or deliver to the Administrative Agent or the Canadian Agent, as applicable, for the benefit of the L/C Issuer and the Revolving Domestic Lenders or the Canadian Lenders, as applicable, as collateral for the Domestic L/C Obligations or the Canadian L/C Obligations, as applicable, cash or deposit account balances in an amount equal to one hundred five percent (105%) of the Outstanding Amount of all Domestic L/C Obligations (other than Domestic L/C Borrowings) or the Canadian L/C Obligations (other than Canadian L/C Borrowings), as applicable, pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent or the Canadian Agent, as applicable, and the L/C Issuer (which documents are hereby consented to by the Revolving Lenders). Derivatives of such term have corresponding meanings. The Domestic Borrowers hereby grant to the Administrative Agent (for the benefit of itself and the other Credit Parties) a security interest in, and Lien on, all such cash, deposit accounts and all balances in the Cash Collateral Account established by the Domestic Loan Parties and all proceeds of the foregoing to secure the Secured Obligations (as defined in the Security Agreement) of the Domestic Loan Parties. The Canadian Loan Parties hereby grant to the Canadian Agent a security interest in, and Lien on, all such cash, deposit accounts and all balances in the Cash Collateral Account established by the Canadian Loan Parties and all proceeds of the foregoing to secure the Canadian Liabilities. Cash Collateral shall be maintained in Cash Collateral Accounts at Bank of America or Bank of America-Canada Branch, as applicable. If at any time the Administrative Agent reasonably determines that any funds held by it as Cash Collateral are subject to any right or claim of any Person other than the Administrative Agent (for the benefit of itself and the other Domestic Credit Parties) or that the total amount of such funds is less than 105% of the aggregate Outstanding Amount of all Domestic L/C Obligations (other than Domestic L/C Borrowings), the Domestic Borrowers will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited as Cash Collateral, an amount equal to the excess of (x) such aggregate Outstanding Amount of all Domestic L/C Obligations (other than Domestic L/C Borrowings) over (y) the total amount of funds, if any, then held by the Administrative Agent as Cash Collateral that the Administrative Agent reasonably determines to be free and clear of any such right and claim. If at any time the Canadian Agent reasonably determines that any funds held by it as Cash Collateral are subject to any right or claim of any Person other than the Canadian Agent (for the benefit of itself and the other Canadian Credit Parties) or that the total amount of such funds is less than 105% of the aggregate Outstanding Amount of all Canadian L/C Obligations (other than Canadian L/C Borrowings), the Canadian Borrower will, forthwith upon demand by the Canadian Agent, pay to the Canadian Agent, as additional funds to be deposited as Cash Collateral, an amount equal to the excess of
(x) such aggregate Outstanding Amount of all Canadian L/C Obligations (other than Canadian L/C
Borrowings) over (y) the total amount of funds, if any, then held by the Canadian Agent as Cash Collateral that the Canadian Agent reasonably determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit for which funds are on deposit as Cash Collateral, such funds shall be applied, to the extent permitted under applicable Laws, to reimburse the L/C Issuer and, to the extent not so applied, shall thereafter be applied to satisfy other Obligations in the manner specified in Section 2.05 and Section 8.03.
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Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will confirm with the Administrative Agent or the Canadian Agent, as applicable (by telephone or in writing) that the Administrative Agent or the Canadian Agent, as applicable, has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent or the Canadian Agent, as applicable (by telephone or in writing) of the contents thereof. Unless the Swing Line Lender has received notice (by telephone or in writing) from the Administrative Agent or the Canadian Agent at the request of the Required Revolving Lenders prior to 2:00 p.m. on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the proviso in clause (i) or clause
(ii) to the first sentence of Section 2.04(a), or (B) that one or more of the applicable conditions specified in Article IV is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender may, in its discretion, not later than 3:00 p.m. on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Domestic Borrowers or the Canadian Borrower, as applicable, at its office by crediting the account of such Borrower or such other account as directed by the applicable Borrower, as applicable, on the books of the Swing Line Lender in immediately available funds.
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The Administrative Agent will make such demand upon the request of the Swing Line Lender. The obligations of the Revolving Domestic Lenders under this clause shall survive the Payment in Full of the Obligations and the termination of this Agreement.
(B) on the date of prepayment of Prime Rate Loans; (ii) any voluntary prepayment of Term SOFR Loans or BA Equivalent Loans shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof (or the Equivalent Amount thereof); and (iii) any voluntary prepayment of Prime Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof (or the Equivalent Amount thereof) or, in each case, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid and, if Term SOFR Loans or BA Equivalent Loans, the Interest Period(s) of such Loans. The Administrative Agent or the Canadian Agent, as applicable, will promptly notify each Revolving Domestic Lender or Canadian Lender, as applicable, of its receipt of each such notice, and of the amount of such Revolving Domestic Lender’s or Canadian Lender’s Applicable Percentage of such prepayment. If such notice is given by the Parent or the Canadian Borrower, the applicable Borrowers shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a Term SOFR Loan or a BA Equivalent Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05. Each such prepayment shall be applied to the Committed Loans of the Revolving Domestic Lenders or Canadian Lenders, as the case may be, in accordance with their respective Applicable Percentages.
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Notwithstanding anything to the contrary contained herein, the Parent may rescind any notice of prepayment provided pursuant to this Section 2.05(a) if such prepayment was to have been made with the proceeds of a refinancing of all or part of the Committed Loans hereunder or from the proceeds of an asset sale or a similar transaction, which refinancing, asset sale or similar transaction shall not have been consummated or shall otherwise have been delayed.
(ii) any such prepayment shall be in a minimum principal amount of $100,000 or the Equivalent Amount thereof, as applicable, or, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment. If such notice is given, the applicable Borrowers, as applicable, shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Notwithstanding anything to the contrary contained herein, the Borrowers may rescind any notice of prepayment provided pursuant to this Section 2.05(b) if such prepayment was to have been made with the proceeds of a refinancing of all part of the Swing Line Loans hereunder or from the proceeds of an asset sale or similar transaction, which refinancing, asset sale or similar transaction shall not have been consummated or shall otherwise have been delayed.
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(d) hereof, to the extent necessary as a result of any such recalculation.
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Notwithstanding anything to the contrary contained herein, the Domestic Borrowers may rescind any notice of reduction or termination of the Revolving Domestic Commitments provided pursuant to this Section 2.06(a), if such termination or reduction was to have been made with the proceeds of a refinancing of all part of the Committed Loans hereunder or from the proceeds of an asset sale or a similar transaction, which refinancing, asset sale or similar transaction shall not have been consummated or shall otherwise have been delayed.
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Upon any reduction of the Canadian Total Commitments, the Canadian Commitment of each Canadian Lender shall be reduced by such Canadian Lender’s Applicable Percentage of such reduction amount. All fees (including, without limitation, Commitment Fees and Letter of Credit Fees) and interest in respect of the Aggregate Total Commitments accrued until the effective date of any termination of the Aggregate Total Commitments shall be paid on the effective date of such termination.
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Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.12(a), bear interest for one day. Each determination by the Administrative Agent or the Canadian Agent, as applicable, of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.
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All payments received by the Administrative Agent or the Canadian Agent after 2:00 p.m. shall, at the option of the Administrative Agent or the Canadian Agent, as applicable, be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment (other than with respect to payment of a Term SOFR Loan or a BA Equivalent Loan) to be made by the Borrowers shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.
Domestic Prime Rate Loans and (D) in the case of a payment to be made by the Canadian Borrower, the interest rate applicable to Canadian Prime Rate Loans with respect to payments due in Canadian Dollars and the rate applicable to US Index Rate Loans with respect to payments due in Dollars. If the applicable Borrowers and such Revolving Lender shall pay such interest to the Administrative Agent or the Canadian Agent, as applicable, for the same or an overlapping period, the Administrative Agent or the Canadian Agent, as applicable, shall promptly remit to such Borrowers the amount of such interest paid by such Borrowers for such period.
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If such Revolving Lender pays its share of the applicable Committed Borrowing or participation to the Administrative Agent or the Canadian Agent, as applicable, then the amount so paid shall constitute such Revolving Lender’s Committed Loan included in such Committed Borrowing or participation in such Letter of Credit or Swing Line Loan. Any payment by the Borrowers shall be without prejudice to any claim the Borrowers may have against a Revolving Lender that shall have failed to make such payment to the Administrative Agent or the Canadian Agent, as applicable.
A notice of the Administrative Agent or the Canadian Agent, as applicable, to any Lender or the Parent with respect to any amount owing under this Section 2.12(c) shall be conclusive, absent manifest error.
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(b) purchase (for cash at face value) participations in the Committed Loans and subparticipations in L/C Obligations and Swing Line Loans of the other applicable 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, provided that:
Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation.
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As reflected on the summary statement, (i) the Administrative Agent or the Canadian Agent, as applicable, shall transfer to each Revolving Domestic Lender or Canadian Lender, as applicable, its Applicable Percentage of repayments, and (ii) each Revolving Lender shall transfer to the Administrative Agent or the Canadian Agent, as applicable (as provided below) or the Administrative Agent or the Canadian Agent, as applicable, shall transfer to each Revolving Lender, such amounts as are necessary to insure that, after giving effect to all such transfers, the amount of Committed Loans made by each Revolving Lender shall be equal to such Revolving Lender’s Applicable Percentage of all Committed Loans outstanding as of such Settlement Date. If the summary statement requires transfers to be made to the Administrative Agent or the Canadian Agent, as applicable, by the Revolving Lenders and is received prior to 1:00 p.m. on a Business Day, such transfers shall be made in immediately available funds no later than 3:00 p.m. that day; and, if received after 1:00 p.m., then no later than 3:00 p.m. on the next Business Day. The obligation of each Revolving Lender to transfer such funds is irrevocable, unconditional and without recourse to or warranty by the Administrative Agent or the Canadian Agent, as applicable. If and to the extent any Revolving Domestic Lender shall not have so made its transfer to the Administrative Agent, such Revolving Domestic Lender agrees to pay to the Administrative Agent forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent equal to the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation plus any administrative, processing, or similar fees customarily charged by the Administrative Agent in connection with the foregoing. If and to the extent any Canadian Lender shall not have so made its transfer to the Canadian Agent, such Canadian Lender agrees to pay to the Canadian Agent forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Canadian Agent equal to the greater of the greater of the Bank of Canada Overnight Rate with respect to payments due to the Canadian Agent in Canadian Dollars and the Federal Funds Rate with respect to payments due to the Canadian Agent in Dollars, and a rate determined by the Canadian Agent in accordance with banking industry rules on interbank compensation plus any administrative processing or similar fees customarily charged by the Canadian Agent in connection with the foregoing.
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Any Lender not responding within such time period shall be deemed to have declined to increase its Revolving Commitment.
(a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01, (ii) the Borrowers, the Administrative Agent, and any Additional Commitment Lender shall have executed and delivered a joinder to the Loan Documents in such form as the Administrative Agent shall reasonably require; (iii) the Borrowers shall have paid such fees and other compensation to the Additional Commitment Lenders and to any existing Lender increasing its Commitment as the Parent and such Additional Commitment Lenders shall agree; (iv) if the Parent has requested Bank of America or any of its Affiliates to seek additional Lenders pursuant to Section 2.15(e), the Borrowers shall have paid such arrangement fees to Bank of America and such Affiliates as the Parent and Bank of America may agree; (v) the Borrowers shall deliver to the Administrative Agent and the Lenders an opinion or opinions, in form and substance reasonably
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satisfactory to the Administrative Agent, from counsel to the Borrowers reasonably satisfactory to the Administrative Agent and dated such date; (vi) the Borrowers and the Additional Commitment Lender shall have delivered such other instruments, documents and agreements evidencing the Commitment Increase as the Administrative Agent may reasonably have requested; and (vii) no Default exists. The Borrowers shall prepay any Committed Loans outstanding on the Increase Effective Date (and pay any additional amounts required pursuant to Section 3.05) to the extent necessary to keep the outstanding Committed Loans ratable with any revised Applicable Percentages arising from any nonratable increase in the Aggregate Total Commitments under this Section.
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4.02 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and L/C Obligations owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or L/C Obligations owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in L/C Obligations and Swing Line Loans are held by the Lenders pro rata in accordance with their Applicable Percentages hereunder without giving effect to Section 2.16(a)(iv). 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 2.16(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.
4.02 are satisfied at the time of such reallocation (and, unless the Borrowers shall have otherwise notified the Administrative Agent at such time, the Borrowers shall be deemed to have represented and warranted that such conditions are satisfied at such time), and
(y) such reallocation does not cause the aggregate Outstanding Amount of Obligations or Canadian Liabilities of any Non-Defaulting Lender to exceed such Non-Defaulting Lender’s Revolving Domestic Commitment or Canadian Commitment, as applicable. 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.
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ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY; APPOINTMENT OF PARENT
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(y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN or IRS Form W-8BEN-E, as 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;
(x) a certificate substantially in the form of Exhibit G-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrowers within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S.
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Tax Compliance Certificate”) and (y) executed originals of IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable; or
applicable, a U.S. Tax Compliance Certificate substantially in the form of Exhibit G-2 or Exhibit G-3, 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 G-4 on behalf of each such direct and indirect partner;
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If any Recipient determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified by any Loan Party or with respect to which any Loan Party has paid additional amounts pursuant to this Section 3.01, it shall pay to the Loan Party an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by a Loan Party under this Section 3.01 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) incurred by such Recipient, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Loan Party, upon the request of the Recipient, agrees to repay the amount paid over to the Loan Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Recipient in the event the Recipient is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this subsection, in no event will the applicable Recipient be required to pay any amount to the Loan Party pursuant to this subsection the payment of which would place the Recipient in a less favorable net after-Tax position than such Recipient 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 subsection shall not be construed to require any Recipient to make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Loan Party or any other Person.
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Upon receipt of such notice, the applicable Borrowers shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Term SOFR Loans and BA Equivalent Loans of such Lender to Prime Rate Loans or Canadian Prime Rate Loans, as applicable, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Term SOFR Loans or BA Equivalent Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Loans. Upon any such prepayment or conversion, the applicable Borrowers shall also pay accrued interest on the amount so prepaid or converted.
(B) adequate and reasonable means do not otherwise exist for determining Term SOFR or the BA Rate for any requested Interest Period with respect to a proposed Term SOFR Loan or BA Equivalent Loan or in connection with an existing or proposed Prime Rate Loan, or (ii) the Administrative Agent or the Required Lenders determine that for any reason that Term SOFR for any requested Interest Period with respect to a proposed Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, or (iii) the Administrative Agent or the Required Lenders holding Canadian Commitments determine that for any reason that the BA Rate for any requested Interest Period with respect to a proposed Loan does not adequately and fairly reflect the cost to such Canadian Lenders of funding such Loan, then, in each case, the Administrative Agent will promptly so notify the Parent and each Lender. Thereafter, (w) the obligation of the Lenders to make or maintain Term SOFR Loans, or to convert Domestic Prime Rate Loans or US Index Rate Loans to Term SOFR Loans, shall be suspended (to the extent of the affected Term SOFR Loans or Interest Periods), (ix) in the event of a determination described in the preceding sentence with respect to the Term SOFR component of the U.S. Prime Rate or US Index Rate, the utilization of the Term SOFR component in determining the U.S. Prime Rate or US Index Rate shall be suspended, in each case until the Administrative Agent (or, in the case of a determination by the Required Lenders described in clause (ii) of this Section 3.03(a), until the Administrative Agent upon instruction of the Required Lenders) revokes such notice, (y) the obligation of the Canadian Lenders to make or maintain BA Equivalent Loans, or to convert Canadian Prime Rate Loans to BC Equivalent Loans, shall be suspended (to the extent of the affected BA Equivalent Loans or Interest Periods), and (z) in the event of a determination described in the preceding sentence with respect to the BA Rate component of the Canadian Prime Rate, the utilization of the BA Rate component in determining the Canadian Prime Rate shall be suspended, in each case until the Administrative Agent (or, in the case of a determination by the Required Lenders holding Canadian Commitments described in clause (iii) of this Section 3.03(a), until the Administrative Agent upon instruction of such Required Lenders) revokes such notice.
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Upon receipt of such notice, (i) the Parent may revoke any pending request for a Borrowing of, or conversion to, or continuation of Term SOFR Loans (to the extent of the affected Term SOFR Loans or Interest Periods) or BA Equivalent Loans (to the extent of the affected BA Equivalent Loans or Interest Periods) or, failing that, will be deemed to have converted such request into a request for a Borrowing of Prime Rate Loans in the amount specified therein, (ii) any outstanding Term SOFR Loans shall be deemed to have been converted to Domestic Prime Rate Loans or US Index Rate Loans, as applicable, immediately at the end of their respective applicable Interest Period, and (iii) any outstanding BA Equivalent Loans shall be deemed to have been converted to Canadian Prime Rate Loans immediately at the end of their respective applicable Interest Period.
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Notwithstanding anything to the contrary herein, (i) if the Administrative Agent determines that Daily Simple SOFR is not available on or prior to the Term SOFR Replacement Date, or (ii) if the events or circumstances of the type described in Section 3.03(b)(i) or (ii) have occurred with respect to the Successor Rate then in effect, then in each case, the Administrative Agent and the Parent may amend this Agreement solely for the purpose of replacing Term SOFR or any then current Successor Rate in accordance with this Section 3.03 at the end of any Interest Period, relevant interest payment date or payment period for interest calculated, as applicable, with an alternative benchmark rate giving due consideration to any evolving or then existing convention for similar U.S. dollar denominated credit facilities syndicated and agented in the United States for such alternative benchmark and, in each case, including any mathematical or other adjustments to such benchmark giving due consideration to any evolving or then existing convention for similar U.S. dollar denominated credit facilities syndicated and agented in the United States for such benchmark, which adjustment or method for calculating such adjustment shall be published on an information service as selected by the Administrative Agent from time to time in its reasonable discretion and may be periodically updated. For the avoidance of doubt, any such proposed rate and adjustments, shall constitute a “Successor Rate”. Any such amendment shall become effective at 5:00 p.m. on the fifth Business Day after the Administrative Agent shall have posted such proposed amendment to all Lenders and the Parent unless, prior to such time, Lenders comprising the Required Lenders have delivered to the Administrative Agent written notice that such Required Lenders object to such amendment.
any other Loan Documents:
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Canadian Tenors of the BA Rate have either permanently or indefinitely ceased to be provided by RBSL and
the Canadian Benchmark Replacement will replace such Canadian Benchmark for all purposes hereunder and under any Loan Document in respect of any setting of such Canadian Benchmark on such day and all subsequent settings without any amendment to, or further action or consent of any other party to this Agreement or any other Loan Document. If the Canadian Benchmark Replacement is Daily Simple CORRA, all interest payments will be payable on a monthly basis.
holding Canadian Commitments. .
bear interest by reference to such Canadian Benchmark until the Canadian Borrower’s
receipt of notice from the Administrative Agent that a Canadian Benchmark Replacement has replaced
such Canadian Benchmark, and, failing that, the Canadian Borrower will be deemed to have converted any such request into a request for a borrowing of or conversion to Canadian Prime Rate Loans . During the period referenced in the foregoing sentence, the component of Canadian Prime Rate based upon the Benchmark will not be used in any determination of Canadian Prime Rate.
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(B) Taxes described in clauses (b) through (d) 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
and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Term SOFR Loan or BA Equivalent Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the L/C Issuer of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the L/C Issuer hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the L/C Issuer, the Loan Parties will pay to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer, as the case may be, for such additional costs incurred or reduction suffered.
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including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. The applicable Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.
Section 3.05
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would eliminate or reduce amounts payable pursuant to Section 3.01 or Section 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender or L/C Issuer to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender or L/C Issuer. The Borrowers hereby agree to pay all reasonable costs and expenses incurred by any Lender or L/C Issuer in connection with any such designation or assignment.
ARTICLE IV
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS
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Note;
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Parties;
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Without limiting the generality of the provisions of Section 9.04, for purposes of determining compliance with the conditions specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Effective Date specifying its objection thereto.
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5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01.
Each Request for a Credit Extension (other than a Committed Loan Notice requesting only a conversion of a Committed Loan to another Type of Committed Loan or a continuation of Term SOFR Loans, BA Equivalent Loans) submitted by the Parent or the Canadian Borrower, as applicable, shall be deemed to be a representation and warranty by the Domestic Borrowers or the Canadian Borrower, as applicable, that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension. The conditions set forth in this Section 4.02 are for the sole benefit of the Credit Parties but unless and until the Required Revolving Lenders otherwise direct the Administrative Agent and the Canadian Agent (in accordance with the terms of this Agreement) to cease making Committed Loans, the Revolving Lenders will fund their Applicable Percentage of all Revolving Loans that are requested by the Parent or the Canadian Borrower, as applicable, of all L/C Advances required to be made hereunder and participate in all Swing Line Loans and Letters of Credit whenever made or issued in accordance with the provisions of this Agreement, and which, notwithstanding the failure of the Loan Parties to comply with the provisions of this Article IV, are agreed to by the Administrative Agent or the Canadian Agent, as applicable; provided that, the making of any such Revolving Loans or the issuance of any Letters of Credit in the event the provisions of this Article IV are not complied with shall not be deemed to be a modification or waiver by any Credit Party of the provisions of this Article IV on any future occasion or a waiver of any rights of the Credit Parties as a result of any such failure to comply.
ARTICLE V REPRESENTATIONS AND WARRANTIES
To induce the Credit Parties to enter into this Agreement and to make Loans and to issue Letters of Credit hereunder, each Loan Party represents and warrants to the Administrative Agent and the other Credit Parties that:
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(i) any material contract or any Material Indebtedness to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; (c) result in or require the creation of any Lien upon any asset of any Loan Party (other than Liens in favor of the Collateral Agent or the Canadian Agent, as applicable, under the Security Documents); or (d) violate any Law.
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(ii) fairly present the financial condition of the Parent and its Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all Material Indebtedness and other liabilities, direct or contingent, of the Parent and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.
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Encumbrances.
Except for events, conditions or circumstances that would not constitute a Material
Adverse Effect:
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(b) failure to be maintained, where required, in good standing with applicable regulatory authorities;
(c) any obligation of the Parent or its Subsidiaries in connection with the termination or partial termination of, or withdrawal from, any such foreign plan; (d) any Lien on the property of the Parent or its Subsidiaries in favor of a Governmental Authority as a result of any action or inaction regarding such a foreign plan; (e) for each such foreign plan which is a funded or insured plan, failure to be funded or insured on an ongoing basis to the extent required by applicable non-U.S.
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law (using actuarial methods and assumptions which are consistent with the valuations last filed with the applicable Governmental Authorities); (f) any facts that, to the best knowledge of the Parent or any of its Subsidiaries, exist that would reasonably be expected to give rise to a dispute and any pending or threatened disputes that, to the best knowledge of the Parent or any of its Subsidiaries, would reasonably be expected to result in a material liability to the Parent or any of its Subsidiaries concerning the assets of any such foreign plan (other than individual claims for the payment of benefits); and (g) failure to make all contributions in a timely manner to the extent required by applicable non-U.S. law.
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(b) the failure to comply therewith, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
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Notwithstanding anything to the contrary herein, the Loan Parties shall have no obligation to prefect Liens on any Collateral in any jurisdiction outside the United States of America or Canada.
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ARTICLE VI AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification claims for which a claim has not been asserted), or any Letter of Credit shall remain outstanding, the Loan Parties shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, and 6.03) cause each Subsidiary to:
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(i) within ten (10) Business Days after end of each Fiscal Quarter (or, if such day is not a Business Day, on the next succeeding Business Day), a certificate in the form of Exhibit E (a “Borrowing Base Certificate”) showing the Domestic Borrowing Base, Canadian Borrowing Base and Combined Borrowing Base as of the close of business as of the last day of the immediately preceding Fiscal Quarter, each Borrowing Base Certificate to be certified as complete and correct by a Responsible Officer of the Parent or Holdings; provided that at any time that the Borrowers have failed to maintain Excess Availability of at least sixty percent (60%) of the Loan Cap, such Borrowing Base Certificate shall be delivered within ten (10) Business Days after end of each Fiscal Month (or, if such day is not a Business Day, on the next succeeding Business Day); and provided, further, that at any time that an Accelerated Borrowing Base Delivery Event has occurred and is continuing, such Borrowing Base Certificate shall be delivered on Wednesday of each week (or, if Wednesday is not a Business Day, on the next succeeding Business Day), as of the close of business on the immediately preceding Saturday, and (ii) within one (1) Business Day after the consummation of the Disposition outside of the ordinary course of business of any Collateral included in the Domestic Borrowing Base or the Canadian Borrowing Base, in each case either with a cost value as included in the Combined Borrowing Base of equal to or greater than $25,000,000, or in connection with the Disposition of Stores consisting of more than five percent (5%) of the number of the Borrowers’ Stores as of the beginning of such Fiscal Year, a Borrowing Base Certificate showing the Domestic Borrowing Base, Canadian Borrowing Base and Combined Borrowing Base after giving effect to the consummation of such Disposition. In connection with each Borrowing Base Certificate, if the Accounts Receivable Reporting Requirement is not in effect, the Borrowers’ reporting of Accounts shall be summary in nature and shall be from the Parent’s or Holdings’ then current financial statements with classification by only entity or business segment; if the Accounts Receivable Reporting Requirement is in effect (or the Borrowers elect to provide detailed Accounts reporting pursuant to the definition thereof) the Borrowers’ reporting of Accounts shall set forth in reasonable detail the aging and dilution thereof and incorporate appraisal and audit work with respect thereto;
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Documents required to be delivered pursuant to paragraphs (a) and (b) of Section 6.01 or pursuant to Section 6.02(e) (to the extent any such documents and the information required to be provided therewith as set forth above are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which Holdings posts such documents, or provides a link thereto on Holdings’ website on the Internet at the website address listed on Schedule 10.02 or filed with the SEC; or (ii) on which such documents are posted on Holdings’ behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) Holdings shall deliver paper copies of such documents to the Administrative Agent or any Lender that requests Holdings to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) Holdings shall notify the Administrative Agent and each Lender (by telecopier or electronic mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. The Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Loan Parties with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.
The Loan Parties hereby acknowledge that (a) the Administrative Agent and/or the Arranger will make available to the Lenders and the L/C Issuer materials and/or information provided by or on behalf of the Loan Parties hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on Debt Domain, Syndtrak, IntraLinks or another similar electronic system (the “Platform”) and (b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Loan Parties or their securities) (each, a “Public Lender”).
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The Loan Parties hereby agree that so long as any Loan Party is the issuer of any outstanding debt or equity securities that are registered or issued pursuant to a private offering or is actively contemplating issuing any such securities they will use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that (w) all such Borrower Materials shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” the Loan Parties shall be deemed to have authorized the Administrative Agent, the Arranger, the L/C Issuer and the Lenders to treat such Borrower Materials as not containing any material non-public information (although it may be sensitive and proprietary) with respect to the Loan Parties or their securities for purposes of all applicable securities laws (provided, however, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 10.07); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Investor”; and (z) the Administrative Agent and the Arranger shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Investor.”
(ii) or (iii) above, would be reasonably expected to result in a Material Adverse Effect; or (iv) the first occurrence of an underfunding under a Single Employer Plan or Foreign Plan that exceeds 10% of the value of the assets of such Single Employer Plan or Foreign Plan, in each case, determined as of the most recent annual valuation date of such Single Employer Plan or Foreign Plan on the basis of the actuarial assumptions used to determine the funding requirements of such Single Employer Plan or Foreign Plan as of such date;
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$10,000,000;
Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of the Parent setting forth details of the occurrence referred to therein and stating what action the Parent has taken and proposes to take with respect thereto.
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collection of the contested obligation and enforcement of any Lien securing such obligation, and (iv) no Lien has been filed with respect thereto. Nothing contained herein shall be deemed to limit the rights of the Agents with respect to determining Reserves pursuant to this Agreement.
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inventory appraisal in each twelve (12) month period at the Loan Parties’ expense; provided that if Excess Availability is less than 20% of the Loan Cap at any time, the Administrative Agent or the Canadian Agent, as applicable, may, in its discretion, each undertake up to two (2) inventory appraisals in each such twelve (12) month period at the Loan Parties’ expense, such expense to be reasonable and the Parent shall have the opportunity to review the invoices thereof. Notwithstanding the foregoing, the Administrative Agent may cause additional appraisals to be undertaken (x) as it in its discretion deems necessary or appropriate, at its own expense, without unreasonable interference with the Loan Parties’ business operation, or (y) if required by Law or if a Default or Event of Default shall have occurred and be continuing, at the expense of the Loan Parties.
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The Loan Parties shall undertake all action which may be necessary to effectuate the foregoing ACH and wire transfers as and when required hereunder.
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The Loan Parties hereby acknowledge and agree that (i) the Loan Parties have no right of withdrawal from the Concentration Accounts, (ii) the funds on deposit in each Domestic Concentration Account shall at all times be collateral security for the Obligations, (iii) the funds on deposit in each Canadian Concentration Account shall at all times be collateral security for all of the Canadian Liabilities and (iv) the funds on deposit in the Concentration Accounts shall be applied as provided in this Agreement. In the event that, notwithstanding the provisions of this Section 6.12, any Loan Party receives or otherwise has dominion and control of any such proceeds or collections while a Trigger Event exists, such proceeds and collections shall be held in trust by such Loan Party for the Agents, shall not be commingled with any of such Loan Party’s other funds or deposited in any account of such Loan Party and shall, not later than the Business Day after receipt thereof, be deposited into the Domestic Concentration Account or the Canadian Concentration Account, as applicable, or dealt with in such other fashion as such Loan Party may be instructed by the Agents. Notwithstanding the foregoing, to the extent that no Obligations are outstanding any amounts deposited in the Domestic Concentration Account and the Canadian Concentration Account shall be disbursed by the Administrative Agent or Canadian Agent, as applicable to such depository accounts as may be designated by the applicable Borrower.
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ARTICLE VII NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification claims for which a claim has not been asserted), or any Letter of Credit shall remain outstanding, no Loan Party shall directly or indirectly:
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Create, incur, assume, guarantee, suffer to exist or otherwise become or remain liable with respect to, any Secured Funded Indebtedness, except:
4.00 to 1.00 and any Permitted Refinancing thereof; provided that, unless otherwise agreed by the Administrative Agent, if such Secured Funded Indebtedness includes security consisting of
(i) any of the Collateral, or (ii) any other real or personal property (including, without limitation, licensees or transferees of Intellectual Property), which property is deemed by the Collateral Agent or the Canadian Agent, as applicable, reasonably necessary to be utilized to realize upon, and maximize the amounts recovered on any liquidation of, any of the Collateral included in the Combined Borrowing Base, the holder of such Indebtedness shall have entered into an intercreditor agreement with the applicable Agent so as to permit the Collateral Agent or the Canadian Agent, as applicable, access to and use of such property for a reasonable period of time to collect upon, effect a liquidation of, or otherwise exercise rights with respect to, the Collateral, all on such terms and conditions reasonably acceptable to the Administrative Agent in its Permitted Discretion; for clarity, such intercreditor agreement shall not include provisions subordinating the debt (as opposed to the Liens on any Collateral) of the holder of such Secured Funded Indebtedness to the Obligations;
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(ii) in the case of any such merger to which any Loan Party is a party, such Loan Party is the surviving Person or, alternatively, such surviving Person executes the joinder documents contemplated by Section 6.11; and
Party.
Person;
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Except in connection with Permitted Refinancings thereof, amend, supplement, waive or otherwise modify any of the provisions of the Notes Indenture:
Change the Fiscal Year of Holdings, or the accounting policies or reporting practices of the Loan Parties which would in any way materially change the reporting or calculation of any component of the Combined Borrowing Base, except as required by GAAP; provided that (a) the Parent may, upon written notice to the Administrative Agent, change its fiscal year to any other fiscal year reasonably acceptable to the Administrative Agent, in which case, the Parent and the Administrative Agent will, and will be authorized by the Lenders to, make any adjustments to the Loan Documents that are necessary to reflect such change in Fiscal Year, and (b) the Loan Parties may change such accounting policies if such change is reasonably acceptable to the Administrative Agent.
Open new DDAs or Blocked Accounts unless the Loan Parties shall promptly thereafter have delivered to the Administrative Agent or the Canadian Agent, as applicable, appropriate Blocked Account Agreements consistent with the provisions of Section 6.12. No Loan Party shall maintain any bank accounts or enter into any agreements with credit card processors other than the ones expressly contemplated herein or in Section 6.12 hereof.
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ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
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(i) Any Loan Party (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Material Indebtedness, or (B) fails to observe or perform any other agreement or condition relating to any such Material Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Material Indebtedness or the beneficiary or beneficiaries of any Guarantee thereof (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded, and such event has not been waived or the holder of such Indebtedness has agreed and continues to forbear from exercising its rights on account thereof; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which a Loan Party or any Subsidiary thereof is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which a Loan Party or any Subsidiary thereof is an Affected Party (as so defined) and, in either event, the Swap Termination Value owed by the Loan Party or such Subsidiary as a result thereof is greater than $20,000,000, unless such event described in (A) or (B) has been waived or the counterparty has agreed and continues to forbear from exercising its rights on account thereof; or
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any “accumulated funding deficiency” (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Domestic Pension Plan or any Lien in favor of the PBGC or a Domestic Pension Plan shall arise on the assets of either of the Parent or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is in the reasonable opinion of the Administrative Agent likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA other than a standard termination pursuant to Section 4041(b) of ERISA, (v) either of the Parent or any Commonly Controlled Entity shall, or in the reasonable opinion of the Administrative Agent is reasonably likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan, or (vi) any other event or condition shall occur or exist with respect to a Domestic Pension Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, would be reasonably expected to result in a Material Adverse Effect; or
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provided, however, that upon the entry of an order for relief (or similar order) with respect to any Loan Party or any Subsidiary thereof under any Debtor Relief Laws, the obligation of each Revolving Lender to make Revolving Loans and any obligation of the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Loan Parties to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent, the Canadian Agent, the L/C Issuer or any Lender.
No remedy herein is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of Law.
First, to payment of that portion of the Obligations (excluding the Other Liabilities and the Canadian Liabilities) constituting fees, indemnities, Credit Party Expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Article III) payable to the Administrative Agent, in its capacity as such;
Second, to payment of that portion of the Obligations (excluding the Other Liabilities and the Canadian Liabilities) constituting indemnities, Credit Party Expenses, and other amounts (other than principal, interest and fees) payable to the Domestic Lenders and the L/C Issuer (on account of Domestic Letters of Credit) (including fees, charges and disbursements of counsel to the respective Domestic Lenders and the L/C Issuer (on account of Domestic Letters of Credit) and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Second payable to them;
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Third, to the extent not previously reimbursed by the Revolving Domestic Lenders, to payment to the Revolving Domestic Lenders of that portion of the Obligations constituting principal and accrued and unpaid interest on any Permitted Domestic Overadvances, ratably among the Revolving Domestic Lenders in proportion to the amounts described in this clause Third payable to them;
Fourth, to the extent that Swing Line Loans made to the Domestic Borrowers have not been refinanced by a Domestic Committed Loan, payment to the Swing Line Lender of that portion of the Obligations constituting accrued and unpaid interest on the Swing Line Loans made to the Domestic Borrowers;
Fifth, to the extent that Swing Line Loans made to the Domestic Borrowers have not been refinanced by a Domestic Committed Loan, payment to the Swing Line Lender of that portion of the Obligations constituting unpaid principal on the Swing Line Loans made to the Domestic Borrowers;
Sixth, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Revolving Domestic Loans, Domestic L/C Borrowings and other Obligations (other than the Canadian Liabilities), and fees (including Letter of Credit Fees, other than any fees due on account of any Canadian Letter of Credit), ratably among the Revolving Domestic Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Sixth payable to them;
Seventh, to payment of that portion of the Obligations constituting unpaid principal of the Revolving Domestic Loans and Domestic L/C Borrowings, and to the Administrative Agent for the account of the L/C Issuer, to Cash Collateralize that portion of Domestic L/C Obligations comprised of the aggregate undrawn amount of Domestic Letters of Credit, ratably among the Revolving Domestic Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Seventh held by them;
Eighth, subject to Section 8.03(c), to the Canadian Agent to be held by the Canadian Agent, for the ratable benefit of the Canadian Lenders as cash collateral to payment of that portion of the Canadian Liabilities (excluding the Other Canadian Liabilities) constituting fees, indemnities, Credit Party Expenses and other amounts (including fees, charges and disbursements of counsel to the Canadian Agent and amounts payable under Article III) payable to the Canadian Agent, in its capacity as such;
Ninth, subject to Section 8.03(c), to the Canadian Agent to be held by the Canadian Agent, for the ratable benefit of the Canadian Lenders and the L/C Issuer as cash collateral to payment of that portion of the Canadian Liabilities (excluding the Other Canadian Liabilities) constituting indemnities, Credit Party Expenses, and other amounts (other than principal, interest and fees) payable to the Canadian Lenders and the L/C Issuer (on account of Canadian Letters of Credit) (including fees, charges and disbursements of counsel to the respective Domestic Lenders and the L/C Issuer (on account of Canadian Letters of Credit) and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Ninth payable to them;
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Tenth, to the extent not previously reimbursed by the Canadian Lenders and subject to Section 8.03(c), to the Canadian Agent to be held by the Canadian Agent, for the ratable benefit of the Canadian Lenders as cash collateral to payment to the Canadian Lenders of that portion of the Canadian Liabilities constituting principal and accrued and unpaid interest on any Permitted Canadian Overadvances, ratably among the Canadian Lenders in proportion to the amounts described in this clause Tenth payable to them;
Eleventh, to the extent that Swing Line Loans made to the Canadian Borrower have not been refinanced by a Canadian Committed Loan and subject to Section 8.03(c), to the Canadian Agent to be held by the Canadian Agent, for the ratable benefit of the Canadian Lenders and the Swing Line Lender as cash collateral to payment to the Swing Line Lender of that portion of the Canadian Liabilities constituting accrued and unpaid interest on the Swing Line Loans made to the Canadian Borrower;
Twelfth, to the extent that Swing Line Loans made to the Canadian Borrower have not been refinanced by a Canadian Committed Loan and subject to Section 8.03(c), to the Canadian Agent to be held by the Canadian Agent, for the ratable benefit of the Canadian Lenders and the Swing Line Lender as cash collateral to payment to the Swing Line Lender of that portion of the Canadian Liabilities constituting unpaid principal of the Swing Line Loans made to the Canadian Borrower;
Thirteenth, subject to Section 8.03(c), to the Canadian Agent to be held by the Canadian Agent, for the ratable benefit of the Canadian Lenders and the L/C Issuer as cash collateral to payment of that portion of the Canadian Liabilities constituting accrued and unpaid interest on the Canadian Loans, Canadian L/C Borrowings and other Canadian Liabilities, and fees (including Letter of Credit Fees), ratably among the Canadian Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Thirteenth payable to them;
Fourteenth, subject to Section 8.03(c), to the Canadian Agent to be held by the Canadian Agent, for the ratable benefit of the Canadian Lenders and the L/C Issuer as cash collateral to payment of that portion of the Canadian Liabilities constituting unpaid principal of the Canadian Loans, Canadian L/C Borrowings and the aggregate undrawn amount of Canadian Letters of Credit, ratably among the Canadian Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Fourteenth held by them;
Fifteenth, to payment of all other Obligations (including without limitation the cash collateralization of unliquidated indemnification obligations for which a claim has been made as provided in Section 10.04, but excluding any Other Domestic Liabilities and Other Canadian Liabilities), ratably among the Credit Parties in proportion to the respective amounts described in this clause Fifteenth held by them;
Sixteenth, to payment of that portion of the Obligations arising from Cash Management Services, ratably among the Credit Parties in proportion to the respective amounts described in this clause Sixteenth held by them; Seventeenth, to payment of all other Obligations arising from Bank Products, ratably among the Credit Parties in proportion to the respective amounts described in this clause Seventeenth held by them; and
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Last, the balance, if any, after the indefeasible Payment in Full of all of the Obligations and the termination of the Aggregate Total Commitments, to the Domestic Loan Parties or as otherwise required by Law.
Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate undrawn amount of Domestic Letters of Credit pursuant to clause Seventh above shall be applied to satisfy drawings under such Domestic Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral after all Domestic Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above.
Any amounts received by the Canadian Agent pursuant to clauses Eighth through Seventeenth of Section 8.03(a) shall be held as cash collateral for the applicable Canadian Liabilities until the earlier of (i) the Substantial Liquidation of the Collateral granted by the Canadian Loan Parties to secure the Canadian Liabilities, or (ii) such date that the Canadian Agent and the Administrative Agent shall otherwise determine.
First, to payment of that portion of the Canadian Liabilities (excluding the Other Canadian Liabilities) constituting fees, indemnities, Credit Party Expenses and other amounts (including fees, charges and disbursements of counsel to the Canadian Agent and amounts payable under Article III) payable to the Canadian Agent, in its capacity as such;
Second, to payment of that portion of the Canadian Liabilities (excluding the Other Canadian Liabilities) constituting indemnities, Credit Party Expenses, and other amounts (other than principal, interest and fees) payable to the Canadian Lenders and the L/C Issuer (on account of Canadian Letters of Credit) (including fees, charges and disbursements of counsel to the respective Domestic Lenders and the L/C Issuer (on account of Canadian Letters of Credit) and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Second payable to them;
Third, to the extent not previously reimbursed by the Canadian Lenders, to the Canadian Agent to be applied to that portion of the Canadian Liabilities constituting principal and accrued and unpaid interest on any Permitted Canadian Overadvances, ratably among the Canadian Lenders in proportion to the amounts described in this clause Third payable to them;
Fourth, to the extent that Swing Line Loans made to the Canadian Borrower have not been refinanced by a Canadian Committed Loan, to payment to the Swing Line Lender of that portion of the Canadian Liabilities constituting accrued and unpaid interest on the Swing Line Loans made to the Canadian Borrower; Fifth, to the extent that Swing Line Loans made to the Canadian Borrower have not been refinanced by a Canadian Committed Loan, payment to the Swing Line Lender of that portion of the Canadian Liabilities constituting unpaid principal on the Swing Line Loans made to the Canadian Borrower;
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Sixth, to payment of that portion of the Canadian Liabilities constituting accrued and unpaid interest on the Canadian Loans, Canadian L/C Borrowings and other Canadian Liabilities, and fees (including Letter of Credit Fees due on account of Canadian Letters of Credit), ratably among the Canadian Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Sixth payable to them;
Seventh, to payment of that portion of the Canadian Liabilities constituting unpaid principal of the Canadian Loans, Canadian L/C Borrowings, and to Cash Collateralize that portion of Canadian L/C Obligations comprised of the aggregate undrawn amount of Canadian Letters of Credit, ratably among the Canadian Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Seventh held by them;
Eighth, to payment of all other Canadian Liabilities (including without limitation the cash collateralization of unliquidated indemnification obligations as provided in Section 10.04, but excluding, except as provided above, any Other Canadian Liabilities), ratably among the Credit Parties in proportion to the respective amounts described in this clause Eighth held by them;
Ninth, to payment of that portion of the Canadian Liabilities arising from Cash Management Services to the extent secured under the Security Documents, ratably among the Credit Parties in proportion to the respective amounts described in this clause Ninth held by them;
Tenth, to payment of all other Canadian Liabilities arising from Bank Products to the extent secured under the Security Documents, ratably among the Credit Parties in proportion to the respective amounts described in this clause Tenth held by them; and
Last, the balance, if any, after the indefeasible Payment in Full of all of the Canadian Liabilities and the termination of the Canadian Total Commitments, to the Canadian Loan Parties or as otherwise required by Law.
Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate undrawn amount of Canadian Letters of Credit pursuant to clause Seventh above shall be applied to satisfy drawings under such Canadian Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral after all Canadian Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Canadian Liabilities, if any, in the order set forth above.
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ARTICLE IX ADMINISTRATIVE AGENT
9.05 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Security Documents, or for exercising any rights and remedies thereunder at the direction of the Administrative Agent, shall be entitled to the benefits of all provisions of this Article IX and Article X, as though such co-agents, sub-agents and attorneys-in-fact were the “collateral agent” under the Loan Documents, as if set forth in full herein with respect thereto.
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The Attorney shall: (i) have the right and authority to exercise, except as may be otherwise specifically restricted by the terms hereof, all rights and remedies given to the Attorney pursuant to any such deed of hypothec and applicable law, and (ii) benefit from and be subject to all provisions hereof with respect to the Administrative Agent or the Canadian Agent, as applicable, mutatis mutandis, including, without limitation, all such provisions with respect to the liability or responsibility to and indemnification by the Credit Parties and Loan Parties. Any Person who becomes a Credit Party shall, by its execution of an Assignment and Assumption, be deemed to have consented to and confirmed the appointment of the Attorney as the person acting as hypothecary representative and to have ratified, as of the date it becomes a Credit Party, all actions taken by the Attorney in such capacity. The substitution of the Canadian Agent pursuant to the provisions of this Article IX shall also constitute the substitution of it as the Attorney.
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No Agent shall be liable to any Credit Party 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 such Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a final and non-appealable judgment of a court of competent jurisdiction.
The Agents shall not be deemed to have knowledge of any Default unless and until notice describing such Default is given to such Agent by the Loan Parties, a Lender or the L/C Issuer. In the event that the Agents obtains such actual knowledge or receives such a notice, the Agents shall give prompt notice thereof to each of the other Lenders. Upon the occurrence of an Event of Default, the Agents shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders. Unless and until the Agents shall have received such direction, the Agents may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to any such Default or Event of Default as they shall deem advisable in the best interest of the Credit Parties. In no event shall the Agents be required to comply with any such directions to the extent that any Agent believes that its compliance with such directions would be unlawful.
The Agents shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default 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 the creation, perfection or priority of any Lien purported to be created by the Security Documents and subject to the Intercreditor Agreement, (v) the value or the sufficiency of any Collateral, or (vi) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agents.
Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including, but not limited to, 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. Each 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 L/C Issuer, the Administrative Agent and the Canadian Agent may presume that such condition is satisfactory to such Lender or the L/C Issuer unless the Administrative Agent or the Canadian Agent, as applicable, shall have received written notice to the contrary from such Lender or the L/C Issuer prior to the making of such Loan or the issuance of such Letter of Credit. Each Agent may consult with legal counsel (who may be counsel for any Loan Party), 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.
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Except as provided in Section 9.12, the Agents and the Arranger shall not have any duty or responsibility to provide any Credit Party with any other credit or other information concerning the affairs, financial condition or business of any Loan Party that may come into the possession of the Agents or the Arranger.
and any custodian, receiver, interim receiver, assignee, trustee, monitor, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the L/C Issuer to make such payments to the Agents and, if the Agents shall consent to the making of such payments directly to the Lenders and the L/C Issuer, to pay to the Agents any amount due for the reasonable compensation, expenses, disbursements and advances of the Agents and its agents and counsel, and any other amounts due the Agents under Sections 2.09 and 10.04.
Nothing contained herein shall be deemed to authorize the Agents to authorize or consent to or accept or adopt on behalf of any Lender or the L/C Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or the L/C Issuer or to authorize the Agents to vote in respect of the claim of any Lender or the L/C Issuer in any such proceeding.
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Upon request by any Agent at any time, 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) will confirm in writing the Collateral Agent’s or the Canadian 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 Facility Guaranty and each other applicable Loan Document pursuant to this Section 9.10. In each case as specified in this Section 9.10, the Collateral Agent or the Canadian Agent will, at the Loan Parties’ expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and Lien granted under the Security Documents or to subordinate its interest in such item, or to release such Guarantor from its obligations under the Facility Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 9.10.
The Agents may deem and treat a Lender party to this Agreement as the owner of such Lender’s portion of the Loans and Commitments for all purposes, unless and until, and except to the extent, an Assignment and Assumption shall have become effective as set forth in Section 10.06.
By signing this Agreement, each Lender:
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Each Agent and Lender hereby appoints each other Agent and Lender as agent for the purpose of perfecting Liens for the benefit of the Agents and the Lenders, in assets which, in accordance with Article 9 of the UCC, the PPSA or any other applicable Law of the United States or Canada can be perfected only by possession. Should any Lender (other than the Agents) obtain possession of any such Collateral, such Lender shall notify the Agents thereof, and, promptly upon the Administrative Agent’s or the Canadian Agent’s request therefor, shall deliver such Collateral to the Administrative Agent or the Canadian Agent, as applicable, or otherwise deal with such Collateral in accordance with the Administrative Agent’s or the Canadian Agent’s instructions.
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Without limitation of any other provision in this Agreement, if at any time the Administrative Agent makes a payment hereunder in error to any Lender or any other Credit Party, whether or not in respect of an Obligation due and owing by the Borrowers at such time, where such payment is a Rescindable Amount, then in any such event, each Credit Party receiving a Rescindable Amount severally agrees to repay to the Administrative Agent forthwith on demand the Rescindable Amount received by such Credit Party in immediately available funds in the currency so received, with interest thereon, for each day from and including the date such Rescindable Amount is received by it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. Each Credit Party irrevocably waives any and all defenses, including any “discharge for value” (under which a creditor might otherwise claim a right to retain funds mistakenly paid by a third party in respect of a debt owed by another) or similar defense to its obligation to return any Rescindable Amount. The Administrative Agent shall inform each Credit Party promptly upon determining that any payment made to such Credit Party comprised, in whole or in part, a Rescindable Amount.
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ARTICLE X MISCELLANEOUS
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change the definition of the term “Domestic Borrowing Base”, “Canadian Borrowing Base”, “Combined Borrowing Base” or any component definition of either term, if as a result thereof the amount of credit available to the Borrowers hereunder would be increased without the written consent of each Lender, provided that the foregoing shall not limit the discretion of the Administrative Agent to change, establish or eliminate any Reserves with respect to the Domestic Borrowing Base, or the Canadian Agent to change, establish or eliminate any Reserves with respect to the Canadian Borrowing Base even if such change or elimination results in an increase in the amount of credit available to the Borrowers hereunder;
and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the L/C Issuer in addition to the Lenders required above, affect the rights or duties of the L/C Issuer under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or duties of the Swing Line Lender under this Agreement;
Notwithstanding any provision herein to the contrary, this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Agents and the Borrowers
If any Lender does not consent (a “Non-Consenting Lender”) to a proposed amendment, waiver, consent or release with respect to any Loan Document that requires the consent of each Lender and that has been approved by the Required Lenders, the Parent may replace such Non-Consenting Lender in accordance with Section 10.13; provided that such amendment, waiver, consent or release can be effected as a result of the assignment contemplated by such Section (together with all other such assignments required by the Parent to be made pursuant to this paragraph).
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Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).
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.
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In no event shall the Agents or any of their Related Parties (collectively, the “Agent Parties”) have any liability to any Loan Party, any Lender, the L/C Issuer or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Loan Parties’ or the Agent Parties’ transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to any Loan Party, any Lender, the L/C Issuer or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).
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 Agents in accordance with Section 8.02 for the benefit of all the Lenders and the L/C Issuer; provided, however, that the foregoing shall not prohibit (a) the Agents from exercising on their own behalf the rights and remedies that inure to its benefit (solely in their capacity as Agents) hereunder and under the other Loan Documents, (b) the L/C Issuer or the Swing Line Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as L/C Issuer or Swing Line Lender, as the case may be) hereunder and under the other Loan Documents, or (c) any Lender from exercising setoff rights in accordance with Section 10.08 (subject to the terms of Section 2.13); and provided, further, that if at any time there is no Person acting as Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Agents pursuant to Section 8.02 and (ii) in addition to the matters set forth in clauses (b) and (c) of the preceding proviso and subject to Section 2.13, any Lender may, (a) with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders, (b) without limiting the Agent’s rights under Section 9.09 file and prove a claim for the whole amount of the 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 such Lender allowed in such judicial proceeding; and (c) exercise rights and remedies (other than against the Collateral) under any agreements relating to Bank Products and Cash Management Services furnished by such Lender.
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therefor.
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Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning 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 3.01,
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3.04, 3.05, and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. Upon request, the Borrowers (at their expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.06(d).
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant. Subject to subsection (e) of this Section, the Loan Parties agree that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 10.06(b). To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.13 as though it were a Lender.
Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrowers, 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 or, to the extent applicable, is required under Section 3.01 of this Agreement.
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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.
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The Administrative Agent and each of the Credit Parties may, at its option, create one or more copies of any Communication in the form of an imaged Electronic Record (“Electronic Copy”), which shall be deemed created in the ordinary course of the such Person’s business, and destroy the original paper document. All Communications in the form of an Electronic Record, including an Electronic Copy, shall be considered an original for all purposes, and shall have the same legal effect, validity and enforceability as a paper record. Notwithstanding anything contained herein to the contrary, the Administrative Agent is under no obligation to accept an Electronic Signature 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, (a) to the extent the Administrative Agent has agreed to accept such Electronic Signature, the Administrative Agent and each of the Credit Parties shall be entitled to rely on any such Electronic Signature purportedly given by or on behalf of any Loan Party without further verification and (b) upon the request of the Administrative Agent or any Lender, any Electronic Signature shall be promptly followed by such manually executed counterpart. For purposes hereof, “Electronic Record” and “Electronic Signature” shall have the meanings assigned to them, respectively, by 15 USC
§7006, as it may be amended from time to time.
(30) days’ notice to the Parent and the Lenders, resign as an L/C Issuer and/or (ii) with duplication of any notice required under Section 9.06, upon thirty (30) days’ notice to the Parent, resign as a Swing Line Lender. In the event of any such resignation as L/C Issuer or Swing Line Lender, the Parent shall be entitled to appoint from among the Lenders a successor L/C Issuer or Swing Line Lender hereunder; provided, however, that no failure by the Parent to appoint any such successor shall affect the resignation of Bank of America or Bank of America Canada-Branch as an L/C Issuer or a Swing Line Lender, as the case may be. If Bank of America or Bank of America Canada-Branch and its Affiliates resigns as L/C Issuer, it shall retain all the rights, powers, privileges and duties of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)). Upon the appointment of a successor L/C Issuer and/or Swing Line Lender, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as the case may be, (b) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Bank of America or Bank of America Canada-Branch to effectively assume the obligations of Bank of America or Bank of America Canada-Branch and any of its Affiliates with respect to such Letters of Credit, and
(c) the successor Swing Line Lender shall repay all outstanding Obligations with respect to Swing Line
Loans due to the resigning Swing Line Lender.
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For purposes of this Section, “Information” means all information received from the Loan Parties or any Subsidiary thereof relating to the Loan Parties or any Subsidiary thereof or their respective businesses, other than any such information that is available to any Credit Party on a non-confidential basis prior to disclosure by the Loan Parties or any Subsidiary thereof, provided that, in the case of information received from any Loan Party or any Subsidiary after the Effective Date, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
Each of the Credit Parties acknowledges that (a) the Information may include material non-public information concerning the Loan Parties or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with Law, including Federal and state securities Laws.
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(y) any obligations that may thereafter arise with respect to the Other Liabilities, and (z) any Obligations that may thereafter arise under Section 10.04 hereof.
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Without limiting the foregoing provisions of this Section 10.12, if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Agent, the L/C Issuer or the Swing Line Lender, as applicable, then such provisions shall be deemed to be in effect only to the extent not so limited.
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 Borrowers to require such assignment and delegation cease to apply.
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EACH OF THE LOAN PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(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.
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In connection with all aspects of each transaction contemplated hereby, the Loan Parties each acknowledge and agree that: (i) the credit facility provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Loan Parties, on the one hand, and the Credit Parties, on the other hand, and each of the Loan Parties is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof);
(ii) in connection with the process leading to such transaction, the each Credit Party is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Loan Parties or any of their respective Affiliates, stockholders, creditors or employees or any other Person; (iii) none of the Credit Parties has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Loan Parties with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether any of the Credit Parties has advised or is currently advising any Loan Party or any of its Affiliates on other matters) and none of the Credit Parties has any obligation to any Loan Party or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Credit Parties and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Loan Parties and their respective Affiliates, and none of the Credit Parties has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Credit Parties have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and each of the Loan Parties has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate. Each of the Loan Parties hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against each of the Credit Parties with respect to any breach or alleged breach of agency or fiduciary duty.
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Notwithstanding the preceding sentence and except as may otherwise be agreed in writing, each of the Lenders agrees that the Administrative Agent has no obligation to ascertain the identity of the Canadian Loan Parties or any authorized signatories of the Canadian Loan Parties on behalf of any Lender, or to confirm the completeness or accuracy of any information it obtains from any Canadian Loan Party or any such authorized signatory in doing so.
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To the fullest extent permitted by applicable Law, the obligations of each Loan Party shall not be affected by (i) the failure of any Credit Party to assert any claim or demand or to enforce or exercise any right or remedy against any other Loan Party under the provisions of this Agreement, any other Loan Document or otherwise, (ii) any release of any other Loan Party from any of the terms or provisions of, this Agreement or any other Loan Document, or (iii) the failure to perfect any security interest in, or the release of, any of the Collateral or other security held by or on behalf of any Agent, the Collateral Agent or any other Credit Party.
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Subject to the foregoing, to the extent that any Borrower or Guarantor shall, under this Agreement as a joint and several obligor, repay any of the Obligations constituting Loans made to another Borrower hereunder or other Obligations incurred directly and primarily by any other Borrower (an “Accommodation Payment”), then the Borrower or Guarantor making such Accommodation Payment shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Loan Parties in an amount, (x) for each of such other Domestic Borrower, equal to a fraction of such Accommodation Payment, the numerator of which fraction is such other Domestic Borrower’s Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Domestic Borrowers, or (y) for the Canadian Loan Parties, in an amount equal to such Accommodation Payment. As of any date of determination, the “Allocable Amount” of each Domestic Borrower shall be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Domestic Borrower hereunder without (a) rendering such Domestic Borrower “insolvent” within the meaning of Section 101 (31) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”), (b) leaving such Domestic Borrower with unreasonably small capital or assets, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or
(c) leaving such Domestic Borrower unable to pay its debts as they become due within the meaning of
Section 548 of the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA.
The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.
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The exhibits, schedules and annexes attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein, except that in the event of any conflict between any of the provisions of such exhibits and the provisions of this Agreement, the provisions of this Agreement shall prevail.
Each Loan Party that is a Qualified ECP Guarantor at the time the Facility Guaranty or the grant of a security interest under the Loan Documents, in each case, by any Specified Loan Party becomes effective with respect to any Swap Obligation, hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support to each Specified Loan Party with respect to such Swap Obligation as may be needed by such Specified Loan Party from time to time to honor all of its obligations under the Loan Documents in respect of such Swap Obligation (but, in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering such Qualified ECP Guarantor’s obligations and undertakings under the Facility Guaranty voidable under applicable Law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations and undertakings of each Qualified ECP Guarantor under this Section shall remain in full force and effect until Payment in Full of the Obligations have been indefeasibly paid and performed in full. Each Loan Party intends this Section to constitute, and this Section shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support, or other agreement” for the benefit of, each Specified Loan Party for all purposes of the Commodity Exchange Act.
Solely to the extent any Lender or Issuing Lender that is an Affected Financial Institution is a party to this Agreement and notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Lender or Issuing Lender 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:
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(a) 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.
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From and after the Effective Date, any reference to the Existing Credit Agreement in any of the other Loan Documents executed or issued by and/or delivered to any one or more parties hereto pursuant to or in connection therewith shall be deemed to be a reference to this Agreement, and the provisions of this Agreement shall prevail in the event of any conflict or inconsistency between such provisions and those of the Existing Credit Agreement.
Without limiting the generality of Section 10.32, the parties agree that:
[SIGNATURES ON THE FOLLOWING PAGES]
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Annex B
Updated Exhibits [see attached]
Exhibit A-1
Form of Domestic Committed Loan Notice
Date:
To: Bank of America, N.A., as Administrative Agent 100 Federal Street, 9th Floor
Boston, Massachusetts 02110 Attention: Mr. Matthew Potter
Re: Amended and Restated Credit Agreement dated as of July 6, 2017 (as modified, amended, supplemented or restated and in effect from time to time, the “Credit Agreement”) by and between, among others, (i) SALLY HOLDINGS LLC, a Delaware limited liability company (“Holdings”) and as a Domestic Borrower, (ii) the other Domestic Borrowers, (iii) the Guarantors party thereto, and (iv) Bank of America, N.A., as Administrative Agent (the “Administrative Agent”), for its own benefit and the benefit of the other Credit Parties. Capitalized terms used but not defined herein shall have the meanings set forth in the Credit Agreement.
Ladies and Gentlemen:
Holdings refers to the above described Credit Agreement and hereby irrevocably notifies you of the [Committed Borrowing][Conversion of Committed Loans from one Type to the other Type][continuation of Term SOFR Loans] requested below:
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$1,000,000 or a whole multiple of $1,000,000 in excess thereof, in the case of Term SOFR Loans or BA Equivalent Loans), or (b) $ (which, in the case of Domestic Prime Rate Loans or US Index Rate Loans, shall be in a principal amount of $500,000, or a whole multiple of $100,000 in excess thereof or the Equivalent Amount thereof), which [Committed Borrowing][Conversion][continuation] consists of the following Types and following requested currency:
1 Each notice must be received by the Administrative Agent not later than 11:00 a.m. (i) three (3) Business Days prior to the requested date of any Committed Borrowing of or continuation of Term SOFR Loans or BA Equivalent Loans or of any conversion of any such Loans to Loans of a different Type, (ii) four (4) Business Days prior to the requested date of any Committed Borrowing to be made in an Optional Currency of, conversion to, or continuation of Term SOFR Loans or BA Equivalent Loans in an Optional Currency or of any conversion of any such Loans to Loans of a different Type, and (iii) on the requested date of any Committed Borrowing of any of Domestic Prime Rate Loans or US Index Rate Loans.
SALLY HOLDINGS LLC
As a Domestic Borrower and as Holdings on behalf of Domestic Borrowers
By:
Name:
Title:
Exhibit 22
LIST OF SUBSIDIARY GUARANTORS
As of June 30, 2023, each of the following subsidiaries of Sally Beauty Holdings, Inc. is a guarantor of our unsecured 5.625% Senior Notes due 2025. The guarantees are joint and several, and full and unconditional. Sally Beauty Holdings, Inc. owns, directly or indirectly, 100% of each guarantor subsidiary.
Exact Name of Registrant as Specified in Its Charter |
State of Incorporation or Organization |
Arcadia Beauty Labs LLC |
Delaware |
Armstrong McCall Holdings, Inc. |
Texas |
Armstrong McCall Holdings, L.L.C. |
Delaware |
Armstrong McCall, L.P. |
Texas |
Armstrong McCall Management, L.C. |
Texas |
Beauty Holding LLC |
Delaware |
Beauty Systems Group LLC |
Virginia |
Diorama Services Company, LLC |
Delaware |
Innovations-Successful Salon Services |
California |
Loxa Beauty LLC |
Indiana |
Neka Salon Supply, Inc. |
New Hampshire |
Procare Laboratories, Inc. |
Delaware |
Sally Beauty Holdings, Inc. |
Delaware |
Sally Beauty International Finance LLC |
Delaware |
Sally Beauty Military Supply LLC |
Delaware |
Sally Beauty Supply LLC |
Virginia |
Sally Investment Holdings LLC |
Delaware |
Salon Success International, LLC |
Florida |
Exhibit 31.1
CERTIFICATION
PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Denise Paulonis, certify that:
Date: August 3, 2023 |
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By: |
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/s/ Denise Paulonis |
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Denise Paulonis |
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Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Marlo M. Cormier, certify that:
Date: August 3, 2023 |
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By: |
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/s/ Marlo M. Cormier |
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Marlo M. Cormier |
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Senior Vice President, Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Sally Beauty Holdings, Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Denise Paulonis, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
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By: |
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/s/ Denise Paulonis |
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Denise Paulonis |
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Chief Executive Officer |
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Date: August 3, 2023 |
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Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Sally Beauty Holdings, Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Marlo M. Cormier, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
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By: |
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/s/ Marlo M. Cormier |
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Marlo M. Cormier |
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Senior Vice President, Chief Financial Officer |
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Date: August 3, 2023 |
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