CREDIT AND GUARANTY AGREEMENT

Exhibit 10.1

CREDIT AND GUARANTY AGREEMENT

dated as of April 30, 2007

among

HANDLEMAN COMPANY AND CERTAIN OF ITS SUBSIDIARIES,

as Guarantors,

HANDLEMAN ENTERTAINMENT RESOURCES L.L.C.

and

CERTAIN OTHER DOMESTIC SUBSIDIARIES OF HANDLEMAN COMPANY,

as Borrowers,

VARIOUS LENDERS,

SILVER POINT FINANCE, LLC,

as Administrative Agent, Collateral Agent, and Co-Lead Arranger

and

GENERAL ELECTRIC CAPITAL CORPORATION,

as Co-Lead Arranger

 

$140,000,000 Senior Secured Credit Facilities

 

TABLE OF CONTENTS

 

 

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CREDIT AND GUARANTY AGREEMENT

This CREDIT AND GUARANTY AGREEMENT , dated as of April 30, 2007, is entered into by and among HANDLEMAN COMPANY, a Michigan corporation (“ Holdings ”), HANDLEMAN ENTERTAINMENT RESOURCES L.L.C. , a Michigan limited liability company (“ Company ”), CERTAIN DOMESTIC SUBSIDIARIES OF HOLDINGS IDENTIFIED ON THE SIGNATURE PAGES HERETO AS “BORROWERS” (such Subsidiaries, together with the Company, are referred to individually as a “ Borrower ” and collectively, jointly and severally, as “ Borrowers ”), and CERTAIN SUBSIDIARIES OF HOLDINGS IDENTIFIED ON THE SIGNATURE PAGES HERETO AS “GUARANTORS” , as Guarantors (as hereinafter defined), the Lenders (as hereinafter defined) party hereto from time to time, SILVER POINT FINANCE, LLC (“ Silver Point ”), as administrative agent for the Lenders (in such capacity, “ Administrative Agent ”), as collateral agent for the Lenders (in such capacity, “ Collateral Agent ”) and as co-lead arranger (in such capacity, a “ Co-Lead Arranger ”).

RECITALS:

WHEREAS , capitalized terms used in these Recitals shall have the respective meanings set forth for such terms in Section 1.1 hereof;

WHEREAS , Lenders have agreed to extend certain credit facilities to Borrowers, in an aggregate principal amount not to exceed $140,000,000 , consisting of (a)  $50,000,000 aggregate principal amount of Tranche A Term Loans, (b)  $40,000,000 aggregate principal amount of Tranche B Term Loans, and (c) up to $50,000,000 aggregate principal amount of Revolving Commitments, the proceeds of which shall be used to (i) repay the Existing Indebtedness and the Existing Intercompany Notes, (ii) finance the working capital needs and general corporate purposes of Holdings and its Subsidiaries, and (iii) pay fees and expenses associated with the transactions contemplated by this Agreement and the refinancing of the Existing Indebtedness.

WHEREAS , each Borrower has agreed to secure all of its obligations hereunder and under the other Credit Documents by granting to Collateral Agent, for the benefit of Secured Parties, a Requisite Priority Lien on substantially all of its assets; and

WHEREAS , each Guarantor has agreed to guarantee the obligations of the Borrowers hereunder and to secure its obligations hereunder and under the other Credit Documents by granting to Collateral Agent, for the benefit of Secured Parties, a Requisite Priority Lien on substantially all of its assets:

NOW, THEREFORE , in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:

 

SECTION 1. DEFINITIONS AND INTERPRETATION

1.1 Definitions. The following terms used herein, including in the preamble, recitals, exhibits and schedules hereto, shall have the following meanings:

“Account(s)” means any account or Account as defined under the UCC, including without limitation, with respect to any Person, any and all rights of such Person to payment for goods sold or leased or for services rendered, including accounts, general intangibles, intangibles, and any and all such rights evidenced by chattel paper, instruments or documents, whether due or to become due and whether or not earned by performance, and whether now or hereafter acquired or arising in the future, and any supporting obligations in respect of the foregoing and any proceeds arising from or relating to the foregoing.

“Account Debtor” means each Person who is in any way obligated on or in connection with any Account.

“Adjusted LIBOR Rate” means, for any Interest Rate Determination Date with respect to an Interest Period for a LIBOR Rate Loan, the rate per annum obtained by dividing (and rounding upward to the next whole multiple of one-sixteenth of one percent (1/16 of 1%)) (i) (a) the rate per annum (rounded to the nearest one-hundredth of one percent (1/100 of 1%)) equal to the rate determined by Administrative Agent to be the offered rate which appears on the page of the Telerate Screen which displays an average British Bankers Association Interest Settlement Rate (such page currently being page number 3740 or 3750, as applicable) for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, or (b) in the event the rate referenced in the preceding clause (a) does not appear on such page or service or if such page or service shall cease to be available, the rate per annum (rounded to the nearest one-hundredth of one percent (1/100 of 1%)) equal to the rate determined by Administrative Agent to be the offered rate on such other page or other service which displays an average British Bankers Association Interest Settlement Rate for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, or (c) in the event the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum (rounded to the nearest one-hundredth of one percent (1/100 of 1%)) equal to the offered quotation rate to first class banks in the London interbank market for deposits (for delivery on the first day of the relevant period) in Dollars of amounts in same day funds comparable to the principal amount of the applicable Loan, for which the Adjusted LIBOR Rate is then being determined with maturities comparable to such period as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date as determined by Administrative Agent in accordance with its customary practices, by (ii) an amount equal to (a) one, minus (b) the Applicable Reserve Requirement.

“Administrative Agent” as defined in the preamble hereto.

“ Administrative Agent’s Account ” means an account at a bank designated by Administrative Agent from time to time as the account into which Credit Parties shall make all payments to Administrative Agent for the benefit of Agent and Lenders under this Agreement and the other Credit Documents.

 

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“Adverse Proceeding” means any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration (whether or not purportedly on behalf of Holdings or any of its Subsidiaries) at law or in equity, or before or by any Governmental Authority, domestic or foreign (including any Environmental Claims) or other regulatory body or any mediator or arbitrator whether pending or, to the best knowledge of Holdings or any of its Subsidiaries, threatened against or affecting Holdings or any of its Subsidiaries or any property of Holdings or any of its Subsidiaries.

“Affected Lender” as defined in Section 2.17(b).

“Affected Loans” as defined in Section 2.17(b).

“Affiliate” means, with respect to any Person, (a) each Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, 5% or more of the Stock having ordinary voting power in the election of directors of such Person, (b) each Person that controls, is controlled by or is under common control with such Person, (c) each of such Person’s officers, directors, joint venturers and partners and (d) in the case of Borrowers, the immediate family members, spouses and lineal descendants of individuals who are Affiliates of any Borrower. For the purposes of this definition, “control” of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding anything to the contrary herein, in no event shall any Agent or Lender be considered an “Affiliate” of any Credit Party.

“Agent” means each of Administrative Agent and Collateral Agent.

“Agent Advances” as defined in Section 9.8(c).

“Aggregate Amounts Due” as defined in Section 2.16.

“Aggregate Payments” as defined in Section 7.2.

“Agreement” means this Credit and Guaranty Agreement, dated as of April 30, 2007, as it may be amended, supplemented or otherwise modified from time to time and any annexes, exhibits, schedules to any of the foregoing.

“Applicable Reserve Requirement” means, at any time, for any LIBOR Rate Loan, the maximum rate, expressed as a decimal, at which reserves (including any basic marginal, special, supplemental, emergency or other reserves) are required to be maintained with respect thereto against “Eurocurrency Liabilities” (as such term is defined in Regulation D) under regulations issued from time to time by the Board of Governors of the Federal Reserve System or other applicable banking regulator. Without limiting the effect of the foregoing, the Applicable Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which the applicable Adjusted LIBOR Rate or any other interest rate of a Loan is to be determined, or (ii) any category of extensions of credit or other assets which

 

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include LIBOR Rate Loans. A LIBOR Rate Loan shall be deemed to constitute Eurocurrency Liabilities and as such shall be deemed subject to reserve requirements without benefits of credit for proration, exceptions or offsets that may be available from time to time to the applicable Lender. The rate of interest on LIBOR Rate Loans shall be adjusted automatically on and as of the effective date of any change in the Applicable Reserve Requirement.

“Asset Sale” means a sale, lease or sublease (as lessor or sublessor), sale and leaseback, assignment, conveyance, transfer or other disposition to, or any exchange of property with, any Person, in one transaction or a series of transactions, of all or any part of Holdings’ or any of its Subsidiaries’ businesses, assets or properties of any kind, whether real, personal, or mixed and whether tangible or intangible, whether now owned or hereafter acquired, including the Capital Stock of any of Holdings’ Subsidiaries, other than inventory sold or leased in the ordinary course of business.

“Assignment Agreement” means an Assignment and Assumption Agreement substantially in the form of Exhibit E, with such amendments or modifications as may be approved by Administrative Agent.

“Attributable Debt” means as of the date of determination thereof, without duplication, (i) in connection with a sale and leaseback transaction, the net present value (discounted according to GAAP at the cost of debt implied in the lease) of the obligations of the lessee for rental payments during the then-remaining term of any applicable lease, and (ii) the principal balance outstanding under any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product to which such Person is a party, where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease in accordance with GAAP.

“Authorized Officer” means, as applied to any Person, any individual holding the position of chairman of the board (if an officer), chief executive officer, president, chief financial officer or treasurer, in each case, whose signatures and incumbency have been certified to Administrative Agent.

“Availability Reserves” shall mean such reserves to the Working Capital Borrowing Base as the Administrative Agent determines from time to time in its reasonable discretion based upon the lending practices of the Administrative Agent, which reserves may relate to the assets the value of which are used to determine the Working Capital Borrowing Base or any other assets or other matter or circumstance deemed appropriate by the Administrative Agent in its reasonable discretion based upon the lending practices of the Administrative Agent.

“Bankruptcy Code” means (i) Title 11 of the United States Code entitled “Bankruptcy,” (ii) the Bankruptcy and Insolvency Act (Canada), (iii) the Companies’ Creditors Arrangement Act (Canada) or (iv) the Insolvency Act of 1986 of England and Wales, as applicable, or any similar legislation in a relevant jurisdiction, in each case, as now and hereafter in effect, or any successor statute.

 

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“Base Rate” means, for any day, a rate per annum equal to the greater of (i) the Prime Rate in effect on such day, and (ii) the Federal Funds Effective Rate in effect on such day plus three percent (3.0%). Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

“Base Rate Loan” means a Loan bearing interest at a rate determined by reference to the Base Rate.

“Blocked Account” means a Deposit Account of a Credit Party maintained by a financial institution that has entered into a control agreement or similar agreement with the Working Capital Agent and the Administrative Agent.

“Blocked Cash” means, as of any date of determination, (i) with respect to any Cash or Cash Equivalents maintained in Canada, the amount of unrestricted Cash and Cash Equivalents of the Canadian Guarantors maintained in a deposit account which is subject to a tri-party blocked account agreement and provides Agent with perfected first-priority Lien on such account and the contents thereof and grants Agent sole dominion and control over such account; provided, however , Blocked Cash maintained in Canada shall not at any time exceed the lesser of (a) $15,000,000 or (b) one-third (33%) of the trailing-three month sales for the Canadian Guarantors, calculated as of the most recently ended Fiscal Month and (ii) with respect to any Cash or Cash Equivalents maintained in the United Kingdom, the amount of unrestricted Cash and Cash Equivalents of the U.K. Guarantors maintained in a deposit account which is subject to a tri-party blocked account agreement that provides Agent with perfected first-priority Lien on such account and the contents thereof and grants Agent sole dominion and control over such account; provided, however , Blocked Cash maintained in the United Kingdom shall not at any time exceed the lesser of (y) $30,000,000 or (z) one-third (33%) of the trailing-three month sales for the U.K. Guarantors, calculated as of the most recently ended Fiscal Month.

“Book Value” means, as of any date of determination with respect to any Person, the value of the applicable Inventory or Accounts maintained in the financial records of such Person, based on the lower of cost or market, on a first-in, first-out basis (if applicable), in accordance with GAAP.

“Borrower” and “Borrowers” as defined in the preamble hereto.

“Borrower Representative” means the Company.

“Borrowing Base Certificate” means a certificate signed by an Authorized Officer of Holdings and setting forth the calculation of the Working Capital Borrowing Base in compliance with Section 5.1(q), substantially in the form of Exhibit L.

“Borrowing Base Excess” as defined in Section 6.21(c).

“Business Day” means (i) any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close, and (ii) with respect to all notices, determinations, fundings and payments in connection with the

 

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Adjusted LIBOR Rate or any LIBOR Rate Loans, the term “ Business Day ” shall mean any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in Dollar deposits in the London interbank market.

“Business Trade Secrets” as defined in Section 4.31.

“Canadian Employee Benefits Laws” means the Canadian Pension Plan Act (Canada), the Pension Benefit Act (Ontario), the Pension Benefits Standards Act 1985 (Canada), the Health Insurance Act (Ontario), the Employment Standards Act (Ontario), the Income Tax Act (Canada), the Canada Labour Code, and any federal, provincial or local counterparts or equivalents, in each case, as amended from time to time.

“Canadian Guarantee” means the General Guarantee made by the Canadian Guarantors in favor of the Collateral Agent, for the benefit of the Secured Parties, substantially in the form of Exhibit I-2.

“Canadian Guarantors” means Canadian OpCo and any other Guarantor that is formed under the laws of Canada or any province or territory thereof, and “Canadian Guarantor” means any of the Canadian Guarantors.

“Canadian HoldCo” means Handleman Canada Inc., a corporation organized under the laws of the Province of Ontario.

“Canadian Income Tax Act” means the Income Tax Act (Canada), R.S.C. 1985 C.1 (5 ^th Supp), as amended.

“Canadian Obligations” means all debts, principal, interest (including any interest that, but for the provisions of the Bankruptcy Code, would have accrued), premiums, liabilities, obligations, indemnifications, fees, charges, costs, expenses (including any fees or expenses that, but for the provisions of the Bankruptcy Code, would have accrued), lease payments, guaranties, covenants, and duties of any kind and description, including, without limitation, the Guaranteed Obligations of the Canadian Guarantors with respect to the U.S. Obligations and the U.K. Obligations, in each case, owing by the Canadian Guarantors, to the Agents (including former Agents), the Lenders or any of them pursuant to or evidenced by the Credit Documents and irrespective of whether for the payment of money, whether direct or indirect, primary or secondary absolute or contingent, due or to become due, now existing or hereafter arising, or otherwise and including all interest not paid when due and all expenses that the Canadian Guarantors are required to pay or reimburse or perform by the Credit Documents, by law, or otherwise. Any reference in this Agreement or in the Credit Documents to the Canadian Obligations shall include all amendments, changes, extensions, modifications, renewals replacements, substitutions, and supplements, thereto and thereof, as applicable, both prior and subsequent to any proceedings under the Bankruptcy Code.

“Canadian OpCo” means Handleman Company of Canada Limited, a corporation organized under the laws of the Province of Ontario.

 

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“Canadian Security Agreement ” means the General Security Agreement made by the Canadian Guarantors in favor of the Collateral Agent, for the benefit of the Secured Parties, substantially in the form of Exhibit I-3.

“Canadian Security Documents” means (i) the Canadian Guarantee, (ii) the Canadian Security Agreement, and (iii) any additional agreements delivered to evidence the Canadian Obligations and/or to establish a security interest in the Collateral located in Canada, in each case, in form and substance satisfactory to the Collateral Agent.

“Canadian Withholding Taxes” means withholding taxes payable by the Canadian Guarantors to the CRA pursuant to Section 212(1) of the Canadian Income Tax Act.

“Capital Lease” means, as applied to any Person, any lease of (or other arrangement conveying the right to use) any property (whether real, personal or mixed) by that Person as lessee (or the equivalent) that, in conformity with GAAP, is or should be accounted for as a capital lease on the balance sheet of that Person.

“Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including partnership interests and membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing.

“Cash” means money, currency or a credit balance in any demand or Deposit Account.

“Cash Equivalents” means, as at any date of determination, (i) marketable securities (a) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or the government of Canada or England, or (b) issued by any agency of the United States, Canada or England, the obligations of which are backed by the full faith and credit of the United States, Canada or England, in each case maturing within one year after such date; (ii) marketable direct obligations issued by any state of the United States of America, province of Canada, or any political subdivision of any such state or province or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody’s; (iii) commercial paper maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody’s; (iv) certificates of deposit or bankers’ acceptances maturing within one year after such date and issued or accepted by any Lender or by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia or Canada or any province thereof that (a) is at least “ adequately capitalized ” (as defined in the regulations of its primary federal banking regulator), and (b) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000; and (v) shares of any money market mutual fund that (a) has at least ninety-five percent (95%) of its assets invested continuously in the types of investments referred to in clauses (i) and (ii) above, (b) has net assets of not less than $500,000,000, and (c) has the highest rating obtainable from either S&P or Moody’s.

 

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“Certificate Regarding Non-Bank Status” means a certificate substantially in the form of Exhibit F.

“Change of Control” means, at any time, (i) any Person or “ group ” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) (a) shall have acquired, directly or indirectly, beneficial or of record ownership of twenty-five percent (25%) or more on a fully diluted basis of the voting and/or economic interest in the outstanding Capital Stock of Holdings or (b) shall have obtained the power (whether or not exercised) to elect a majority of the members of the board of directors (or similar governing body) of Holdings; (ii) Holdings shall cease to beneficially own and control one hundred percent (100%) on a fully diluted basis of the economic and voting interest in the outstanding Capital Stock of any Credit Party; (iii) the majority of the seats (other than vacant seats) on the board of directors (or similar governing body) of Holdings cease to be occupied by Persons who either (a) were members of the board of directors of Holdings on the Closing Date, or (b) were nominated for election or appointed by the board of directors of Holdings, a majority of whom were directors on the Closing Date or whose election or nomination for election was previously approved by a majority of such directors; or (iv) any “change of control” occurs under any of the following agreements: (A) Agreement dated September 6, 2005 between Holdings and Ronnie Wayne Lund, (B) Agreement dated March 17, 1997 between Holdings and Stephen Strome, (C) Agreement dated February 16, 2007 between Holdings and Robert Kirby, (D) Agreement dated August 8, 2003 between Holdings and Thomas C. Braum, Jr., (E) Change of Control/Severance Agreement dated March 2007 between Holdings and Jeff Skipton, (F) Change of Control/Severance Agreement dated March 2007 between Holdings and Scott Wilson, (G) Change of Control/Severance Agreement dated March 2007 between Holdings and Khaled Haram, and (H) Change of Control/Severance Agreement dated March 2007 between Holdings and Mark Albrecht.

“Class” means (i) with respect to Lenders, each of the following classes of Lenders: (a) Lenders having Tranche A Term Loan Exposure; (b) Lenders having Tranche B Term Loan Exposure; and (c) Lenders having Revolving Exposure; (ii) with respect to Loans, each of the following classes of Loans: (a) Tranche A Term Loans; (b) Tranche B Term Loans; and (c) Revolving Loans.

“Closing Date” means the date on which the Term Loans are made.

“Closing Date Certificate” means a Closing Date Certificate substantially in the form of Exhibit G-1.

“Closing Date Mortgaged Property” as defined in Section 3.1(h).

“Co-Lead Arranger” as defined in the preamble hereto.

“Collateral” means, collectively, all of the property and assets and all interests therein and proceeds thereof now owned or hereafter acquired by any Person upon which a Lien is granted or purported to be granted by such Person pursuant to the Collateral Documents or any other Credit Documents as security for the Obligations.

“Collateral Access Agreement” means any Landlord Collateral Access Agreements, or any other agreement, acknowledgement or certificate in form and substance reasonably satisfactory to the Agents pursuant to which a mortgagee or lessor

 

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of real property on which Collateral is stored or otherwise located, or a warehouseman, processor, converter facility or other bailee of Inventory or other property owned by Holdings or any of its Subsidiaries, acknowledges the Liens under the Collateral Documents and subordinates or waives any Liens held by such Person on such property and, in the case of any such agreement with a mortgagee or lessor, permits the Collateral Agent reasonable access to and the use of such real property during the continuance of an Event of Default to assemble, complete and sell any Collateral stored or otherwise located thereon.

“Collateral Agent” as defined in the preamble hereto.

“Collateral Documents” means the U.S. Pledge and Security Agreement, the Canadian Security Documents, the U.K. Security Documents, the Mortgages, any Collateral Access Agreements, the Collateral Questionnaire, the Guaranties, the Patent Security Agreement, the Trademark Security Agreement, the Copyright Security Agreement and all other acknowledgments (including the consent executed by the Army and Air Force Exchange Service), certificates, financing statements, (and foreign equivalents thereof) instruments, documents and agreements delivered by any Credit Party pursuant to this Agreement or any of the other Credit Documents in order to grant to Collateral Agent, for the benefit of Secured Parties, a Lien on any real, personal or mixed property of that Credit Party as security for the Obligations, in each case, as such Collateral Documents may be amended or otherwise modified from time to time.

“Collateral Questionnaire” means a perfection certificate in form satisfactory to Collateral Agent that provides information with respect to the personal or mixed property of each Credit Party.

“Commitment” means any Revolving Commitment, Tranche A Term Loan Commitment, Tranche B Term Loan Commitment.

“Communications” as defined in Section 9.9(a).

“Company” as defined in the preamble hereto.

“Compliance Certificate” means a Compliance Certificate substantially in the form of Exhibit C.

“Consolidated Adjusted EBITDA” means, for any period, an amount determined for Holdings and its Subsidiaries on a consolidated basis equal to:

 

(i)

the sum, without duplication, of the amounts for such period of:

 

(a)

Consolidated Net Income, plus

 

(b)

Consolidated Interest Expense, plus

 

(c)

provisions for taxes based on income, plus

 

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(d)

total depreciation expense, plus

 

(e)

total amortization expense, plus

 

(f)

amortization of License Advances; plus

 

(g)

amortization of Software Development Costs; plus

 

(h)

other non-Cash items reducing Consolidated Net Income (excluding any such non-Cash item to the extent that it represents an accrual or reserve for potential Cash items in any future period or amortization of a prepaid Cash item that was paid in a prior period), minus

 

(ii)

the sum, without duplication, of the amounts for such period of:

 

(a)

other non-Cash items increasing Consolidated Net Income for such period (excluding any such non-Cash item to the extent it represents the reversal of an accrual or reserve for potential Cash item in any prior period), plus

 

(b)

investment income, plus

 

(c)

income tax credits, plus

 

(d)

extraordinary cash gains and other income, plus

 

(e)

net gains from the sale or exchange of capital assets;

in each case, determined in accordance with GAAP.

“Consolidated Capital Expenditures” means, for any period, the aggregate of all expenditures of Holdings and its Subsidiaries during such period determined on a consolidated basis that, in accordance with GAAP, are or should be included in “ purchase of property and equipment (including the portion of liabilities under any Capital Lease that is or should be capitalized in accordance with GAAP) or which should otherwise be capitalized ” or similar items reflected in the consolidated statement of cash flows of Holdings and its Subsidiaries.

“Consolidated Cash Interest Expense” means, for any period, Consolidated Interest Expense for such period, excluding any amount not payable in Cash.

“Consolidated Excess Cash Flow” means, for any period, an amount (if positive) determined for Holdings and its Subsidiaries on a consolidated basis equal to:

 

(i)

the sum, without duplication, of the amounts for such period of:

 

(a)

Consolidated Adjusted EBITDA, plus

 

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(b)

investment income, plus

 

(c)

other non-ordinary course income, minus

 

(ii)

the sum, without duplication, of the amounts for such period of:

 

(a)

voluntary and scheduled repayments of Consolidated Total Debt (excluding repayments of any revolving credit indebtedness except to the extent the obligation of the relevant lenders to make such revolving credit available is permanently reduced or terminated in connection with such repayments, to the extent of such reduction or termination), plus

 

(b)

Consolidated Capital Expenditures (net of any proceeds of (x) Net Asset Sale Proceeds to the extent reinvested in accordance with Section 2.13(a), (y) Net Insurance/Condemnation Proceeds to the extent reinvested in accordance with Section 2.13(b), and (z) any proceeds of related financings with respect to such expenditures) made in cash; plus

 

(c)

Consolidated Cash Interest Expense, plus

 

(d)

License Advances made in cash, plus

 

(e)

Software Development Costs paid in cash, plus

 

(f)

provisions for current taxes based on income of Holdings and its Subsidiaries and payable in cash with respect to such period.

“Consolidated Fixed Charges” means, for any period, the sum, without duplication, of the amounts determined for Holdings and its Subsidiaries on a consolidated basis equal to:

 

(i)

Consolidated Cash Interest Expense, plus

 

(ii)

scheduled payments of principal on Consolidated Total Debt, plus

 

(iii)

Consolidated Capital Expenditures, plus

 

(iv)

dividends or distributions paid in cash, plus

 

(v)

the portion of taxes based on income actually paid in cash and provisions for cash income taxes, plus

 

(vi)

License Advances, plus ,

 

(vii)

Software Development Costs, as each of the foregoing is made during such period in conformity with GAAP.

 

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“Consolidated Interest Expense” means, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest) of Holdings and its Subsidiaries on a consolidated basis with respect to all outstanding Consolidated Total Debt, including all commissions, discounts and other fees and charges owed with respect to letters of credit and net costs under Interest Rate Agreements.

“Consolidated Net Income” means, for any period:

(i) the net income (or loss) of Holdings and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP, minus

(ii) the sum of:

(a) the income (or loss) of any Person (other than a Subsidiary of Holdings) in which any other Person (other than Holdings or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to Holdings or any of its Subsidiaries by such Person during such period, plus

(b) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Holdings 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, plus

(c) the income of any Subsidiary of Holdings 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 charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, plus

(d) any after tax gains attributable to Asset Sales or returned surplus assets of any Pension Plan, plus

(e) (to the extent not included in clauses (a) through (d) above) any net extraordinary gains.

“Consolidated Total Debt” means, as at any date of determination: the aggregate amount of all Indebtedness of Holdings and its Subsidiaries determined on a consolidated basis in accordance with GAAP or, in the case of Rate Management Transactions or other hedging arrangements, the Net Mark-to-Market Exposure determined on a consolidated basis.

“Contractual Obligation” means, as applied to any Person, any provision of any Security issued by that Person or of any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.

 

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“Contributing Guarantors” as defined in Section 7.2.

“Conversion/Continuation Date” means the effective date of a continuation or conversion, as the case may be, as set forth in the applicable Conversion/Continuation Notice.

“Conversion/Continuation Notice” means a Conversion/Continuation Notice substantially in the form of Exhibit A-2.

“Counterpart Agreement” means a Counterpart Agreement substantially in the form of Exhibit H delivered by a Credit Party pursuant to Section 5.10.

“Copyright Security Agreement” means the Copyright Security Agreements made in favor of the Collateral Agent, on behalf of the Secured Parties, by each applicable Credit Party.

“CRA” means the Canada Revenue Agency.

“Credit Date” means the date of a Credit Extension.

“Credit Document” means any of this Agreement, the Notes, if any, the Collateral Documents, the Fee Letter, the Intercreditor Agreement, the Intercompany Subordination Agreements, the Flow of Funds Agreement, and all other certificates, documents, instruments or agreements executed and delivered by a Credit Party for the benefit of any Agent or any Lender in connection herewith.

“Credit Extension” means the making, conversion or continuance of a Loan.

“Credit Party” means each Person (other than any Agent or any Lender, or any representative thereof) from time to time party to a Credit Document.

“Currency Agreement” means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic or other similar agreement or arrangement, each of which is for the purpose of hedging the foreign currency risk associated with Holdings’ and its Subsidiaries’ operations and not for speculative purposes.

“Default” means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default.

“Default Excess” means, with respect to any Defaulting Lender, the excess, if any, of such Defaulting Lender’s Pro Rata Share of the aggregate outstanding principal amount of Loans of all Lenders (calculated as if all Defaulting Lenders (other than such Defaulting Lender) had funded all of their respective Defaulted Loans) over the aggregate outstanding principal amount of all Loans of such Defaulting Lender.

“Default Period” means, with respect to any Defaulting Lender, the period commencing on the date of the applicable Funding Default and ending on the earliest of the following dates: (i) the date on which all Commitments are cancelled or terminated and/or the Obligations are declared or become immediately due and payable, (ii) the date on which (a) the Default Excess with respect

 

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to such Defaulting Lender shall have been reduced to zero (whether by the funding by such Defaulting Lender of any Defaulted Loans of such Defaulting Lender or by the non-pro rata application of any voluntary or mandatory prepayments of the Loans in accordance with the terms of Section 2.12 or Section 2.13 or by a combination thereof), and (b) such Defaulting Lender shall have delivered to the Borrower Representative and Administrative Agent a written reaffirmation of its intention to honor its obligations hereunder with respect to its Commitments, and (iii) the date on which the Borrower Representative, Administrative Agent and Requisite Lenders waive all Funding Defaults of such Defaulting Lender in writing.

“Defaulted Loan” as defined in Section 2.21.

“Defaulting Lender” as defined in Section 2.21.

“Default Rate” means any interest payable pursuant to Section 2.9.

“Deposit Account” means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit.

“ Disqualified Capital Stock ” means Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, (a) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the first anniversary of the Final Maturity Date, (b) is convertible into or exchangeable (unless at the sole option of the issuer thereof) for (i) debt securities or (ii) any Capital Stock referred to in clause (a) above, in each case at any time prior to the first anniversary of the Final Maturity Date, (c) contains any repurchase obligation that may come into effect prior to payment in full of all Obligations, (d) requires cash dividend payments prior to one year after the Final Maturity Date, (e) does not provide that any claims of any holder of such Capital Stock may have against Holdings or any of its Subsidiaries (including any claims as judgment creditor or other creditor in respect of claims for the breach of any covenant contained therein) shall be fully subordinated (including a full remedy bar) to the Obligations in a manner satisfactory to Administrative Agent, (f) provides the holders of such Capital Stock thereof with any rights to receive any cash upon the occurrence of a change of control prior to the first anniversary date on which the Obligations have been irrevocably paid in full, unless the rights to receive such cash are contingent upon the Obligations being irrevocably paid in full, or (g) is prohibited by the terms of this Agreement. As used in this definition “Final Maturity Date” means of April 30, 2012.

“Dollars” and the sign “$” mean the lawful money of the United States of America.

“Domestic Subsidiary” means any Subsidiary organized under the laws of the United States of America, any State thereof or the District of Columbia.

“Eligible Assignee” means (i) in the case of the Revolving Loans or Revolving Commitments, (a) any Lender with Revolving Exposure or any Affiliate (other than a natural person) of any Lender with Revolving Exposure, (b) a commercial bank

 

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organized under the laws of the United States, or any state thereof, and having total assets or net worth in excess of $100,000,000, (c) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development or a political subdivision of any such country and which has total assets or net worth in excess of $100,000,000, provided that such bank is acting through a branch or agency located in the United States, and (d) a finance company, insurance company, or other financial institution or fund that is engaged in making, purchasing, or otherwise investing in commercial loans in the ordinary course of its business and having (together with its Affiliates) total assets or net worth in excess of $100,000,000, (ii) in the case of the Term Loans (a) any Lender, any Affiliate of any Lender and any Related Fund (any two or more Related Funds being treated as a single Eligible Assignee for all purposes hereof), and (b) any commercial bank, insurance company, investment or mutual fund or other entity that is an “ accredited investor ” (as defined in Regulation D under the Securities Act) and which extends credit or buys loans as one of its businesses, and (iii) any other Person (other than a natural Person) approved by Administrative Agent; provided , that neither Holdings nor any Affiliate of Holdings shall, in any event, be an Eligible Assignee.

“Employee Benefit Plan” means any “ employee benefit plan ” as defined in Section 3(3) of ERISA or a benefit plan, pension plan or plan under Canadian Employee Benefit Laws or a U.K. Employee Benefit Laws which is or was sponsored, maintained or contributed to by, or required to be contributed by, Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates.

“Environmental Claim” means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order, complaint, summons, citation, direction, penalty, fine, investigation, or other order, directive or proceeding (conditional or otherwise), by any Governmental Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law; (ii) in connection with any Hazardous Material or any actual or alleged Hazardous Materials Activity; or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment.

“Environmental Laws” means any and all current or future foreign or domestic, federal, provincial, state or local (or any subdivision of any of them), statutes, ordinances, orders, rules, by-laws, regulations, judgments, guidelines, policies, Governmental Authorizations, or any other requirements of Governmental Authorities or any rule of common law, or any judicial or administrative interpretation thereof, imposing liability or establishing standards of conduct for or relating to (i) public health and safety, protection of the environment or other environmental matters, including those relating to any Hazardous Materials Activity; (ii) the generation, use, storage, transportation or disposal of Hazardous Materials; or (iii) occupational safety and health, or the protection of human health or welfare.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto, in each case together with the regulations thereunder.

 

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“ERISA Affiliate” means, as applied to any Person, (i) any corporation which is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. Any former ERISA Affiliate of Holdings or any of its Subsidiaries shall continue to be considered an ERISA Affiliate of Holdings or any such Subsidiary within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of Holdings or such Subsidiary and with respect to liabilities arising after such period for which Holdings or such Subsidiary could be liable under the Internal Revenue Code or ERISA.

“ERISA Event” means (i) a “ reportable event ” within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan or Multiemployer Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) notice of intent to terminate a Pension Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan with two or more non-related contributing sponsors or the termination of any such Pension Plan resulting in liability to Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might reasonably constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any liability or potential liability therefor, or the receipt by Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could give rise to the imposition on Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan or the assets thereof, or against Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates in connection with any Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of

 

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the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan; or (xii) the imposition of any material liability under Title IV of ERISA, other than the PBGC premiums due but not delinquent under Section 4007 of ERISA, upon Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates; (xiii) any equivalent event, action, condition, proceeding or otherwise under Canadian Employee Benefit Laws or U.K. Employee Benefit Laws, or (xiv) any other event or condition with respect to a Pension Plan or Multiemployer Plan that could reasonably be expected to result in material liability of Holdings.

“Event of Default” means each of the conditions or events set forth in Section 8.1.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.

“Existing Credit Documents” means that certain Amended and Restated Credit Agreement, dated as of November 22, 2005, by and among Holdings, certain Subsidiaries of Holdings, the lenders from time to time party thereto, LaSalle Bank Midwest National Association, as administrative agent, KeyBank National Association, as co-syndication agent, Comerica Bank, as co-syndication agent, U.S. Bank, N.A., as co-syndication agent, and LaSalle Bank Midwest National Association, as documentation agent, together with all related Loan Documents, (as such term is defined therein), all as amended, restated, supplemented or otherwise modified prior to the Closing Date.

“Existing Indebtedness” means Indebtedness and other obligations outstanding under the Existing Credit Documents.

“Existing Intercompany Notes” means, collectively, (i) the promissory note made by U.K. OpCo to the order of Holdings (successor by merger to Lifetime Holding, Inc.) in the aggregate outstanding principal amount of approximately $80,000,000, and (ii) the promissory note made by Holdings (successor by merger to Lifetime Holding, Inc.) to the order of U.K. OpCo in the aggregate outstanding principal amount of approximately $20,000,000.

“Extraordinary Receipts” means any cash received by or paid to or for the account of Holdings or any of it Subsidiaries not in the ordinary course of business, including any foreign, United States, state or local tax refunds, pension plan reversions, judgments, proceeds of settlements or other consideration of any kind in connection with any cause of action, condemnation awards (and payments in lieu thereof), indemnity payments and any purchase price adjustment received in connection with any purchase agreement and proceeds of insurance (excluding, however, any Net Insurance/Condemnation Proceeds which are subject to Section 2.13(b)).

“Facility” means any real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by Holdings or any of its Subsidiaries or any of their respective predecessors or Affiliates.

 

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“Fair Share Contribution Amount” as defined in Section 7.2.

“Fair Share” as defined in Section 7.2.

“Federal Funds Effective Rate” means for any day, the rate per annum (expressed, as a decimal, rounded upwards, if necessary, to the next higher one-hundredth of one percent (1/100 of 1%)) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided , that, (i) if such day is not a Business Day, the Federal Funds Effective Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Effective Rate for such day shall be the average of the quotations for the day of such transactions received by Administrative Agent from three federal funds brokers of recognized standing selected by it.

“Fee Letter” means the letter agreement dated the date hereof between the Borrowers and the Administrative Agent, and acknowledged by each of the other Credit Parties.

“Financial Officer Certification” means, with respect to the financial statements for which such certification is required, the certification of the chief financial officer of Holdings that such financial statements fairly present, in all material respects, the financial condition of Holdings and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, in each case in conformity with GAAP applied on a consistent basis, subject, in the case of interim financial statements, to changes resulting from normal audit and year-end adjustments.

“Financial Plan” as defined in Section 5.1(i).

“Fiscal Month” means any of the monthly accounting periods of Holdings and its Subsidiaries.

“Fiscal Quarter” means a fiscal quarter of any Fiscal Year.

“Fiscal Year” means the fiscal year of Holdings and its Subsidiaries ending on the Saturday closest to April 30th of each calendar year.

“Fixed Charge Coverage Ratio” means the ratio as of the last day of any Fiscal Month of (a) Consolidated Adjusted EBITDA for the twelve month period most recently ended, taken as a single accounting period, to (b) Consolidated Fixed Charges for such twelve month period.

“Flood Hazard Property” means any Real Estate Asset subject to a mortgage in favor of Collateral Agent, for the benefit of the Secured Parties, and located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards.

“Flow of Funds Agreement” means that certain Flow of Funds Agreement, dated as of the Closing Date, duly executed by each Credit Party, each Agent, each Lender and any other person party thereto, in form and substance satisfactory to the Agents, in connection with the disbursement of Loan proceeds in accordance with Section 2.5 of this Agreement.

 

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“Foreign Currency” as defined in Section 10.27.

“Foreign Currency Conversion Date” as defined in Section 10.27.

“Funding Default” as defined in Section 2.21.

“Funding Guarantor” as defined in Section 7.2.

“Funding Notice” means a notice substantially in the form of Exhibit A-1.

“GAAP” means, subject to the limitations on the application thereof set forth in Section 1.2, United States generally accepted accounting principles in effect as of the date of determination thereof.

“Governmental Acts” means any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority.

“Governmental Authority” means any federal, state, provincial, municipal, national, local or other government, governmental department, commission, board, bureau, court, agency, tribunal, administrative hearing body, arbitration panel, commission or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, any province or territory of Canada, Canada, or any other foreign entity or government (including any supra-national bodies such as the European Union or the European Central Bank).

“Governmental Authorization” means any approval, certificate, permit, license, authorization, plan, registration, directive, consent order or consent decree of or from any Governmental Authority.

“Granting Lender” as defined in Section 10.7.

“Grantor” as defined in the U.S. Pledge and Security Agreement.

“ Guarantee ” means, with respect to any Person, any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, that is (a) an obligation of such Person the primary purpose or intent of which is to provide assurance to an obligee that the obligation of the obligor thereof will be paid or discharged, or any agreement relating thereto will be complied with, or the holders thereof will be protected (in whole or in part) against loss in respect thereof; or (b) a liability of such Person for an obligation of another through any agreement (contingent or otherwise) (i) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (ii) to maintain the

 

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solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (i) or (ii) of this clause (b), the primary purpose or intent thereof is as described in clause (a) above.

“Guaranteed Obligations” as defined in Section 7.1.

“Guarantor” means Holdings and each Subsidiary of Holdings (other than the Borrowers, Canadian HoldCo and the Insignificant Subsidiaries), and each other Person, if any, that executes a Guaranty or other similar agreement in favor of the Collateral Agent, for the benefit of the Secured Parties, in connection with the transactions contemplated by this Agreement and the other Credit Documents.

“Guarantor Subsidiary” means each Guarantor other than Holdings.

“Guaranty” means the guaranty of each Guarantor set forth in Section 7 and any other guaranty executed and delivered to the Collateral Agent to guarantee the payment of the Obligations (or any portion thereof).

“Hazardous Materials” shall include, without regard to amount and/or concentration (a) any element, compound, or chemical that is defined, listed or otherwise classified as a contaminant, pollutant, toxic pollutant, toxic, deleterious or hazardous substances, extremely hazardous substance or chemical, hazardous waste, hazardous materials, medical waste, biohazardous or infectious waste, special waste, or solid waste; (b) petroleum, petroleum-based or petroleum-derived products; (c) polychlorinated biphenyls; (d) any substance exhibiting a hazardous waste characteristic including but not limited to corrosivity, ignitibility, toxicity or reactivity as well as any radioactive or explosive materials; and (e) any asbestos-containing materials.

“Hazardous Materials Activity” means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any Remedial Action with respect to any of the foregoing.

“Highest Lawful Rate” means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to any Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow.

“Historical Financial Statements” means as of the Closing Date, (i) the audited financial statements of Holdings and its Subsidiaries for the Fiscal Year ended April 29, 2006, consisting of balance sheets and the related consolidated statements of income, stockholders’ equity and cash flows for such Fiscal Year, and (ii) for the interim period from January 31, 2007 to the Closing Date, internally prepared, unaudited financial statements of Holdings and its Subsidiaries consisting of a balance sheet and the related consolidated statements of income, stockholders’ equity and cash flows for each quarterly period completed prior to forty six (46)

 

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days before the Closing Date and for each Fiscal Month completed prior to thirty-one (31) days prior to the Closing Date, in the case of clauses (i) and (ii) certified by the chief financial officer of Holdings that such financial statements fairly present, in all material respects, the financial condition of Holdings and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject, if applicable, to changes resulting from audit and normal year end adjustments.

“Holdings” as defined in the preamble hereto.

“Increased Cost Lender” as defined in Section 2.22.

“Incremental Availability Reserve” means a reserve imposed against the Working Capital Borrowing Base in an amount equal to the greater of (a) $0 and (b) an amount equal to the difference between (i) $30,000,000, and (ii) the sum of (A) 10% of the Book Value of Eligible Accounts (as defined in the Working Capital Agreement as in effect on the date hereof, whether or not such agreement remains in effect), plus (B) 10% of the Net Orderly Liquidation Value (as defined in the Working Capital Agreement as in effect on the date hereof, whether or not such agreement remains in effect) of Eligible Inventory (as defined in the Working Capital Agreement, as in effect on the date hereof, whether or not such agreement remains in effect), plus (C) 75% of the appraised fair market value (based upon a sale period of nine (9) months) of all Real Estate Assets owned by the Credit Parties on which the Collateral Agent has a Requisite Priority Lien (which fair market value shall be adjusted in accordance with the appraisals required to be delivered pursuant to Section 5.1(u)).

“Indebtedness” as applied to any Person, means, without duplication, (i) all indebtedness for borrowed money; (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP; (iii) all obligations of such Person evidenced by notes, bonds or similar instruments or upon which interest payments are customarily paid and all obligations in respect of drafts accepted representing extensions of credit whether or not representing obligations for borrowed money; (iv) any obligation owed for all or any part of the deferred purchase price of property or services (excluding (a) trade payables incurred in the ordinary course of business having a term of less than four (4) months that are not overdue by more than sixty (60) days and (b) other trade payables in an aggregate amount not exceeding $2,000,000 at any time) which purchase price is (a) due more than four (4) months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument; (v) all obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by such person, (vi) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person; (vii) the face amount of any letter of credit or letter of guaranty issued, bankers’ acceptances facilities, surety bond and similar credit transactions for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or drafts; (viii) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another; (ix) any obligation of such Person the primary purpose or intent of which is to provide assurance to an obligee that the obligation of the obligor thereof will be paid or discharged, or any agreement relating thereto will be complied with, or the

 

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holders thereof will be protected (in whole or in part) against loss in respect thereof; (x) any liability of such Person for an obligation of another through any agreement (contingent or otherwise) (a) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (b) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (a) or (b) of this clause (x), the primary purpose or intent thereof is as described in clause (ix) above; (xi) all obligations of such Person in respect of any exchange traded or over the counter derivative transaction, including any Interest Rate Agreement and Currency Agreement, whether entered into for hedging or speculative purposes; (xii) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any Capital Stock of such Person and (xii) all Attributable Debt of such Person. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or joint venturer, unless such Indebtedness is expressly non-recourse to such Person.

“Indemnified Liabilities” means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, fines, claims (including Environmental Claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any Hazardous Materials Activity), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the other Credit Documents or the transactions contemplated hereby or thereby (including the Lenders’ agreement to make Credit Extensions or the use or intended use of the proceeds thereof, or any enforcement of any of the Credit Documents (including any sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Guaranty), or in connection with any request made by any Agent to the Working Capital Agent to implement, increase or maintain any Availability Reserve; (ii) the statements contained in the commitment letter or proposal letter delivered by any Lender to Holdings with respect to the transactions contemplated by this Agreement; or (iii) any Environmental Claim against or any Hazardous Materials Activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership or occupancy, or practice of Holdings or any of its Subsidiaries.

“Indemnitee” as defined in Section 10.3(a).

“Indemnitee Agent Party” as defined in Section 9.6.

 

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“Insignificant Subsidiaries” means each of the Subsidiaries of Holdings listed on Schedule 1.1(a).

“Intercompany Subordination Agreement” means that certain Intercompany Subordination Agreement, dated as of the date hereof, made by the Credit Parties and their Subsidiaries in favor of the Collateral Agent for the benefit of the Agents and the Lenders.

“Intercreditor Agreement” shall mean the Intercreditor Agreement, dated as of the date hereof, by and among the Agents, and the Working Capital Agent and acknowledged by the Borrowers and the Guarantors, in form and substance satisfactory to the Agents and Lenders, as the same may be amended, supplemented or otherwise modified from time to time and any annexes, exhibits, schedules to any of the foregoing.

“Interest Payment Date” means with respect to any Loan the last day of each month, commencing on the first such date to occur after the Closing Date.

“Interest Period” means, in connection with a LIBOR Rate Loan, an interest period of one (1), two (2), three (3) or six (6) months, as selected by the Borrower Representative in the applicable Funding Notice or Conversion/Continuation Notice, (i) initially, commencing on the Credit Date or Conversion/Continuation Date thereof, as the case may be; and (ii) thereafter, commencing on the day on which the immediately preceding Interest Period expires; provided , that, (a) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day unless no further Business Day occurs in such month, in which case such Interest Period shall expire on the immediately preceding Business Day; (b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clauses (c) and (d) of this definition, end on the last Business Day of a calendar month; (c) no Interest Period with respect to any portion of any Class of Term Loans shall extend beyond such Class’s Term Loan Maturity Date; and (d) no Interest Period with respect to any portion of the Revolving Loans shall extend beyond the Revolving Commitment Termination Date.

“Interest Rate Agreement” means any interest rate swap agreement, interest rate cap agreement, or interest rate collar agreement, interest rate hedging agreement or other similar agreement or arrangement, each of which is (i) for the purpose of hedging the interest rate exposure associated with Holdings’ and its Subsidiaries’ operations, (ii) approved by Administrative Agent, and (iii) not for speculative purposes.

“Interest Rate Determination Date” means, with respect to any Interest Period, the date that is two Business Days prior to the first day of such Interest Period.

“Internal Control Event” means a material weakness in internal controls over public reporting, as described in the Securities Laws, or fraud that involves management of Holdings, which fraud has a material effect on Holdings’ internal controls over public reporting, as described in the Securities Laws.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute.

 

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“Inventory” means, with respect to any Person, all goods and merchandise of such Person, including, without limitation, all raw materials, work-in-process, packaging, supplies, materials and finished goods of every nature used or usable in connection with the shipping, storing, advertising or sale of such goods and merchandise, whether now owned or hereafter acquired, and all such other property the sale or other disposition of which would give rise to an Account or cash.

“Investment” means (i) any direct or indirect purchase or other acquisition by Holdings or any of its Subsidiaries of, or of a beneficial interest in, any of the Securities of any other Person; (ii) any direct or indirect redemption, retirement, purchase or other acquisition for value, by any Subsidiary of Holdings from any Person, of any Capital Stock of such Person; (iii) any direct or indirect loan, advance or capital contributions by Holdings or any of its Subsidiaries to any other Person, including all indebtedness and Accounts from that other Person that are not current assets or did not arise from sales to that other Person in the ordinary course of business; and (iv) any direct or indirect Guarantee of any obligations of any other Person. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment.

“Joint Venture” means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form; provided , that, in no event shall any corporate Subsidiary of any Person be considered to be a Joint Venture to which such Person is a party.

“Landlord Collateral Access Agreement” means a Landlord Consent and Subordination Agreement substantially in the form of Exhibit K, or otherwise in form and substance reasonably acceptable to the Collateral Agent.

“Leasehold Property” means any leasehold interest of any Credit Party as lessee under any lease of real property, other than any such leasehold interest designated from time to time by Collateral Agent in its sole discretion as not being required to be included in the Collateral.

“Lender” means each lender listed on the signature pages hereto as a Lender, and any other Person that becomes a party hereto pursuant to an Assignment Agreement other than any such Person that ceases to be a party hereto pursuant to an Assignment Agreement.

“LIBOR Rate Loan” means a Loan bearing interest at a rate determined by reference to the Adjusted LIBOR Rate.

“License Advances” means prepaid or guaranteed royalties and/or license fees paid to the owners of intellectual property rights.

“Lien” means (i) any lien, mortgage, pledge, assignment, hypothec, deed of trust, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing, and (ii) in the case of Securities, any purchase option, call or similar right of a third party with respect to such Securities.

 

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“Loan” means a Tranche A Term Loan, a Tranche B Term Loan and a Revolving Loan.

“Make-Whole Amount” means, for any prepayment of a Term Loan or reduction or termination of all or any part of any of the Revolving Credit Commitment, an amount equal to the sum of (a) the difference between (1) the aggregate amount of interest which would have otherwise been payable on the amount of the principal prepayment or commitment reduction from the date of prepayment or reduction until April 30, 2009 (assuming that interest would have been payable with respect to the amount of principal prepaid or commitment reduced at a rate equal to the one-month LIBOR Rate on the date of such prepayment or commitment reduction plus the Applicable Margin from the date of such principal prepayment or commitment reduction through April 30, 2009), and (2) the aggregate amount of interest Lenders would earn if the prepaid or reduced principal amount were reinvested for the period from the date of prepayment or reduction until April 30, 2009, at the Treasury Rate, plus (b) 2.0% of the amount of the principal prepayment or commitment reduction made on such date. No amount will be payable pursuant to the foregoing provisions with respect to any prepayment of all or any part of any Loan or termination or reduction of any commitment on or after April 30, 2009.

“Margin Stock” as defined in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.

“Material Adverse Effect” means a material adverse effect on and/or material adverse developments with respect to (i) the business operations, properties, assets, condition (financial or otherwise) or prospects of Holdings and its Subsidiaries taken as a whole; (ii) the ability of any Credit Party to fully and timely perform its Obligations; (iii) the legality, validity, binding effect, or enforceability against a Credit Party of a Credit Document to which it is a party; (iv) the Collateral or the Collateral Agent’s Liens (on behalf of itself and the Secured Parties) on the Collateral or the priority of such Liens; or (v) the rights, remedies and benefits available to, or conferred upon, any Agent and any Lender or any Secured Party under any Credit Document. Without limiting the generality of the foregoing, any event or occurrence adverse to one or more Credit Parties which results or could reasonably be expected to result in losses, costs, damages, liabilities or expenditures in excess of $2,500,000 shall constitute a Material Adverse Effect.

“Material Contract” means, collectively, any contract or other arrangement to which Holdings or any of its Subsidiaries is a party (other than the Credit Documents) for which breach, nonperformance, cancellation or failure to renew could reasonably be expected to have a Material Adverse Effect, and including, in any event each contract or agreement to which Holdings or any of its Subsidiaries is a party involving aggregate consideration payable to or by Holdings or such Subsidiary of $5,000,000 or more (other than purchase orders in the ordinary course of the business of Holdings or such Subsidiary and other than contracts that by their terms may be terminated by Holdings or such Subsidiary in the ordinary course of its business upon less than 60 days’ notice without penalty or premium).

 

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“Material Customer” means any customer from whom Holdings or any of its Subsidiaries, individually or in the aggregate, derives, or has derived, during any year within the immediately preceding three year period, annual revenues in excess of $10,000,000, and, in any event, shall include each of the Persons specified on Schedule 1.1(c).

“Material Real Estate Asset” means (i) (a) any fee-owned Real Estate Asset having a fair market value in excess of $2,000,000 as of any date of determination, and (b) all Leasehold Properties other than those with respect to which the aggregate payments under the term of the lease are less than $2,000,000 per annum, or (ii) any Real Estate Asset that the Requisite Lenders have determined is material to the business, results of operations, properties, assets, condition (financial or otherwise) or prospects of Holdings or any Subsidiary thereof and any listed on Schedule 1.1(a).

“Minimum Availability Amount” means (a) at any time prior to January 1, 2008, the greater of (i) $40,000,000, and (ii) an amount equal to 10% of the Working Capital Borrowing Base at such time, and (b) at any time on and after January 1, 2008, the greater of (i) $50,000,000 and (ii) an amount equal to 10% of the Working Capital Borrowing Base at such time; provided, however , that for so long as Consolidated Adjusted EBITDA for the twelve month period ending on the last day of the most recently ended Fiscal Month equals or exceeds $25,000,000, the Minimum Availability Amount shall be equal to the greater of (i) $40,000,000, and (ii) an amount equal to 10% of the Working Capital Borrowing Base at such time.

“Moody’s” means Moody’s Investor Services, Inc.

“Mortgages” means each of the mortgages, deeds of trust, leasehold mortgages, leasehold deeds of trust, collateral assignments of leases or other real estate security documents delivered by any Credit Party to Collateral Agent on behalf of itself and Lenders with respect to the Closing Date Mortgaged Property, substantially in the form of Exhibit J, or otherwise in form and substance reasonably satisfactory to Collateral Agent.

“Multiemployer Plan” means any Employee Benefit Plan which is a “multiemployer plan” as defined in Section 3(37) of ERISA or such equivalent plan under Canadian Employee Benefit Laws or U.K. Employee Benefit Laws.

“NAIC” means The National Association of Insurance Commissioners, and any successor thereto.

“Narrative Report” means, with respect to the financial statements for which such narrative report is required, a narrative report describing the operations of Holdings and its Subsidiaries in the form prepared for presentation to senior management thereof for the applicable Fiscal Month, Fiscal Quarter or Fiscal Year and for the period from the beginning of the then current Fiscal Year to the end of such period to which such financial statements relate with comparison to and variances from the immediately preceding period and budget.

“Net Asset Sale Proceeds” means, with respect to any Asset Sale, an amount equal to: (i) the sum of Cash payments and Cash Equivalents received by Holdings or any of its Subsidiaries from such Asset Sale (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

 

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received), minus (ii) any bona fide direct costs incurred in connection with such Asset Sale, including (a) income or gains taxes paid or payable by the seller as a result of any gain recognized in connection with such Asset Sale during the tax period the sale occurs (after taking into account any available tax credits or deductions and any tax-sharing arrangements), (b) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Loans) that is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of such Asset Sale, and (c) a reasonable reserve for any indemnification payments (fixed or contingent) attributable to seller’s indemnities and representations and warranties to purchaser in respect of such Asset Sale undertaken by Holdings or any of its Subsidiaries in connection with such Asset Sale; provided , that upon release of any such reserve, the amount released shall be considered Net Asset Sale Proceeds).

“Net Insurance/Condemnation Proceeds” means an amount equal to: (i) any Cash payments or proceeds received by Holdings or any of its Subsidiaries (a) under any casualty, business interruption or “ key man ” insurance policies in respect of any covered loss thereunder, or (b) as a result of the taking of any assets of Holdings or any of its Subsidiaries by any Person pursuant to the power of eminent domain, condemnation or otherwise, or pursuant to a sale of any such assets to a purchaser with such power under threat of such a taking, minus (ii) (a) any actual and reasonable costs incurred by Holdings or any of its Subsidiaries in connection with the adjustment or settlement of any claims of Holdings or such Subsidiary in respect thereof, and (b) any bona fide direct costs incurred in connection with any sale of such assets as referred to in clause (i)(b) of this definition, including income taxes paid or payable as a result of any gain recognized in connection therewith (after taking into account any available tax credits or deductions and any tax-sharing arrangements).

“Net Mark-to-Market Exposure” of a Person means, as of any date of determination, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from Rate Management Transactions. As used in this definition, “unrealized losses” means the fair market value of the cost to such Person of replacing such Rate Management Transaction as of the date of determination (assuming the Rate Management Transaction were to be terminated as of that date), and “unrealized profits” means the fair market value of the gain to such Person of replacing such Rate Management Transaction as of the date of determination (assuming such Rate Management Transaction were to be terminated as of that date).

“Non Consenting Lender” as defined in Section 2.22.

“Non-U.S. Lender” as defined in Section 2.19(e).

“Note” means a Tranche A Term Loan Note, a Tranche B Term Loan Note or a Revolving Loan Note.

“Notice” means a Funding Notice or a Conversion/Continuation Notice.

“Obligations” means, collectively, the U.S. Obligations, the Canadian Obligations and the U.K. Obligations.

 

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“Obligation Currency” as defined in Section 10.27.

“Obligee Guarantor” as defined in Section 7.7.

“Operating Lease Obligations” means all obligations for the payment of rent for any real or personal property under leases or agreements to lease, other than with respect to Capital Leases.

“Organizational Documents” means (i) with respect to any corporation, its certificate or articles of incorporation or organization, as amended, and its by laws, as amended, or, in each case, the equivalent of the foregoing, and with respect to the Canadian Guarantors, shall include any unanimous shareholder agreement or unanimous shareholder declaration or equivalent document, (ii) with respect to any limited partnership, its certificate of limited partnership, as amended, and its partnership agreement, as amended, (iii) with respect to any general partnership, its partnership agreement, as amended, (iv) with respect to any limited liability company, its articles of organization, as amended, and its operating agreement, as amended (or similar documents) and (v) with respect to any other type of entity, its corresponding, organization documents. In the event any term or condition of this Agreement or any other Credit Document requires any Organizational Document to be certified by a secretary of state or similar governmental official, the reference to any such “ Organizational Document ” shall only be to a document of a type customarily certified by such governmental official.

“Other Taxes” means any and all present or future stamp, registration, recording, filing, transfer, documentary, excise or property Taxes, charges or similar levies arising from any payment made hereunder or under any of the other Credit Documents, or from the execution, delivery or enforcement of, or otherwise with respect to or in connection with, any Credit Document.

“Participant” as defined in Section 10.6(h).

“Patent Security Agreement” means the Patent Security Agreements made in favor of the Collateral Agent, on behalf of the Secured Parties, by each applicable Credit Party.

“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001).

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto or equivalent entity under Canadian Employee Benefit Laws or U.K. Employee Benefit Laws.

“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA and equivalent Employee Benefit Plans under Canadian Employee Benefit Laws and U.K. Employee Benefit Laws.

“Permitted Acquisition” means any acquisition by Holdings, any Borrower or any wholly-owned Guarantor Subsidiaries of Holdings, whether by purchase, merger or otherwise, of all or substantially all of the assets of, all of the Capital Stock of, or a business line or unit or a division of, any Person; provided

 

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1. immediately prior to, and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing or would result therefrom;

2. all transactions in connection therewith shall be consummated, in all material respects, in accordance with all applicable laws and in conformity with all applicable Governmental Authorizations;

3. in the case of the acquisition of Capital Stock, all of the Capital Stock (except for any such Securities in the nature of directors’ qualifying shares required pursuant to applicable law) acquired or otherwise issued by such Person or any newly formed Subsidiary of such Person in connection with such acquisition shall be owned one hundred percent (100%) by Holdings or a Guarantor Subsidiary thereof, and Holdings or such Guarantor Subsidiary shall have taken, or caused to be taken, as of the date such Person becomes a Subsidiary of Holdings or such Guarantor Subsidiary, each of the actions set forth in Sections 5.10 and/or 5.11, as applicable;

4. (A) Holdings and its Subsidiaries shall be in compliance with the financial covenants set forth in Section 6.7 on a pro forma basis after giving effect to such proposed acquisition as of the last day of the Fiscal Month most recently ended (as determined in accordance with Section 6.7(f)); (B) after giving effect to such proposed acquisition, the average Working Capital Availability (after giving effect to the Incremental Availability Reserve, the Revolver/Term Loan A Reserve, the Minimum Availability Amount and all other Reserves (as defined in the Working Capital Agreement)) on a pro forma basis (determined in accordance with Section 6.7(f)) for (i) the 30 day period immediately prior to the making of such proposed acquisition, and (ii) the 30 day period immediately following the making of such proposed acquisition equals or exceeds the Specified Availability Amount at such time; (C) Consolidated Adjusted EBITDA for the twelve month period ending on the last day of the most recently ended Fiscal Month equals or exceeds $50,000,000; and (D) after giving effect to such proposed acquisition, the Fixed Charge Coverage Ratio of Holdings and its Subsidiaries, on a pro forma basis (determined in accordance with Section 6.7(f)) for (i) the most recently ended twelve-month period for which financial statements are available immediately preceding the making of such proposed acquisition, and (y) the twelve-month period immediately following the making of such proposed acquisition, is equal to or greater than 1.1:1.0;

5. Holdings shall have delivered to Administrative Agent at least 30 Business Days prior to such proposed acquisition, (A) a Compliance Certificate evidencing compliance with Section 6.7 as required under clause (4) above, together with all relevant financial information with respect to such acquired assets, including the aggregate consideration for such acquisition and any other information required to demonstrate compliance with Section 6.7; accompanied by (B) term sheet and/or commitment letter (setting forth in reasonable detail the terms and conditions of such acquisition) and, at the request of any Agent, such other information and documents that any Agent may request, including, without limitation, executed counterparts of the respective agreements, instruments or other documents pursuant to which such acquisition is to be consummated (including, without limitation, any related management,

 

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non-compete, employment, option or other material agreements), any schedules to such agreements, instruments or other documents and all other material ancillary agreements, instruments or other documents to be executed or delivered in connection therewith, (B) pro forma financial statements of Holdings and its Subsidiaries after the consummation of such acquisition, and (C) copies of such other agreements, instruments or other documents as any Agent shall reasonably request;

6. the agreements, instruments and other documents referred to in clause (5)(B) above shall provide that (A) neither the Credit Parties nor any of their Subsidiaries shall, in connection with such Acquisition, assume or remain liable in respect of any Indebtedness any Seller, or other obligation of the any seller (except for obligations incurred in the ordinary course of business in operating the property so acquired and necessary and desirable to the continued operation of such property and except for Permitted Indebtedness), and (B) all property to be so acquired in connection with such acquisition shall be free and clear of any and all Liens, except for Permitted Liens (and if any such property is subject to any Lien not permitted by this clause (B) then concurrently with such Acquisition such Lien shall be released);

7. any Person or assets or division as acquired in accordance herewith (y) shall be in same business or lines of business in which Holdings and/or its Subsidiaries are engaged as of the Closing Date and (z) shall have generated positive cash flow for the four quarter period most recently ended prior to the date of such acquisition;

8. the acquisition shall have been approved by the board of directors or other governing body or controlling Person of the Person acquired or the Person from whom such assets or division is acquired;

9. not less than fifty percent (50%) of the total consideration paid in connection with the acquisition shall be in the form of equity interests in Holdings or from the proceeds of issuances of equity by Holdings after the Closing Date not required to be used to prepay Loans;

10. the aggregate consideration paid in connection with the acquisition shall not exceed an amount equal to $5,000,000 during any Fiscal Year, or $10,000,000 in the aggregate from the Closing Date to the date of determination; and

11. as of the date of the acquisition, the chief executive officer or the chief financial officer of Holdings shall provide a certificate to Administrative Agent and the Lenders certifying as to the matters set forth in the foregoing clauses and further certifying that the acquisition shall not have a Material Adverse Effect.

“Permitted Liens” means each of the Liens permitted pursuant to Section 6.2.

“Person” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and Governmental Authorities.

 

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“Phase I Report” means, with respect to any Facility, a report that (i) conforms to the ASTM Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process, E 1527, or the current ATSM standard for such process, (ii) was conducted no more than six months prior to the date such report is required to be delivered hereunder, by one or more environmental consulting firms reasonably satisfactory to Administrative Agent, (iii) includes an assessment of asbestos-containing materials at such Facility, (iv) is accompanied by (a) an estimate of the reasonable worst-case cost of investigating and remediating any Hazardous Materials Activity identified in the Phase I Report as giving rise to an actual or potential material violation of any Environmental Law or as presenting a material risk of giving rise to a material Environmental Claim or Environmental Liability, and (b) a current compliance audit setting forth an assessment of Holdings’, its Subsidiaries’ and such Facility’s current and past compliance with Environmental Laws and an estimate of the cost of rectifying any non compliance with current Environmental Laws identified therein and the cost of compliance with reasonably anticipated future Environmental Laws identified therein.

“Platform” as defined in Section 9.9(b).

“PPSA” shall mean the Personal Property Security Act (Ontario) (as may be amended and in effect from time to time), as applicable in the context, or analogous legislation of the applicable Canadian province(s) or territory(ies) in respect of the applicable Credit Party.

“Prepayment Date” as defined in Section 2.14(c).

“Prepayment Premium” means, with respect to any payment or prepayment of any Term Loans or any Commitment reduction or termination, a fee payable on the amount so paid, prepaid, reduced or terminated as follows:

 

“Prime Rate” means the rate of interest publicly announced by the Reference Bank in New York, New York from time to time as its reference rate, base rate or prime rate. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Any Agent or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate.

“Principal Office” means, for Administrative Agent, such Person’s “ Principal Office ” as set forth on Appendix B, or such other office as such Person may from time to time designate in writing to Holdings, Administrative Agent and each Lender.

 

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“Prior Statutory Claims” means claims for unpaid wages, vacation pay, worker’s compensation, unemployment insurance premiums, pension plan contributions, employee or non-resident withholding tax source deductions, unremitted goods and services, excise or sales taxes (net of applicable input credits, in the case of goods and services, excise, value-added and similar taxes), customs duties, realty taxes (including utility charges and business taxes which are collectable like realty taxes) or similar statutory obligations secured by a non-consensual statutory Lien arising in the ordinary course of such Credit Party’s business to the extent: (i) such Liens secure amounts which are not overdue for more than five (5) days or (ii) such Liens secure amounts relating to claims or liabilities which are being contested in good faith by appropriate proceedings diligently pursued and available to such Credit Party, in each case prior to the commencement of foreclosure or other similar proceedings and with respect to which adequate reserves have been set aside on its books in accordance with GAAP.

“Projections” as defined in Section 4.8.

“Pro Rata Share” means (i) with respect to all payments, computations and other matters relating to the Tranche A Term Loan of any Lender, the percentage obtained by dividing (a) the Tranche A Term Loan Exposure of that Lender, by (b) the aggregate Tranche A Term Loan Exposure of all Lenders, (ii) with respect to all payments, computations and other matters relating to the Tranche B Term Loan of any Lender, the percentage obtained by dividing (a) the Tranche B Term Loan Exposure of that Lender, by (b) the aggregate Tranche B Term Loan Exposure of all Lenders, and (iii) with respect to all payments, computations and other matters relating to the Revolving Commitment or Revolving Loans (including Agent Advances) of any Lender the percentage obtained by dividing (a) the Revolving Exposure of that Lender, by (b) the aggregate Revolving Exposure of all Lenders. For all other purposes with respect to each Lender, “Pro Rata Share” means the percentage obtained by dividing (A) an amount equal to the sum of (1) the Tranche A Term Loan Exposure, (2) the Tranche B Term Loan Exposure, and (3) the Revolving Exposure of that Lender, by (B) an amount equal to the sum of (1) the aggregate Tranche A Term Loan Exposure, (2) the aggregate Tranche B Term Loan Exposure, and (3) the aggregate Revolving Exposure of all Lenders.

“Qualified Cash” means, as of any date of determination, the amount of unrestricted Cash and Cash Equivalents in excess of $17,500,000 maintained in a deposit account or a securities account in accordance with the terms of this Agreement, including, without limitation, Section 6.6(a), which account is subject to a tri-party blocked account agreement and provides Collateral Agent with a perfected first priority Lien on such account and the contents thereof; provided, however , that Qualified Cash shall be deemed to equal zero at all times when there are Working Capital Loans outstanding under the Working Capital Agreement.

“Rate Management Transaction” means any transaction (including an agreement with respect thereto) now existing or hereafter entered by any Credit Party which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures;

 

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provided , that, in order to be deemed to be a Rate Management Transaction under this Agreement for any purpose (other than the definition of the term “Indebtedness”), any such transaction shall be entered into for risk management purposes associated with the Credit Parties’ operations and not for speculative purposes.

“Real Estate Asset” means, at any time of determination, any interest (fee, leasehold or otherwise) then owned by any Credit Party in any real property.

“ Reference Bank ” means JPMorgan Chase Bank, its successors or any other commercial bank designated by the Administrative Agent to the Borrower Representative from time to time.

“Refusal Option” as defined in Section 2.14(c).

“Register” as defined in Section 2.6(b).

“Regulation” as defined in Section 4.38.

“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

“Related Fund” means, with respect to any Lender that is an investment fund, any other investment fund that invests in commercial loans and that is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor. With respect to Silver Point, Related Fund shall also include any swap, special purpose vehicles purchasing or acquiring security interests in collateralized loan obligations or any other vehicle through which Silver Point may leverage its investments from time to time.

“Release” means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, issuance or transportation of any Hazardous Material into the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Material).

“Remedial Action ” means all actions taken to (i) clean up, remove, remediate, contain, treat, monitor, assess, evaluate or in any other way address Hazardous Materials in the indoor or outdoor environment; (ii) prevent or minimize a Release or threatened Release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare, natural resources or the indoor or outdoor environment; (iii) perform pre-remedial studies and investigations and post-remedial operation and maintenance activities; or (iv) any other actions authorized by 42 U.S.C. 9601 or the equivalent provisions of any other applicable Environmental Laws.

“Reorganization” means the corporate reorganization of Holdings and its Subsidiaries, as described on Part I of Schedule 1.1(b).

“Reorganization Documents” means each of the documents executed and delivered in connection with the Reorganization and listed on Part II of Schedule 1.1(b).

 

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“Replacement Lender” as defined in Section 2.22.

“Requisite Lenders” means one or more Lenders having or holding Tranche A Term Loan Exposure, Tranche B Loan Exposure and/or Revolving Exposure and representing more than fifty percent (50%) of the sum of (i) the aggregate Tranche A Term Loan Exposure of all Lenders, (ii) the aggregate Tranche B Term Loan Exposure of all Lenders and (iii) the aggregate Revolving Exposure of all Lenders.

“Requisite Priority” means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that such Lien is a valid, legal and enforceable Lien having priority over all other Liens to which such Collateral is subject, other than Permitted Liens, to the extent any such Permitted Liens would have (and are permitted to have) priority over the Liens in favor of the Collateral Agent pursuant to any applicable law or agreement.

“Restricted Junior Payment” means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Holdings now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class; (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Holdings or any of its Subsidiaries now or hereafter outstanding; (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Holdings or any of its Subsidiaries now or hereafter outstanding; (iv) any management or similar fees payable to any Affiliate of any Credit Party; and (v) any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to, any Indebtedness that is subordinated to the Obligations (other than intercompany Indebtedness subject to the terms of the Intercompany Subordination Agreement).

“Revolver/Term Loan A Reserve” means, at any time, a reserve against the Working Capital Borrowing Base in an amount equal to the aggregate outstanding principal amount of the Revolving Loans at such time plus $50,000,000.

“Revolving Commitment” means the commitment of a Lender to make or otherwise fund any Revolving Loan and “Revolving Commitments” means such commitments of all Lenders in the aggregate. The amount of each Lender’s Revolving Commitment, if any, is set forth on Appendix A-3 or in the applicable Assignment Agreement, subject to any adjustment or reduction pursuant to the terms and conditions hereof. The aggregate amount of the Revolving Commitments as of the Closing Date is $50,000,000.

“Revolving Commitment Period” means the period from the Closing Date to but excluding the Revolving Commitment Termination Date.

“Revolving Commitment Termination Date” means the earliest to occur of (i) May 1, 2007, if the Term Loans are not made on or before that date; (ii) April 30, 2012; (iii) the date the Revolving Commitments are permanently reduced to zero pursuant to Section 2.12(b) or 2.13; and (iv) the date of the termination of the Revolving Commitments pursuant to Section 8.1.

 

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“Revolving Exposure” means, with respect to any Lender as of any date of determination, (i) prior to the termination of the Revolving Commitments, that Lender’s Revolving Commitment; and (ii) after the termination of the Revolving Commitments the aggregate outstanding principal amount of the Revolving Loans of that Lender.

“Revolving Loan” means a Loan made by a Lender to the Borrowers pursuant to Section 2.2(a) and/or Section 2.22.

“Revolving Loan Note” means a promissory note in the form of Exhibit B-3, as it may be amended, supplemented or otherwise modified from time to time.

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill Corporation.

“Secured Parties” means the Agents and the Lenders.

“Securities” means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “ securities ” or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.

“Securities Act” means the Securities Act of 1933, as amended from time to time, and any successor statute.

“Securities Laws” means the Securities Act, the Exchange Act, Sarbanes Oxley Act of 2002 and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the Securities and Exchange Commission or the Public Company Accounting Oversight Board, as each of the foregoing may be amended and in effect on any applicable date hereunder.

“Silver Point” as defined in the preamble hereto.

“Software Development Costs” means the costs of software development arising from the development of software programs by Holdings and its Subsidiaries in the ordinary course of business and which are capitalized on the financial statements and books and records of the Person incurring such costs.

“Solvency Certificate” means a Solvency Certificate of the chief financial officer of Holdings substantially in the form of Exhibit G-2.

“Solvent” means, with respect to any Credit Party, that as of the date of determination, both (i) (a) the sum of such Credit Party’s debt and liabilities (including contingent liabilities) does not exceed the present fair saleable value of such Credit Party’s present assets; (b) such Credit Party’s capital is not unreasonably small in relation to its business as contemplated on the Closing Date and reflected in the Projections or with respect to any transaction contemplated or undertaken after the Closing Date; and (c) such

 

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Person has not incurred and does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due (whether at maturity or otherwise); and (ii) such Person is (a) “solvent” within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances, and (b) not an “insolvent person” (as such term is defined in the Bankruptcy and Insolvency Act (Canada) or the Insolvency Act of 1986, as applicable) or “debtor company” (as such term is defined in the Companies’ Creditors Arrangement Act (Canada)). For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No. 5).

“SPC” as defined in Section 10.7.

“Specified Availability Amount” means, as of any date of determination (which date of determination shall be the date of the proposed event giving rise to the need to calculate the Specified Availability Amount), the applicable amount set forth below opposite the period in which such date occurs:

 

“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than fifty percent (50%) of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof; provided , that in determining the percentage of ownership interests of any Person controlled by another Person, no ownership interest in the nature of a “ qualifying share ” of the former Person shall be deemed to be outstanding.

“SunGard” means SunGard Availability Services LP.

“SunGard Agreement” means the Master Agreement for U.S. Availability Services, dated as of October 1, 2006, between SunGard and Holdings.

 

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“Tax” means any present or future tax, levy, impost, duty, assessment, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed (including without limitation, Canadian Withholding Taxes); provided , that, “Tax on the overall net income” of a Person shall be construed as a reference to a tax imposed by the jurisdiction in which that Person is organized or in which that Person’s applicable principal office (and/or, in the case of a Lender, its lending office) is located or in which that Person (and/or, in the case of a Lender, its lending office) is deemed to be doing business (other than a jurisdiction in which such Person is treated as doing business as a result of its entering into any Credit Document or its participation in the transactions governed thereby) on all or part of the net income, profits or gains (whether worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its applicable lending office).

“Tax-Related Person” means a Person (including a beneficial owner of an interest in a pass-through entity) whose income is realized through or determined by reference to an Agent, a Lender or Participant or any Tax Related Person of any of the foregoing.

“Term Loan” means a Tranche A Term Loan or a Tranche B Term Loan.

“Term Loan Commitment” means the Tranche A Term Loan Commitment or the Tranche B Term Loan Commitment of a Lender, and “Term Loan Commitments” means such commitments of all Lenders.

“Term Loan Maturity Date” means the earlier of (i) April 30, 2012, and (ii) the date that all Tranche A Term Loans and Tranche B Term Loans shall become due and payable in full hereunder, whether by acceleration or otherwise.

“Term Priority Collateral” has the meaning ascribed to such term in the Intercreditor Agreement.

“Terminated Lender” as defined in Section 2.22.

“ Terrorism Laws ” means any of the following (a) Executive Order 13224 issued by the President of the United States, (b) the Terrorism Sanctions Regulations (Title 31 Part 595 of the U.S. Code of Federal Regulations), (c) the Terrorism List Governments Sanctions Regulations (Title 31 Part 596 of the U.S. Code of Federal Regulations), (d) the Foreign Terrorist Organizations Sanctions Regulations (Title 31 Part 597 of the U.S. Code of Federal Regulations), (e) the Patriot Act (as it may be subsequently codified), (f) all other present and future legal requirements of any Governmental Authority addressing, relating to, or attempting to eliminate, terrorist acts and acts of war and (g) any regulations promulgated pursuant thereto or pursuant to any legal requirements of any Governmental Authority governing terrorist acts or acts of war.

“Title Policy” as defined in Section 3.1(h)(iii).

“Total Utilization of Revolving Commitments” means, as at any date of determination, the aggregate principal amount of all outstanding Revolving Loans.

 

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“Trademark Security Agreement” means the Trademark Security Agreements made in favor of the Collateral Agent, on behalf of the Secured Parties, by each applicable Credit Party.

“Tranche A Term Loan” means a Tranche A Term Loan made by a Lender to the Borrowers pursuant to Section 2.1(a).

“Tranche A Term Loan Commitment” means the commitment of a Lender to make or otherwise fund a Tranche A Term Loan and “Tranche A Term Loan Commitments” means such commitments of all Lenders in the aggregate. The amount of each Lender’s Tranche A Term Loan Commitment, if any, is set forth on Appendix A-1 or in the applicable Assignment Agreement, subject to any adjustment or reduction pursuant to the terms and conditions hereof. The aggregate amount of the Tranche A Term Loan Commitments as of the Closing Date is $50,000,000.

“Tranche A Term Loan Exposure” means, with respect to any Lender, as of any date of determination, the outstanding principal amount of the Tranche A Term Loans of such Lender; provided , that, at any time prior to the making of the Tranche A Term Loans, the Tranche A Term Loan Exposure of any Lender shall be equal to such Lender’s Tranche A Term Loan Commitment.

“Tranche A Term Loan Note” means a promissory note in the form of Exhibit B-1, as it may be amended, restated, supplemented or otherwise modified from time to time.

“Tranche B Term Loan” means a Tranche B Term Loan made by a Lender to the Borrowers pursuant to Section 2.2.

“Tranche B Term Loan Commitment” means the commitment of a Lender to make or otherwise fund a Tranche B Term Loan and “Tranche B Term Loan Commitments” means such commitments of all Lenders in the aggregate. The amount of each Lender’s Tranche B Term Loan Commitment, if any, is set forth on Appendix A-2 or in the applicable Assignment Agreement, subject to any adjustment or reduction pursuant to the terms and conditions hereof. The aggregate amount of the Tranche B Term Loan Commitments as of the Closing Date is $40,000,000.

“Tranche B Term Loan Exposure” means, with respect to any Lender, as of any date of determination, the outstanding principal amount of the Tranche B Term Loans of such Lender; provided , that, at any time prior to the making of the Tranche B Term Loans, the Tranche B Term Loan Exposure of any Lender shall be equal to such Lender’s Tranche B Term Loan Commitment.

“Tranche B Term Loan Note” means a promissory note in the form of Exhibit B-2, as it may be amended, restated, supplemented or otherwise modified from time to time.

“Transaction Costs” means the fees, costs and expenses payable by Holdings or any of its Subsidiaries on or before the Closing Date in connection with the transactions contemplated by the Credit Documents and the Working Capital Documents.

 

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“Treasury Rate” means with respect to any prepayment pursuant to Section 2.12, a rate per annum (computed on the basis of actual days elapsed over a year of 360 days) equal to the rate determined by Administrative Agent on the date three (3) Business Days prior to the Prepayment Date, to be the yield expressed as a rate listed in The Wall Street Journal for United States Treasury securities having a term of not greater than thirty-six (36) months.

“Type of Loan” means with respect to either Term Loans or Revolving Loans, a Base Rate Loan or a LIBOR Rate Loan.

“UCC” means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction, including, without limitation, the PPSA.

“U.K. Employee Benefit Laws” means the Income (Tax and Earnings) Act 2003 (U.K.), the Income and Corporations Taxes Act 1998 (U.K.), the Income Tax (Trading and Other Income) Act 2005 (U.K.), the Finance Act 2003 (U.K.), the Employment Rights Act 1996 (U.K.), the Employment Act 2002 (U.K.), the Pensions Schemes Act 1993 (U.K.), the Pensions Act 1995 (U.K.), the Pensions Act 2004 (U.K.), the Social Security Contributions and Benefits Act 1992 (U.K.), the National Insurance Contributions Act 2002 (U.K.), the Companies Act 1985 and 2006 (U.K.), the Financial Services and Markets Act 2000 (U.K.) and all other equivalent statutes governing employee benefits in the United Kingdom, in each case, including any regulations, rules and guidance issued thereunder and in each case, as amended, supplemented and replaced from time to time.

“U.K. Fixed and Floating Security Document” means the English law fixed and floating security document to be granted by U.K. OpCo in favor of the Collateral Agent, for the benefit of the Secured Parties, substantially in the form of Exhibit I-4.

“U.K. Guarantors” means U.K. OpCo and any Guarantor that is formed under the laws of England and Wales or any province or territory thereof.

“U.K. Obligations” means all Guaranteed Obligations of the U.K. Guarantors with respect to the U.S. Obligations and the Canadian Obligations, including, without limitation, all debts, principal, interest (including any interest that, but for the provisions of the Bankruptcy Code, would have accrued), premiums, liabilities, obligations, indemnifications, fees, charges, costs, expenses (including any fees or expenses that, but for the provisions of the Bankruptcy Code, would have accrued), lease payments, guaranties, covenants, and duties of any kind and description, in each case, owing by the U.K. Guarantors to the Agents (including former Agents), the Lenders or any of them pursuant to or evidenced by the Credit Documents and irrespective of whether for the payment of money, whether direct or indirect, primary or secondary absolute or contingent, due or to become due, now existing or hereafter arising, or otherwise and including all interest not paid when due and all expenses that any U.K. Guarantor is required to pay or reimburse or perform by the Credit Documents, by law, or otherwise. Any reference in this Agreement or in the Credit Documents to the U.K. Obligations shall include all amendments, changes, extensions, modifications, renewals replacements, substitutions, and supplements, thereto and thereof, as applicable, both prior and subsequent to any proceedings under the Bankruptcy Code.

 

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“U.K. OpCo” means Handleman UK Limited, a company organized under the laws of England and Wales.

“U.K. Security Documents” means the U.K. Fixed and Floating Security Document and any other security document, including any U.K. Share Charge, that may at any time be given as security for any of the U.K. Obligations pursuant to on in connection with any Credit Document.

“U.K. Share Charge” means any English law share charge to be granted by a Credit Party (other than Canadian HoldCo) that hold the shares of a Person organized under the laws of England and Wales in favor of the Collateral Agent, for the benefit of the Secured Parties, substantially in the form of Exhibit I-5.

“Unadjusted LIBOR Rate Component” means that component of the interest costs to the Borrowers in respect of a LIBOR Rate Loan that is based upon the rate obtained pursuant to clause (i) of the definition of Adjusted LIBOR Rate.

“U.S. Obligations” means all Revolving Loans, Tranche A Term Loans and Tranche B Term Loans, debts, principal, interest (including any interest that, but for the provisions of the Bankruptcy Code, would have accrued), premiums, liabilities, obligations, indemnifications, fees, charges, costs, expenses (including any fees or expenses that, but for the provisions of the Bankruptcy Code, would have accrued), lease payments, guaranties, covenants, and duties of any kind and description, including, without limitation, the Guaranteed Obligations of each Borrower with respect to the U.K. Obligations and the Canadian Obligations, in each case, owing by any Borrower to the Agents (including former Agents), the Lenders or any of them pursuant to or evidenced by the Credit Documents and irrespective of whether for the payment of money, whether direct or indirect, primary or secondary absolute or contingent, due or to become due, now existing or hereafter arising, or otherwise and including all interest not paid when due and all expenses that any Borrower is required to pay or reimburse or perform by the Credit Documents, by law, or otherwise. Any reference in this Agreement or in the Credit Documents to the U.S. Obligations shall include all amendments, changes, extensions, modifications, renewals replacements, substitutions, and supplements, thereto and thereof, as applicable, both prior and subsequent to any proceedings under the Bankruptcy Code.

“U.S. Pledge and Security Agreement” means the U.S. Pledge and Security Agreement to be executed by each Borrower, Holdings, and each Domestic Subsidiary of Holdings that is a Guarantor substantially in the form of Exhibit I-1, as it may be amended, supplemented or otherwise modified from time to time.

“Waivable Prepayment” as defined in Section 2.14(c).

“Working Capital Agent” shall mean General Electric Capital Corporation, as agent under the Working Capital Agreement.

“Working Capital Agreement” shall mean that certain Credit Agreement among certain of the Credit Parties, the Working Capital Lenders, and Working Capital Agent, dated as of the date hereof, in form and substance satisfactory to the Agent.

 

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“Working Capital Availability” shall have the meaning assigned to the term “Borrowing Availability” in the Working Capital Agreement, as in effect on the Closing Date, whether or not such agreement remains in effect.

“Working Capital Borrowing Base” has the meaning assigned to the term “Borrowing Base” in the Working Capital Agreement, as in effect on the Closing Date, whether or not such agreement remains in effect.

“Working Capital Commitments” shall have the meaning assigned to the term “Commitments” in the Working Capital Agreement, as in effect on the Closing Date, whether or not such agreement remains in effect.

“Working Capital Debt” as defined in Section 6.1(c).

“Working Capital Documents” shall mean the Working Capital Agreement and the Loan Documents (as defined in the Working Capital Agreement), in form and substance satisfactory to the Administrative Agent.

“Working Capital Lenders” shall mean the lenders from time to time party to the Working Capital Agreement.

“Working Capital Letters of Credit” shall mean the letters of credit issued by or at the request of, the Working Capital Agent for the benefit of certain of the Borrowers, under, and pursuant to the terms of the Working Capital Agreement.

“Working Capital Loans” shall mean the revolving loans made to the Borrowers under, and pursuant to the terms of, the Working Capital Agreement.

“Working Capital Priority Collateral” has the meaning ascribed to such term in the Intercreditor Agreement.

1.2 Accounting Terms. Except as otherwise expressly provided herein, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. Financial statements and other information required to be delivered by Holdings to Lenders pursuant to Section 5.1(a), 5.1(b) and 5.1(c) shall be prepared in accordance with GAAP as in effect at the time of such preparation (and delivered together with the reconciliation statements provided for in Section 5.1(e), if applicable). Subject to the foregoing, calculations in connection with the definitions, covenants and other provisions hereof shall utilize accounting principles and policies in conformity with those used to prepare the Historical Financial Statements.

1.3 Interpretation, etc. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. References herein to any Section, Appendix, Schedule or Exhibit shall be to a Section, an Appendix, a Schedule or an Exhibit, as the case may be, hereof unless otherwise specifically provided. The use in any Credit Document of the words “include” or “including,” when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not no limiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter.

 

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SECTION 2. LOANS

2.1 Term Loans.

(a) Loan Commitments. Subject to the terms and conditions hereof,

(i) each Lender severally agrees to make, on the Closing Date, a Tranche A Term Loan to the Borrowers in an amount equal to such Lender’s Tranche A Term Loan Commitment;

(ii) each Lender severally agrees to make, on the Closing Date, a Tranche B Term Loan to the Borrowers in an amount equal to such Lender’s Tranche B Term Loan Commitment; and

(iii) The Borrowers may make only one borrowing under each of the Tranche A Term Loan Commitment and Tranche B Term Loan Commitment, which shall be on the Closing Date. Any amount borrowed under this Section 2.1(a) and subsequently repaid or prepaid may not be reborrowed. Subject to Sections 2.11 and 2.12, all amounts owed hereunder with respect to the Term Loans shall be paid in full no later than the Term Loan Maturity Date. Each Lender’s Tranche A Term Loan Commitment and Tranche B Term Loan Commitment shall terminate immediately and without further action on the Closing Date after giving effect to the funding of such Lender’s Tranche A Term Loan Commitment and Tranche B Term Loan Commitment, if any, on such date.

(b) Borrowing Mechanics for Term Loans .

(i) The Borrower Representative with respect to each Term Loan shall deliver to Administrative Agent a fully executed Funding Notice no later than three (3) Business Days prior to the Closing Date. Promptly upon receipt by Administrative Agent of such Funding Notice, Administrative Agent shall notify each Lender of the proposed borrowing. Administrative Agent and Lenders may act without liability upon the basis of written or telecopied notice believed by Administrative Agent in good faith to be from the Borrower Representative (or from any Authorized Officer thereof designated in writing purportedly from the Borrower Representative to Administrative Agent). Administrative Agent and each Lender shall be entitled to rely conclusively on any Authorized Officer’s authority to request a Term Loan on behalf of the Borrowers until Administrative Agent receives written notice to the contrary. Administrative Agent and Lenders shall have no duty to verify the authenticity of the signature appearing on any written Funding Notice.

(ii) Each Lender shall make its Term Loans available to Administrative Agent not later than 12:00 p.m. (New York City time) on the Closing Date, by wire transfer of same day funds in Dollars, to Administrative Agent’s Account. Upon satisfaction or waiver of the conditions precedent specified herein, Administrative Agent shall make the proceeds of the Term Loans available to

 

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the Borrowers on the Closing Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Loans received by Administrative Agent from Lenders to be credited to the account designated by the Borrowers in the Flow of Funds Agreement.

2.2 Revolving Loans.

(a) Revolving Commitment . During the Revolving Commitment Period, subject to the terms and conditions hereof, each Lender severally agrees to make Revolving Loans to Borrowers in an aggregate amount up to but not exceeding such Lender’s Revolving Commitment; provided , that after giving effect to the making of any Revolving Loans in no event shall the Total Utilization of Revolving Commitments exceed the lesser of (i) the Working Capital Borrowing Base then in effect (without giving effect to the Revolver/Term Loan A Reserve or the Incremental Availability Reserve but after giving effect to all other Reserves (as defined in the Working Capital Agreement) then in effect), less the sum of (A) the aggregate principal amount of all Working Capital Loans outstanding at such time, plus (B) the aggregate face amount of all Working Capital Letters of Credit outstanding at such time, plus (C) $50,000,000, plus (D) the Incremental Availability Reserve at such time, plus (E) the Minimum Availability Amount at such time, and (ii) the Revolving Commitments then in effect. Subject to the limitations on borrowing and repaying contained in Sections 2.12 and 3.2, amounts borrowed pursuant to this Section 2.2(a) may be repaid and reborrowed during the Revolving Commitment Period. Each Lender’s Revolving Commitment shall expire on the Revolving Commitment Termination Date and all Revolving Loans and all other amounts owed hereunder with respect to the Revolving Loans and the Revolving Commitments shall be paid in full no later than such date.

(b) Borrowing Mechanics for Revolving Loans .

(i) Revolving Loans shall be made in an aggregate minimum amount of $500,000 and integral multiples of $100,000 in excess of that amount.

(ii) Whenever Borrowers desire that Lenders make Revolving Loans, the Borrower Representative shall deliver to Administrative Agent a fully executed and delivered Funding Notice no later than 10:00 a.m. (New York City time) at least three Business Days in advance of the proposed Credit Date in the case of a LIBOR Rate Loan, and on the proposed Credit Date in the case of a Revolving Loan that is a Base Rate Loan. Except as otherwise provided herein, a Funding Notice for a Revolving Loan that is a LIBOR Rate Loan shall be irrevocable when given, and Borrowers shall be bound to make a borrowing in accordance therewith. Administrative Agent and Lenders may act without liability upon the basis of written or telecopied notice believed by Administrative Agent in good faith to be from the Borrower Representative (or from any Authorized Officer thereof designated in writing purportedly from the Borrower Representative to Administrative Agent). Administrative Agent and each Lender shall be entitled to rely conclusively on any Authorized Officer’s authority to request a Revolving Loan on behalf of the Borrower Representative until Administrative Agent receives written notice to the contrary. Administrative Agent and Lenders shall have no duty to verify the authenticity of the signature appearing on any written Funding Notice.

 

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(iii) Notice of receipt of each Funding Notice in respect of Revolving Loans, together with the amount of each Lender’s Pro Rata Share thereof, if any, together with the applicable interest rate, shall be provided by Administrative Agent to each applicable Lender by telefacsimile with reasonable promptness, but (provided Administrative Agent shall have received such notice by 10:00 a.m. (New York City time)) not later than 2:00 p.m. (New York City time) on the same day as Administrative Agent’s receipt of such Notice from the Borrower Representative.

(iv) Each Lender shall make the amount of its Revolving Loan available to Administrative Agent not later than 12:00 p.m. (New York City time) on the applicable Credit Date by wire transfer of same day funds in Dollars, to Administrative Agent’s account. Except as provided herein, upon satisfaction or waiver of the conditions precedent specified herein, Administrative Agent shall make the proceeds of such Revolving Loans available to Borrowers on the applicable Credit Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Revolving Loans received by Administrative Agent from Lenders to be credited to the account designated in writing to Administrative Agent by the Borrower Representative.

2.3 [RESERVED].

2.4 Pro Rata Shares; Availability of Funds.

(a) Pro Rata Shares . All Loans shall be made by Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that no Lender shall be responsible for any default by any other Lender in such other Lender’s obligation to make a Loan requested hereunder or purchase a participation required hereby nor shall any Term Loan Commitment or any Revolving Commitment of any Lender be increased or decreased as a result of a default by any other Lender in such other Lender’s obligation to make a Loan requested hereunder or purchase a participation required hereby.

(b) Availability of Funds . Unless Administrative Agent shall have been notified by any Lender prior to the applicable Credit Date that such Lender does not intend to make available to Administrative Agent the amount of such Lender’s Loan requested on such Credit Date, Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on such Credit Date and Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to the Borrowers a corresponding amount on such Credit Date. If such corresponding amount is not in fact made available to Administrative Agent by such Lender, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Credit Date until the date such amount is paid to Administrative Agent, at the customary rate set by Administrative Agent for the correction of errors among banks for three (3) Business Days and thereafter at the Base Rate. If such Lender does not pay such corresponding amount forthwith upon Administrative Agent’s demand therefor, Administrative Agent shall promptly notify the Borrower Representative and the Borrowers shall immediately pay such corresponding amount to Administrative Agent together with interest thereon, for each day from such Credit Date until the date such amount is paid to Administrative Agent, at the rate payable hereunder for Base Rate Loans for such Class of Loans. Nothing in this Section 2.4(b) shall be deemed to relieve any Lender from its obligation to fulfill its Term Loan Commitments and Revolving Commitments hereunder or to prejudice any rights that any Borrower may have against any Lender as a result of any default by such Lender hereunder.

 

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2.5 Use of Proceeds. The proceeds of the Term Loans and the Revolving Loans, if any, made on the Closing Date shall be applied by the Borrowers to fund the refinancing of the Existing Indebtedness, the repayment of the Existing Intercompany Notes, the payment of any and all fees and expenses relating to the transactions contemplated by this Agreement and the refinancing of the Existing Indebtedness, and for working capital and general corporate purposes of Holdings and its Subsidiaries. The proceeds of the Revolving Loans made after the Closing Date shall be applied by the Borrowers for working capital and general corporate purposes of Holdings and its Subsidiaries, including Permitted Acquisitions; but shall in no event be used to make or facilitate any Investment or Restricted Junior Payment not otherwise permitted hereunder. No portion of the proceeds of any Credit Extension shall be used in any manner that causes or might cause such Credit Extension or the application of such proceeds to violate Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation thereof or to violate the Exchange Act.

2.6 Evidence of Debt; Register; Lenders’ Books and Records; Notes.

(a) Lenders’ Evidence of Debt . Each Lender shall maintain on its internal records an account or accounts evidencing the Obligations of the Borrowers to such Lender, including the amounts of the Loans made by it and each repayment and prepayment in respect thereof. Any such recordation shall be conclusive and binding on each Borrower, absent manifest error; provided , that the failure to make any such recordation, or any error in such recordation, shall not affect any Lender’s Commitments or any Borrower’s Obligations in respect of any applicable Loans; and provided further , that in the event of any inconsistency between the Register and any Lender’s records, the recordations in the Register shall govern.

(b) Register . Administrative Agent shall maintain at its Principal Office a register for the recordation of the names and addresses of Lenders and the Commitments and Loans of each Lender from time to time (the “Register” ). The Register shall be available for inspection by each Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. Administrative Agent shall record in the Register the Commitments and the Loans (and stated interest thereon), and each repayment or prepayment in respect of the principal amount of the Loans, and any such recordation shall be conclusive and binding on each Borrower and each Lender, absent manifest error; provided , that failure to make any such recordation, or any error in such recordation, shall not affect any Lender’s Commitments or any Borrower’s Obligations in respect of any Loan. Each Borrower hereby designates the entity serving as Administrative Agent to serve as such Borrower’s agent solely for purposes of maintaining the Register as provided in this Section 2.6, and each Borrower hereby agrees that, to the extent such entity serves in such capacity, the entity serving as Administrative Agent and its officers, directors, employees, agents and affiliates shall constitute “Indemnitees”.

(c) Notes . If so requested by any Lender by written notice to the Borrower Representative (with a copy to Administrative Agent) at least two (2) Business Days prior to the Closing Date, or at any time thereafter, the Borrowers shall execute and deliver to such Lender (and/or, if applicable and if so specified in such notice, to any Person who is an assignee of such Lender pursuant to

 

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Section 10.6) on the Closing Date (or, if such notice is delivered after the Closing Date, promptly after the Borrower Representative’s receipt of such notice) a Note or Notes to evidence such Lender’s Tranche A Term Loan, Tranche B Term Loan or Revolving Loan, as the case may be.

2.7 Interest on Loans.

(a) Except as otherwise set forth herein, each Class of Loan shall bear interest on the unpaid principal amount thereof from the date made through repayment (whether by acceleration or otherwise) thereof as follows:

(i) in the case of Tranche A Term Loans and Revolving Loans:

(1) if a Base Rate Loan, at the Base Rate plus three percent (3.0%) per annum; or

(2) if a LIBOR Rate Loan, at the Adjusted LIBOR Rate plus four percent (4.0%) per annum;

(ii) in the case of Tranche B Term Loans:

(1) if a Base Rate Loan, at the Base Rate plus five percent (5.0%) per annum; or

(2) if a LIBOR Rate Loan, at the Adjusted LIBOR Rate plus six percent (6.0%) per annum.

(b) The basis for determining the rate of interest with respect to any Loan, and the Interest Period with respect to any LIBOR Rate Loan, shall be selected by the Borrower Representative and notified to Administrative Agent and Lenders pursuant to the applicable Funding Notice or Conversion/Continuation Notice, as the case may be. If on any day a Loan is outstanding with respect to which a Funding Notice or Conversion/Continuation Notice has not been delivered to Administrative Agent in accordance with the terms hereof specifying the applicable basis for determining the rate of interest, then for that day such Loan shall be a Base Rate Loan.

(c) In connection with LIBOR Rate Loans there shall be no more than six (6) Interest Periods outstanding at any time. In the event the Borrower Representative fails to specify between a Base Rate Loan or a LIBOR Rate Loan in the applicable Funding Notice or Conversion/Continuation Notice, such Loan (if outstanding as a LIBOR Rate Loan) will be automatically converted into a Base Rate Loan on the last day of the then current Interest Period for such Loan (or if outstanding as a Base Rate Loan will remain as, or (if not then outstanding) will be made as, a Base Rate Loan). In the event the Borrower Representative fails to specify an Interest Period for any LIBOR Rate Loan in the applicable Funding Notice or Conversion/Continuation Notice, the Borrower Representative shall be deemed to have selected an Interest Period of one (1) month. As soon as practicable after 10:00 a.m. (New York City time) on each

 

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Interest Rate Determination Date, Administrative Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the LIBOR Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to the Borrower Representative and each Lender.

(d) Interest payable pursuant to Section 2.7(a) shall be computed on the basis of a 360 day year with respect to LIBOR Rate Loans and 365/66 day year with respect to Base Rate Loans, in each case for the actual number of days elapsed in the period during which it accrues. In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a LIBOR Rate Loan, the date of conversion of such LIBOR Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted to a LIBOR Rate Loan, the date of conversion of such Base Rate Loan to such LIBOR Rate Loan, as the case may be, shall be excluded; provided , that if a Loan is repaid on the same day on which it is made, one day’s interest shall be paid on that Loan.

(e) Except as otherwise set forth herein, interest on each Loan shall be payable in arrears (i) on and to each Interest Payment Date applicable to that Loan; (ii) upon any prepayment of that Loan, whether voluntary or mandatory, to the extent accrued on the amount being prepaid; and (iii) at maturity, including final maturity.

2.8 Conversion/Continuation.

(a) Subject to Section 2.17 and so long as no Default or Event of Default shall have occurred and then be continuing, the Borrowers shall have the option:

(i) to convert at any time all or any part of any Term Loan or Revolving Loan equal to $500,000 and integral multiples of $100,000 in excess of that amount from one Type of Loan to another Type of Loan; provided , that a LIBOR Rate Loan may only be converted on the expiration of the Interest Period applicable to such LIBOR Rate Loan unless the Borrowers shall pay all amounts due under Section 2.17 in connection with any such conversion; or

(ii) upon the expiration of any Interest Period applicable to any LIBOR Rate Loan, to continue all or any portion of such Loan equal to $500,000 and integral multiples of $100,000 in excess of that amount as a LIBOR Rate Loan.

(b) The Borrower Representative shall deliver a Conversion/Continuation Notice to Administrative Agent no later than 10:00 a.m. (New York City time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan) and at least three (3) Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a LIBOR Rate Loan). Except as otherwise provided herein, a Conversion/Continuation Notice for conversion to, or continuation of, any LIBOR Rate Loans shall be irrevocable on and after the related Interest Rate Determination Date, and the Borrowers shall be bound to effect a conversion or continuation in accordance therewith.

 

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2.9 Default Interest. Upon the occurrence and during the continuance of an Event of Default, the principal amount of all Loans outstanding and, to the extent permitted by applicable law, any interest payments on the Loans or any fees or other amounts owed hereunder, shall thereafter bear interest (including post petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable on demand at a rate that is two percent (2%) per annum in excess of the interest rate otherwise payable hereunder with respect to the applicable Loans (or, in the case of any such fees and other amounts, at a rate which is two percent (2%) per annum in excess of the interest rate otherwise payable hereunder for Base Rate Loans); provided , that, in the case of LIBOR Rate Loans, upon the expiration of the Interest Period in effect at the time any such increase in interest rate is effective such LIBOR Rate Loans shall thereupon become Base Rate Loans and shall thereafter bear interest payable upon demand at a rate which is two percent (2%) per annum in excess of the interest rate otherwise payable hereunder for Base Rate Loans. Payment or acceptance of the increased rates of interest provided for in this Section 2.9 is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender.

2.10 Fees.

(a) Borrowers agree to pay to Administrative Agent for the ratable benefit of Lenders having Revolving Exposure commitment fees equal to (1) the average of the daily difference between (a) the Revolving Commitments, and (b) the aggregate principal amount of outstanding Revolving Loans, times (2) two percent (2.0%) per annum. Such commitment fees shall be paid to Administrative Agent’s Account and upon receipt, Administrative Agent shall promptly distribute to each Lender having Revolving Exposure its Pro Rata Share thereof. Such commitment fees shall be calculated on the basis of a 360 day year and the actual number of days elapsed and shall be payable monthly in arrears on the last day of each month during the Revolving Commitment Period, commencing on the first such date to occur after the Closing Date, and ending on the Revolving Commitment Termination Date.

(b) In addition to the foregoing commitment fees, each Borrower agrees to pay to Agents all fees payable by it in the Fee Letter in the amounts and at the times specified therein and to Agents such other fees payable by it in the amounts and at the times separately agreed upon.

2.11 Scheduled Payments/Commitment Reductions. The aggregate unpaid principal amount of the Term Loans together with all other amounts owed hereunder with respect thereto, shall be paid in full by the Borrowers no later than the Term Loan Maturity Date. The Revolving Commitments shall be reduced in connection with any voluntary or mandatory reductions of the Revolving Commitments in accordance with Sections 2.11, 2.12 and 2.13, as applicable, and shall be terminated on the Revolving Commitment Termination Date, and all amounts owed hereunder with respect thereto, shall, in any event, be paid in full by the Borrowers no later than the Revolving Commitment Termination Date.

 

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2.12 Voluntary Prepayments/Commitment Reductions.

(a) Voluntary Prepayments .

(i) Subject to Sections 2.12(a)(iii), 2.12(c) and 2.17(c), any time and from time to time the Borrowers may prepay any such Loans on any Business Day in whole or in part, in an aggregate minimum amount of $500,000 and integral multiples of $100,000 in excess of that amount:

(ii) All such prepayments shall be made upon not less than five (5) Business Days’ prior written notice, and in each case given to Administrative Agent by 12:00 p.m. (New York City time) on the date required in writing to Administrative Agent (and Administrative Agent will promptly transmit such notice for Term Loans or Revolving Loans, as the case may be, by telefacsimile or telephone to each Lender). Upon the giving of any such notice, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein. Any such voluntary prepayment shall be applied as specified in Section 2.14(a) with respect to Revolving Loans and Section 2.14(b) with respect to Term Loans.

(iii) Notwithstanding anything to the contrary contained herein, no Revolving Loan may be voluntarily prepaid at any time when any Working Capital Loans are outstanding.

(b) Voluntary Commitment Reductions .

(i) Subject to Section 2.12(c), Borrowers may, upon not less than three (3) Business Days’ prior written notice to Administrative Agent (which notice Administrative Agent will promptly transmit by telefacsimile or telephone to each applicable Lender), at any time and from time to time terminate in whole or permanently reduce in part the Revolving Commitments in an amount up to the amount by which the Revolving Commitments exceed the Total Utilization of Revolving Commitments at the time of such proposed termination or reduction; provided , that any such partial reduction of the Revolving Commitments shall be in an aggregate minimum amount of $500,000 and integral multiples of $100,000 in excess of that amount; provided further , that until the date on which the Working Capital Agreement is terminated, the Revolving Commitments may not be reduced or terminated without the prior consent of the Working Capital Agent and the Working Capital Lenders.

(ii) The Borrower Representative’s notice to Administrative Agent on behalf of the Borrowers shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction of the Revolving Commitments shall be effective on the date specified in the Borrower Representative’s notice and shall reduce the Revolving Commitment of each Lender proportionately to its Pro Rata Share thereof.

(c) Call Protection . (i) If all or any part of the principal balance of any Term Loan is paid, for any reason (including, without limitation, pursuant to any mandatory prepayment provision other than any mandatory prepayments required by Section 2.13(e)), and/or any Commitment is reduced or terminated after the date on which this Agreement is executed, but on or prior to April 30, 2009, for

 

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any reason (other than the termination of any Term Loan Commitments on the Closing Date), the Borrowers shall pay to Administrative Agent, for the benefit of all Lenders entitled to a portion of such prepayment or reduction, the applicable Make Whole Amount.

(ii) If all or any part of the principal balance of any Term Loan is paid, for any reason (including, without limitation, pursuant to any mandatory prepayment provision other than any mandatory prepayments required by Section 2.13(e)), and/or any Commitment is reduced or terminated after April 30, 2009 but on or prior to April 30, 2011, for any reason, the Borrowers shall pay to Administrative Agent, for the benefit of all Lenders entitled to a portion of such prepayment or reduction, the applicable Prepayment Premium.

2.13 Mandatory Prepayments/Commitment Reductions.

(a) Asset Sales . Subject to Section 2.13(h), no later than the first Business Day following the date of receipt by Holdings or any of its Subsidiaries of any Net Asset Sale Proceeds to the extent that the aggregate amount of Net Asset Sale Proceeds received by Holdings and all such Subsidiaries (and not applied as provided herein) shall exceed for all such Asset Sales $100,000 in any Fiscal Year, or $500,000 since the Closing Date, (i) from any Term Priority Collateral (other than the sale or other disposition of the Capital Stock of Air Eagle, LLC and/or from any leases or sub-leases permitted by Section 6.8(g)), the Borrowers shall prepay the Loans and/or the Revolving Commitments shall be permanently reduced as set forth in Section 2.14(b) in an aggregate amount equal to such Net Asset Sale Proceeds; (ii) from any Working Capital Priority Collateral, the Borrowers shall prepay the Loans and/or the Revolving Commitments shall be permanently reduced as set forth in Section 2.14(b) in an aggregate amount equal to such Net Asset Sale Proceeds; provided that the amount of any mandatory payment required to be made under this Section 2.13(a)(ii) shall be reduced, on a dollar-for-dollar basis, by the amount of any corresponding mandatory prepayment made under the Working Capital Agreement;

(b) Insurance/Condemnation Proceeds . Subject to Section 2.13(h), no later than the first Business Day following the date of receipt by Holdings or any of its Subsidiaries, or Administrative Agent as loss payee, of any Net Insurance/Condemnation Proceeds to the extent that the aggregate amount of Net Insurance/Condemnation Proceeds and Extraordinary Receipts received by Holdings and all such Subsidiaries (and not applied as provided herein or as in clause (f) below) shall exceed $100,000 since the Closing Date, (i) from any Term Priority Collateral, the Borrowers shall prepay the Loans and/or the Revolving Commitments shall be permanently reduced as set forth in Section 2.14(b) in an aggregate amount equal to such Net Insurance/Condemnation Proceeds; ii) from any Working Capital Priority Collateral, the Borrowers shall prepay the Loans and/or the Revolving Commitments shall be permanently reduced as set forth in Section 2.14(b) in an aggregate amount equal to such Insurance/Condemnation Proceeds; provided that the amount of any mandatory payment required to be made under this Section 2.13(b)(ii) shall be reduced, on a dollar-for-dollar basis, by the amount of any corresponding mandatory prepayment made under the Working Capital Agreement;

 

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(c) Issuance of Equity Securities . On the date of receipt by Holdings or any of its Subsidiaries of any Cash proceeds from any capital contribution to, or the issuance of any Capital Stock of, Holdings, the Borrowers shall prepay the Loans and/or the Revolving Commitments shall be permanently reduced as set forth in Section 2.14(b) in an aggregate amount equal to fifty percent (50%) of such proceeds, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses; provided , that the amount of any mandatory payment required to be made under this Section 2.13(c) shall be reduced, on a dollar-for-dollar basis, by the amount of any corresponding mandatory prepayment made under the Working Capital Agreement, provided, that (x) the Working Capital Commitments thereunder have been permanently reduced or a permanent block has been imposed thereon, and (y) a permanent block has been imposed against the Working Capital Borrowing Base, in each case, on a dollar-for-dollar basis with such mandatory prepayment.

(d) Issuance of Debt . On the date of receipt by Holdings or any of its Subsidiaries of any Cash proceeds from the incurrence of any Indebtedness of Holdings or any of its Subsidiaries (other than with respect to any Indebtedness permitted to be incurred pursuant to Section 6.1(a)-(m)), the Borrowers shall prepay the Loans and/or the Revolving Commitments shall be permanently reduced as set forth in Section 2.14(b) in an aggregate amount equal to one hundred percent (100%) of such proceeds, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses; provided , that the amount of any mandatory payment required to be made under this Section 2.13(d) shall be reduced, on a dollar-for-dollar basis, by the amount of any corresponding mandatory prepayment made under the Working Capital Agreement, provided, that (x) the Working Capital Commitments thereunder have been permanently reduced or a permanent block has been imposed thereon, and (y) a permanent block has been imposed against the Working Capital Borrowing Base, in each case, on a dollar-for-dollar basis with such mandatory prepayment.

(e) Consolidated Excess Cash Flow . In the event that there shall be Consolidated Excess Cash Flow for any Fiscal Year (commencing with the Fiscal Year ending May 3, 2008), the Borrowers shall, no later than ninety (90) days after the end of such Fiscal Year, prepay the Loans and/or the Revolving Commitments shall be permanently reduced as set forth in Section 2.14(b) in an aggregate amount equal to seventy-five percent (75%) of such Consolidated Excess Cash Flow; provided , that the amount of any mandatory payment required to be made under this Section 2.13(e) shall be reduced, on a dollar-for-dollar basis, by the amount of any corresponding mandatory prepayment made under the Working Capital Agreement, provided, that (x) the Working Capital Commitments thereunder have been permanently reduced or a permanent block has been imposed thereon, and (y) a permanent block has been imposed against the Working Capital Borrowing Base, in each case, on a dollar-for-dollar basis with such mandatory prepayment. Any amounts prepaid pursuant to this Section 2.13(e) with respect to any Fiscal Year in excess of such percentage of Consolidated Excess Cash Flow shall be treated as voluntary prepayments made pursuant to Section 2.12(a).

(f) Extraordinary Receipts . No later than the first Business Day following the date of receipt by Holdings or any of its Subsidiaries of any Extraordinary Receipts, to the extent that the aggregate amount of Extraordinary Receipts and Net Insurance/Condemnation Proceeds received by Holdings and all such Subsidiaries (and not applied as provided herein or as in clause (b) above)

 

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shall exceed $100,000 since the Closing Date, the Borrowers shall prepay the Loans and/or the Revolving Commitments shall be permanently reduced as set forth in Section 2.14(b) in an aggregate amount equal to one hundred percent (100%) of such Extraordinary Receipts; provided, that , the amount of any mandatory payment required to be made under this Section 2.13(f) shall be reduced, on a dollar-for-dollar basis, by the amount of any corresponding mandatory prepayment made under the Working Capital Agreement provided that (x) the Working Capital Commitments thereunder have been permanently reduced or a permanent block has been imposed thereon, and (y) a permanent block has been imposed against the Working Capital Borrowing Base, in each case, on a dollar-for-dollar basis with such mandatory prepayment.

(g) Tranche A Term Loan and Revolving Loans . The Borrowers shall make the payments required by Section 6.21 hereof.

(h) Reinvestment Provisions . Notwithstanding the foregoing, with respect to Net Asset Sale Proceeds and Insurance/Condemnation Proceeds that the Borrowers are required to use to prepay the Loans and/or permanently reduce the Revolving Commitments, in each case, constituting proceeds of Term Priority Collateral, up to $1,000,000 in the aggregate with respect to Net Asset Sale Proceeds, and up to $1,000,000 in the aggregate with respect to Insurance/Condemnation Proceeds, in each case received by Holdings or any of its Subsidiaries in connection therewith shall not be required to be applied to the prepayment of the Loans or the permanent reduction of the Revolving Commitments on such date to the extent that such proceeds are used solely to reinvest in long-term productive assets of the Credit Parties constituting Term Priority Collateral; provided , that (x) no Default or Event of Default has occurred and is continuing on the date such Person receives such proceeds or uses such proceeds to reinvest in long-term productive assets of the Credit Parties constituting Term Priority Collateral subject to a Requisite Priority Lien in favor of the Collateral Agent, (y) the Borrower Representative delivers a certificate to the Agents within one Business Day after receipt of such Net Asset Sale Proceeds or Insurance Condemnation Proceeds, as the case may be, stating that such proceeds shall be used to reinvest in long term productive assets constituting Term Priority Collateral to be used in such Credit Party’s business within a period specified in such certificate not to exceed 180 days after the receipt of such proceeds, (which certificate shall set forth estimates of the proceeds to be so expended); and (z) either (1) such proceeds are deposited in an account subject to the sole dominion and control of the Collateral Agent until such time as such proceeds are used to reinvest in long-term productive assets of the Credit Parties constituting Term Priority Collateral or (2) such proceeds are applied to prepay Working Capital Loans; provided, that, concurrently with such application to the Working Capital Loans, the Working Capital Agent shall establish and maintain a corresponding reserve against the Working Capital Commitments and the Working Capital Borrowing Base in an amount equal to the full amount of such proceeds (such reserve to be released upon the earlier of (I) the date such Proceeds are used to reinvest in long-term productive assets of the Credit Parties constituting Term Priority Collateral and (II) if no such reinvestment shall occur within the time periods set forth in this Section 2.13(h), the date such proceeds are applied to the Loans as required by Section 2.13(a) or Section 2.13(b), as applicable, and the immediately succeeding clause; and if all or any portion of such proceeds not so applied to the prepayment of the Loans pursuant to Section 2.13(a) or Section 2.13(b), as applicable, are not used in accordance with the preceding provisions of this

 

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Section 2.13(h) within the period specified in the relevant certificate furnished pursuant hereto or there shall occur an Event of Default, such remaining portion shall be applied to the Loans as required by Section 2.13(a) or Section 2.13(b), as applicable, on the last day of such specified period or immediately, in the case of an Event of Default.

(i) Administrative Agent’s Account . Following the request by the Administrative Agent to the Working Capital Agent to transfer all funds deposited in any Blocked Account to the Administrative Agent’s Account in accordance with Section 5.15(b), so long as no Default or Event of Default has occurred and is continuing (in which case funds shall be applied in accordance with Section 2.15(g)), the Administrative Agent shall apply all funds transferred from the Blocked Accounts and deposited in the Administrative Agent’s Account by the Working Capital Agent, to the payment, in whole or in part, of the outstanding principal amount of the Revolving Loans.

(k) Prepayment Certificate . Concurrently with any prepayment of the Loans and/or reduction of the Revolving Commitments pursuant to Sections 2.13(a)-(g), Holdings shall deliver to Administrative Agent a certificate of an Authorized Officer demonstrating the calculation of the amount of the applicable net proceeds, Consolidated Excess Cash Flow or other applicable financial tests or proceeds giving rise to the prepayment, as the case may be. In the event that Holdings or any of its Subsidiaries shall subsequently determine that the actual amount received exceeded the amount set forth in such certificate, the Borrowers shall promptly make an additional prepayment of the Loans and/or the Revolving Commitments shall be permanently reduced in an amount equal to such excess, and Holdings shall concurrently therewith deliver to Administrative Agent a certificate of an Authorized Officer demonstrating the derivation of such excess.

2.14 Application of Prepayments/Reductions.

(a) Application of Voluntary Prepayments of Loans . Any prepayment of any Revolving Loan pursuant to Section 2.12 shall be applied to repay outstanding Revolving Loans to the full extent thereof; provided that no Revolving Loans may be voluntarily prepaid at any time when the principal amount of any Working Capital Loan is outstanding. Any voluntary prepayment of any Term Loan pursuant to Section 2.12 by or on behalf of the Borrowers shall be applied to repay the Tranche A Term Loans until paid in full, and then the Tranche B Term Loans.

(b) Application of Mandatory Prepayments .

(i) So long as no Event of Default has occurred and is continuing, any mandatory prepayment of any Loan pursuant to Section 2.13(c), (d), (e) and (f) shall be applied as follows:

first, except in connection with any Waivable Prepayment in Section 2.14(c), to prepay Tranche A Term Loans until paid in full;

second , to prepay principal of the Revolving Loans;

 

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third , to prepay principal of the Tranche B Term Loans until paid in full; and

fourth , to any other Obligations then outstanding.

(ii) So long as no Event of Default has occurred and is continuing, any mandatory prepayment of any Loan pursuant to Section 2.13(a) or Section 2.13(b) shall be applied as follows:

(1) Net Asset Sale Proceeds and Insurance Condemnation Proceeds from any Term Priority Collateral owned by any Credit Party shall be paid: (A) first, to the Tranche B Term Loans until paid in full; (B) second, to the Tranche A Term Loans, until paid in full; and (C) third, to the Revolving Loans, until paid in full and the Revolving Commitment shall be permanently reduced by the amount of any such prepayment; and

(2) Net Asset Sale Proceeds and Insurance Condemnation Proceeds from any Working Capital Priority Collateral owned by any Credit Party shall be paid: (A) first to Tranche A Term Loans, until paid in full; (B) second, to the Revolving Loans, until paid in full and the Revolving Commitment shall be permanently reduced by the amount of any such prepayment; and (C) third, to the Tranche B Term Loans until paid in full.

(iii) If any Event of Default has occurred and is continuing, all payments shall be applied pursuant to Section 2.15(g). Nothing contained herein shall modify the provisions of Section 2.12(c) or Section 2.15(b) regarding the requirement that all prepayments be accompanied by accrued interest and fees on the principal amount being prepaid to the date of such prepayment and the applicable Make Whole Amount or Prepayment Premium, or any requirement otherwise contained herein to pay all other amounts as the same become due and payable.

(c) Waiver of Certain Prepayments . Anything contained herein to the contrary notwithstanding, in the event any Borrowers are required to make any mandatory prepayment (a “Waivable Prepayment” ) of any of the Term Loans, not later than the Business Day prior to the date (the “Prepayment Date” ) on which such Borrowers are required to make such Waivable Prepayment, the Borrower Representative shall notify Administrative Agent of the amount of such prepayment, and Administrative Agent will promptly thereafter notify each Lender holding an outstanding portion of the Term Loan to be prepaid, of the amount of such Lender’s Pro Rata Share of such Waivable Prepayment and such Lender’s option to refuse such amount (the “Refusal Option” ). Each such Lender may exercise the Refusal Option by giving written notice to the Borrower Representative and Administrative Agent of its election to do so by not later than 11:00 a.m. on the Prepayment Date (it being understood that any Lender which does not notify the Borrower Representative and Administrative Agent of its election to exercise such option on or before the first Business Day prior to the Prepayment Date shall be deemed to have elected, as of such date, not to exercise the Refusal Option). On the Prepayment Date, the Borrowers shall pay to Administrative Agent the amount of the Waivable Prepayment, which amount shall be applied (i) in an amount equal to the Waivable Prepayment payable pro rata to those Lenders that have elected not to exercise the Refusal Option, to

 

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prepay the applicable Term Loans of such Lenders (which prepayment shall be applied to the principal of the Term Loans in accordance with Section 2.14(b)), and (ii) to the extent of any excess, to the Borrowers for working capital and general corporate purposes.

(d) Application of Prepayments of Loans to Base Rate Loans and LIBOR Rate Loans . Considering each Class of Loans being prepaid separately, any prepayment thereof shall be applied first to Base Rate Loans to the full extent thereof before application to LIBOR Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by the Borrowers pursuant to Section 2.17(c).

2.15 General Provisions Regarding Payments.

(a) All payments by any Credit Party of principal, interest, fees and other Obligations shall be made in Dollars in same day funds, without, recoupment, setoff, counterclaim or other defense free of any restriction or condition, and delivered to Administrative Agent not later than 12:00 p.m. (New York City time) on the date due to Administrative Agent’s Account for the account of Lenders; funds received by Administrative Agent after that time on such due date shall be deemed to have been paid on the next Business Day.

(b) All payments in respect of the principal amount of any Loan (other than voluntary prepayments of Revolving Loans) shall be accompanied by payment of accrued interest on the principal amount being repaid or prepaid, the applicable Make Whole Amount or Prepayment Amount and all commitment fees and other amounts payable with respect to the principal amount being repaid or prepaid.

(c) Administrative Agent shall promptly distribute to each Lender at such address as such Lender shall indicate in writing, such Lender’s applicable Pro Rata Share of all payments and prepayments of principal and interest due hereunder, together with all other amounts due thereto, including all fees payable with respect thereto, to the extent received by Administrative Agent.

(d) Notwithstanding the foregoing provisions hereof, if any Conversion/ Continuation Notice is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any LIBOR Rate Loans, Administrative Agent shall give effect thereto in apportioning payments received thereafter.

(e) Subject to the provisos set forth in the definition of “ Interest Period, ” whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder or of the commitment fees hereunder.

(f) Administrative Agent shall deem any payment by or on behalf of any Credit Party hereunder that is not made in same day funds prior to 12:00 p.m. (New York City time) to be a non conforming payment. Any such payment shall not be deemed to have been received by Administrative Agent until the later of (i) the time such funds become available funds, and (ii) the applicable next

 

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Business Day. Interest shall continue to accrue on any principal as to which a non conforming payment is made until such funds become available funds (but in no event less than the period from the date of such payment to the next succeeding applicable Business Day) at the Default Rate determined pursuant to Section 2.9 from the date such amount was due and payable until the date such amount is paid in full.