SECOND LIEN CREDIT AGREEMENT

Exhibit 10.10

Execution Version

 

SECOND LIEN CREDIT AGREEMENT

dated as of March 26, 2009

among

SBARRO, INC.,

as Borrower,

SBARRO HOLDINGS, LLC,

as Holdings,

THE LENDERS FROM TIME TO TIME PARTY HERETO,

and

NATIXIS, NEW YORK BRANCH

as Administrative Agent and Collateral Agent,

 

 

Table of Contents

 

 

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SECOND LIEN CREDIT AGREEMENT

This Second Lien Credit Agreement (“ Agreement ”) is entered into as of March 26, 2009 among SBARRO HOLDINGS, LLC, a Delaware limited liability company (“ Holdings ”), SBARRO, INC., a New York corporation (the “ Borrower ”), each lender from time to time party hereto (collectively, the “ Lenders ” and individually, a “ Lender ”), Natixis, New York Branch, as Administrative Agent and Collateral Agent.

WHEREAS, the Borrower and Holdings have requested that the Lenders extend credit to the Borrower in the form of Loans (such term and each other capitalized terms used but not otherwise defined in these Recitals shall have the meaning assigned thereto in Article I ) on the Closing Date in the Committed Amount which will be used for the purposes set forth in Section 6.11 .

WHEREAS, the First Lien Borrower and the other First Lien Loan Parties have agreed to amend the First Lien Credit Agreement (the “ First Lien Amendment ”) to, among other things, permit the Borrower and Holdings to enter into the Agreement, incur the Second Lien Secured Obligations and to reduce the First Lien Revolving Commited Amount;

The Lenders are willing to make the requested credit facility available on the terms and conditions set forth herein. Accordingly, in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

Section 1.01 Defined Terms . As used in this Agreement, the following terms have the meanings set forth below:

“ Accession Agreement ” means a Loan Party Accession Agreement, substantially in the form of Exhibit H hereto, executed and delivered by an Additional Subsidiary Guarantor after the Closing Date in accordance with Section 6.12(a) or (d) .

“ Additional Collateral Documents ” has the meaning specified in Section 6.12(b) .

“ Additional Subsidiary Guarantor ” means each Person that becomes a Subsidiary Guarantor after the Closing Date by execution of an Accession Agreement as provided in Section 6.12(a) .

“ Acquisition Agreement ” means the Acquisition Agreement dated as of November 22, 2006 among Holdings, MidOcean SBR Acquisition Corp. and the Borrower, as the same may be amended, modified or supplemented from time to time in accordance with the provisions thereof and of the First Lien Credit Agreement, as amended by Amendment No. 1 dated January 31, 2007.

“ Administrative Agent ” means Natixis, New York Branch, in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

“ Administrative Agent’s Office ” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02 , or such other address or account as the Administrative Agent may from time to time notify the Borrower and the Lenders.

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

“ Affiliate ” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“ Agent ” means the Administrative Agent, the Collateral Agent and any successors and assigns in such capacity, and “ Agents ” means any two or more of them.

“ Aggregate Commitments ” means at any date the Commitments of all the Lenders.

“ Agreement ” means this Credit Agreement, as amended, modified or supplemented from time to time.

“ AHYDO Interest Payment ” has the meaning specified in Section 2.06(e) .

“ Applicable Percentage ” means, with respect to any Lender at any time, the percentage (carried out to the ninth decimal place) of the Aggregate Commitments represented by the aggregate of such Lender’s Commitment Percentage at such time; provided that if the Aggregate Commitments have expired, then the Applicable Percentage of each Lender shall be determined based on the Applicable Percentage of such Lender most recently in effect, giving effect to any subsequent assignments. The initial Applicable Percentage of each Lender is set forth opposite the name of such Lender on Schedule 2.01 under the caption “Aggregate Commitment Percentage” or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.

“ Approved Fund ” means any Fund that is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that administers or manages a Lender.

“ Asset Disposition ” means any sale (including any Sale/Leaseback Transaction, whether or not involving a Capital Lease), lease (as lessor), transfer or other disposition (including any such transaction effected by way of merger or consolidation and including any sale or other disposition by any Group Company of Equity Interests of a Subsidiary, but excluding any sale or other disposition by way of Casualty or Condemnation) by any Group Company of any asset. For avoidance of doubt, an Equity Issuance or capital contribution by any Person shall not constitute an Asset Disposition by that Person.

“ Assignee Group ” means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor or by Affiliated investment advisors.

 

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“ Assignment and Assumption ” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.06(b) ), and accepted by the Administrative Agent, substantially in the form of Exhibit C hereto or any other form approved by the Administrative Agent.

“ Attributable Indebtedness ” means, at any date, (i) in respect of any Capital Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, (ii) in respect of any Synthetic Lease Obligation of any Person, the capitalized or principal amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease or other agreement were accounted for as a Capital Lease and (iii) in respect of any Sale/Leaseback Transaction, the lesser of (A) the present value, discounted in accordance with GAAP at the interest rate implicit in the related lease, of the obligations of the lessee for net rental payments over the remaining term of such lease (including any period for which such lease has been extended or may, at the option of the lessor, be extended) and (B) the fair market value of the assets subject to such transaction.

“ Audited Financial Statements ” means the audited balance sheet of the Borrower for the fiscal year ended December 31, 2007, and the related statements of income, shareholders’ equity and cash flows for such fiscal year of the Borrower, including the notes thereto.

“ Bank Secrecy Act ” means the Financial Recordkeeping and Reporting of Currency and Foreign Transactions Act of 1970, 31 U.S.C. 1051 et seq ., as the same may be amended, supplemented, modified, replaced or otherwise in effect from time to time.

“ Bankruptcy Code ” means title 11 of the United States Code entitled “Bankruptcy,” as now and hereafter in effect, or any successor statute.

“ Bankruptcy Law ” means the Bankruptcy Code and all other liquidation, receivership, moratorium, conservatorship, assignment for the benefit of creditors, insolvency or similar federal, state or foreign law for the relief of debtors.

“ Borrower ” has the meaning assigned to such term in the preamble hereto.

“ Borrower Materials ” has the meaning specified in Section 6.02 .

“ Borrowing ” has the meaning specified in Section 1.05 .

“ Business Acquisition ” means the acquisition by the Borrower or one or more of its Subsidiaries of all (other than Nominal Shares) of the Equity Interests of, or all (or any division, line of business or any substantial part for which audited financial statements or other financial information reasonably satisfactory to the Administrative Agent is available) or substantially all of the assets or property of, another Person.

“ Business Day ” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent’s Office is located.

 

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“ Capital Lease ” of any Person means any lease of (or other arrangement conveying the right to use) property (whether real, personal or mixed) by such Person as lessee which would, in accordance with GAAP, be required to be accounted for as a capital lease on the balance sheet of such Person.

“ Capital Lease Obligations ” means, with respect to any Person, all obligations of such Person as lessee under Capital Leases, in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP.

“ Cash Equivalents ” means:

(i) any evidence of debt, maturing not more than one year after such time, issued or guaranteed by the United States of America or any agency thereof;

(ii) commercial paper, maturing not more than one year from the date of issue, or demand notes issued by any domestic corporation not an Affiliate of the Borrower, in each case (unless issued by a Lender of its holding company) rated at least A-2 by S&P or P-2 by Moody’s;

(iii) any certificate of deposit (or time deposits represented by such certificate of deposit), eurodollar time deposit or bankers’ acceptance, maturing not more than one year after such time, or overnight Federal funds transactions with a member of the Federal Reserve System that are issued or sold by a commercial banking institution that is organized under the Laws of the United States, any State thereof or the District of Columbia, any foreign bank or its branches or agencies (fully protected against currency fluctuations) and has a combined capital and surplus and undivided profits of not less than $500,000,000;

(iv) any repurchase agreement entered into with any Lender (or other commercial banking institution of the stature referred to in clause (iii) above) which (A) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (i) through (iii) above and (B) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such Lender (or other commercial banking institution) thereunder;

(v) investments in short-term asset management accounts offered by any Lender (or other commercial banking institution of the stature referred to in clause (iii) above) for the purpose of investing in loans to any corporation (other than the Borrower or an Affiliate of the Borrower), state or municipality, in each case organized under the laws of any state of the United States or of the District of Columbia;

(vi) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least “A” by S&P or Moody’s; and

(vii) shares of any money market fund that (A) has substantially all of its assets invested continuously in the types of investments referred to in clauses (i) through (vi) above, (B) has net assets in excess of $500,000,000 and (C) is rated at least “A-1” by S&P or “P-1” by Moody’s.

 

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“ Casualty ” means any casualty, damage, destruction or other similar loss with respect to real or personal property or improvements.

“ Casualty Insurance Policy ” means any insurance policy maintained by any Group Company covering losses with respect to Casualties.

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

“ Change of Control ” means the occurrence of any of the following events:

(i) prior to a Qualifying IPO, (A) Holdings shall cease to beneficially own, directly or indirectly, 100% of the Equity Interests in the Borrower on a fully-diluted basis assuming the conversion and exercise of all outstanding Equity Equivalents (whether or not such securities are then currently convertible or exercisable), (B) the Sponsor Group shall beneficially own, directly or indirectly, less than a majority of the Equity Interests of Holdings entitled to vote for the election of directors thereof or (C) the failure at any time of the Sponsor Group to control, whether through the ownership of voting securities or by contract, a majority of the seats on the board of directors (or persons performing similar functions) of Holdings and the Borrower; or

(ii) after a Qualifying IPO, (A) Holdings shall cease to beneficially own, directly or indirectly, 100% of the Equity Interests in the Borrower on a fully-diluted basis assuming the conversion and exercise of all outstanding Equity Equivalents (whether or not such securities are then currently convertible or exercisable) or (B)(x) any “person” or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) (other than the Sponsor Group) has become the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have “beneficial ownership” of all securities that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), by way of merger, consolidation or otherwise, of 35% or more of the Equity Interests of Holdings on a fully-diluted basis as set forth above, and (y) such Person or group is or becomes, directly or indirectly, the beneficial owner of a greater percentage of the Voting Securities of Holdings, calculated on a fully-diluted basis as set forth above, than the percentage of the voting power of the Voting Securities of Holdings owned by the Sponsor Group; or

(iii) after a Qualifying IPO, during any period of twelve consecutive calendar months, individuals who at the beginning of such period constituted the board of directors (or persons performing similar functions) of Holdings or the Borrower, as the case may be, together with any new members of such board of directors (A) whose

 

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elections by such board of directors or whose nominations for election by the stockholders of Holdings or the Borrower, as applicable, were approved by a vote of a majority of the members of such board of directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved (excluding, in the case of this clause (A) , any individual whose initial nomination for, or assumption of office as, a member of such board of directors occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors) or (B) nominated by the Sponsor Group, cease for any reason to constitute a majority of the directors of Holdings or the Borrower, as applicable, still in office;

(iv) For purposes of this definition, a “beneficial owner” of a security includes any person who, directly or indirectly, whether by contract or otherwise, has the power to vote or direct the voting of, such security or the power to dispose, or direct the disposition of, such security, and “beneficially owned” shall have a correlative meaning.

(v) a “change of control” (as defined in the Senior Notes Indenture or the First Lien Credit Agreement) occurs.

“ Class A LLC Units ” shall mean the Class A limited liability company interests of MidOcean SBR Holdings, LLC, a Delaware limited liability company.

“ Closing Date ” means the date on or after the Effective Date when the initial Borrowing occurs in accordance with Section 4.01 .

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder.

“ Collateral ” means all of the property which is subject or is purported to be subject to the Liens granted by the Collateral Documents.

“ Collateral Agent ” means Natixis, New York Branch, in its capacity as collateral agent for the Finance Parties under the Collateral Documents, and its successor or successors in such capacity.

“ Collateral Documents ” means, collectively, the Intercreditor Agreement, the Security Agreement, the Pledge Agreement, any Additional Collateral Documents, any additional pledges, security agreements, patent, trademark or copyright filings or mortgages or deeds of trust required to be delivered pursuant to the Loan Documents and any instruments of assignment, control agreements, lockbox letters or other similar instruments or agreements executed pursuant to the foregoing.

“ Commitment ” means, with respect to any Lender, the commitment of such Lender to make a Loan on the Closing Date in a principal amount equal to such Lender’s Commitment Percentage of the Committed Amount.

 

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“ Commitment Percentage ” means, for each Lender, the percentage (carried out to the ninth decimal place) of the aggregate Commitments represented by such Lender’s Commitment at such time and identified as its Commitment Percentage on Schedule 2.01 , as such percentage may be modified in connection with any Assignment and Assumption made in accordance with the provisions of Section 10.06(b) .

“ Committed Amount ” means $25,500,000.

“ Competitor ” means a Person whose primary business competes directly with the Borrower and its Subsidiaries.

“ Compliance Certificate ” means a certificate substantially in the form of Exhibit D hereto.

“ Condemnation ” means any taking by a Governmental Authority of property or assets, or any part thereof or interest therein, for public or quasi-public use under the power of eminent domain, by reason of any public improvement or condemnation.

“ Condemnation Award ” means all proceeds of any Condemnation or transfer in lieu thereof.

“ Consolidated Adjusted Working Capital ” means at any date the excess of (i) Consolidated Current Assets (excluding (i) deferred tax assets and (ii) cash and Cash Equivalents classified as such in accordance with GAAP) over (ii) Consolidated Current Liabilities (excluding (i) deferred tax liabilities and (ii) the current portion of any Consolidated Funded Indebtedness).

“ Consolidated Capital Expenditures ” means for any period the aggregate amount of all expenditures (whether paid in cash, through the incurrence of Indebtedness or Attributable Debt or other consideration or accrued as a liability) that would, in accordance with GAAP, be included as additions to property, plant and equipment and other capital expenditures of Holdings and its Consolidated Subsidiaries for such period, excluding interest capitalized during construction, as the same are or would be set forth in a consolidated statement of cash flows of Holdings and its Consolidated Subsidiaries for such period, but excluding (to the extent that they would otherwise be included):

(i) any such expenditures made for the replacement or restoration of assets to the extent paid for by any Casualty Insurance Policy or Condemnation Award with respect to the asset or assets being replaced or restored to the extent such expenditures are permitted under the Loan Documents and the First Lien Finance Documents;

(ii) any such expenditures made with proceeds of an Equity Issuance of Qualified Capital Stock of Holdings after the Closing Date to the extent not required to prepay the First Lien Loans, the Loans or used for any other purpose;

(iii) any such expenditures to the extent Holdings or any of its Consolidated Subsidiaries has received reimbursement in cash from a third party other

 

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than Holdings or one or more of its Consolidated Subsidiaries and for which none of Holdings or any of its Consolidated Subsidiary has provided or is required to provide or incur, directly or indirectly, any consideration or obligation to such third party or any other Person;

(iv) the book value of any asset owned by Holdings or a Consolidated Subsidiary prior to or during such period which is included as an addition to property, plant and equipment or other capital expenditures of Holdings and its Consolidated Subsidiaries for such period as a result of one or more of them reusing or beginning to reuse such asset during such period without a corresponding expenditure actually having been made in such period except that, for purposes of this clause (iv), (A) any expenditure necessary in order to permit such asset to be reused shall be included as Consolidated Capital Expenditures during the period that such expenditure is actually made and (B) such book value shall have been included in Consolidated Capital Expenditures when such asset was originally acquired;

(v) the purchase price of equipment purchased during such period to the extent the consideration therefor consists of any combination of (A) used or surplus equipment traded in at the time of such purchase and (B) the proceeds of a concurrent sale of used or surplus equipment, in each case in the ordinary course of business;

(vi) any expenditures made with the proceeds of a Debt Issuance of Holdings or any of its Subsidiaries (other than the Loans, First Lien Revolving Loans and Indebtedness incurred pursuant to Section 7.01(xx) after the Closing Date) to the extent not required to prepay the Loans or used for any other purpose; and

(vii) the purchase price of assets (other than cash and Cash Equivalents) that are purchased substantially contemporaneously with the trade-in of existing assets (other than cash and Cash Equivalents) to the extent that the gross amount of such purchase price is reduced by the credit granted by the seller of such assets (other than cash and Cash Equivalents) for the assets (other than cash and Cash Equivalents) being traded in at such time.

“ Consolidated Cash Taxes ” means for any period the aggregate amount of all taxes of Holdings and its Consolidated Subsidiaries for such period to the extent the same are paid in cash by Holdings or any Consolidated Subsidiary of Holdings during such period.

“ Consolidated Current Assets ” means at any date the consolidated current assets of Holdings and its Consolidated Subsidiaries determined as of such date.

“ Consolidated Current Liabilities ” means at any date, without duplication, (i) the consolidated current liabilities of Holdings and its Consolidated Subsidiaries plus (ii) all Guaranty Obligations of Holdings or any Consolidated Subsidiary of Holdings in respect of the current liabilities of any Person (other than Holdings or a Consolidated Subsidiary of Holdings), determined as of such date.

“ Consolidated EBITDA ” means for any period the sum of:

(i) Consolidated Net Income for such period (excluding therefrom (x) any extraordinary or non-recurring items of gain or loss and (y) any gain or loss from discontinued operations not to exceed $2,500,000 during any period of four consecutive fiscal quarters); plus

 

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(ii) to the extent not otherwise included in the determination of Consolidated Net Income for such period, all proceeds of business interruption insurance policies, if any, received during such period; plus

(iii) without duplication, those amounts which, in the determination of Consolidated Net Income for such period, have been deducted (and not previously added-back) for (A) Consolidated Interest Expense, (B) lease expense in respect of Sale/Leaseback Transactions accounted for as Operating Leases under GAAP, (C) provisions for Federal, state, local and foreign income tax, value added tax, franchise taxes and state single business unitary and similar taxes imposed in lieu of income tax, (D) depreciation, amortization (including, without limitation, amortization of goodwill and other intangible assets), impairment of goodwill and other non-cash charges or expenses (excluding any such non-cash charge or expense to the extent that it represents amortization of a prepaid cash expense that was paid in a prior period), (E) unrealized losses on financial derivatives recognized in accordance with SFAS No. 133, (F) non-cash compensation expense, or other non-cash expenses or charges, arising from the granting of stock options, the granting of stock appreciation rights and similar arrangements (including any strike price reductions for dividends paid, repricing, amendment, modification, substitution or change of any such stock option, stock appreciation rights or similar arrangements), (G) non-cash purchase accounting adjustments in accordance with GAAP, (H) Management Fees, (I) any financial advisory fees, accounting fees, legal fees and other similar advisory and consulting fees and other out-of-pocket costs and expenses of the Borrower incurred as a result of the Transaction (whether or not actually consummated) and deducted from net income during the Borrower’s fiscal years ending December 28, 2008 and December 27, 2009, (J) [intentionally omitted], (K) the amount of (x) any expense to the extent that a corresponding amount is received in cash by a Group Company from a Person other than Holdings or any Subsidiary of Holdings under any agreement providing for reimbursement of such expense or (y) any expenses with respect to liability or casualty events, business interruption or product recalls, to the extent covered by insurance (it being understood that if the amount received in cash under any such agreement in any period exceeds the amount of expense paid during such period such excess amounts received may be carried forward and applied against expenses in future periods), (L) any financial advisory fees, accounting fees, legal fees and other similar advisory and consulting fees and related out-of-pocket expenses of the Borrower and its Consolidated Subsidiaries incurred as a result of Permitted Acquisitions, Permitted Joint Ventures, Investments permitted by Section 7.06 , or a Qualifying IPO not to exceed an aggregate of $1,000,000, (M) non-recurring cash charges resulting from severance, consulting, advisory and other similar transition expenses, stay or sign on bonuses, restructuring, consolidation, transition integration and other adjustments made as a result of Permitted Acquisitions, and other Investments permitted under Section 7.06 ; provided that the amounts referred to in this clause (M)  reported in any fiscal year ending after December 31, 2006

 

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shall not, in the aggregate, exceed 2,000,000 during any fiscal year and $4,000,000 in the aggregate since the First Lien First Amendment Effective Date, (N) any write-off or amortization made in such period of deferred financing costs or any write-down of assets or asset value, (O) [intentionally omitted], (P) [intentionally omitted], (Q) Consolidated Pre-Opening Expenses deducted in calculating Consolidated Net Income for such period not to exceed an aggregate of $1,000,000 per year beginning with fiscal year 2009, (R) [intentionally omitted], (S) gains and losses resulting from currency fluctuations, (T) Store Closing Costs not to exceed an aggregate of $3,000,000 per year beginning with fiscal year 2009, (U) restructuring-related expenses (including cash charges in respect of strategic market reviews, management bonuses or early retirement of Indebtedness) not to exceed $1,500,000 in the aggregate, (V) the cumulative effect of changes in accounting principles and (W) expenses related to consolidation, severance or the discontinuance of any portion of operations, employees and/or management not to exceed an aggregate amount during any four consecutive fiscal quarters greater than (1) as of the fiscal quarter ending on March 29, 2009, $3,500,000, (2) as of the fiscal quarter ending on June 28, 2009, $3,000,000, (3) as of the fiscal quarter ending on September 27, 2009, $2,750,000, (4) as of the fiscal quarter ending on December 27, 2009, $2,500,000 and (5) as of any fiscal quarter ending thereafter, $1,500,000; plus

(iv) for purposes of curing any violation of the covenant set forth in Section 7.16 , the Net Cash Proceeds of any Equity Issuance of Qualified Capital Stock to the Investor Group and/or to one or more other Persons who are or become holders of Equity Interests in Holdings, solely to the extent that such Net Cash Proceeds are actually received by the Borrower (including through capital contribution of such Net Cash Proceeds by Holdings to the Borrower) no later than 10 Business Days after the delivery of a Notice of Intent to Cure; provided that Net Cash Proceeds of Equity Issuances of Qualified Capital Stock may be included pursuant to the provisions of this clause (iv)  in Consolidated EBITDA of no more than two fiscal quarters in any period of four consecutive fiscal quarters; and provided further that the aggregate amount of Net Cash Proceeds of Equity Issuances of Qualified Capital Stock which may be included pursuant to this clause (iv)  in Consolidated EBITDA may not exceed, in any case, (A) the aggregate amount necessary to cure an Event of Default arising in respect of the covenant set forth in Section 7.16 for such applicable period for which such Notice of Intent to Cure is delivered or (B) an amount greater than 10% of the Consolidated EBITDA of Holdings as of the last day of the most recent period of four consecutive fiscal quarters of Holdings for which financial statements are required to be delivered pursuant to Section 6.01(a) or (b) ; provided further ; that the Borrower shall prepay the Loans with 100% of all Net Cash Proceeds of Equity Issuances of Qualified Capital Stock included pursuant to this clause (iv)  in the manner and in accordance with the provisions applicable to voluntary prepayments of Loans with Net Cash Proceeds; provided , however , that the aggregate amount of Net Cash Proceeds of Equity Issuances of Qualified Capital Stock which are included pursuant to this clause (iv)  in Consolidated EBITDA shall not increase any basket or other amount hereunder and shall not be used for any other purpose or action hereunder that is specifically permitted to be taken with the use of proceeds from Equity Issuances; it being understood that this clause (iv)  may not be relied on for purposes of calculating any financial ratios other than for purposes of determining compliance with the financial covenant set forth in Section 7.16 ; minus

 

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(v) without duplication, any amount which, in the determination of Consolidated Net Income for such period, has been added for (A) interest income, (B) unrealized gains on financial derivatives recognized in accordance with SFAS No. 133 and (C) any non-cash income or non-cash gains, all as determined in accordance with GAAP; minus

(vi) the aggregate amount of cash payments made during such period in respect of any non-cash accrual, reserve or other non-cash charge or expense accounted for in a prior period which were added to Consolidated Net Income to determine Consolidated EBITDA for such prior period and which do not otherwise reduce Consolidated Net Income for the current period.

To the extent the receipt of any Net Cash Proceeds of any Equity Issuance of Qualified Capital Stock are an effective addition to Consolidated EBITDA as contemplated by, and in accordance with, the provisions of clause (iv)  above and, as a result thereof, any Default or Event of Default of the covenant set forth in Section 7.16 shall have been cured for any applicable period, such cure shall be deemed to be effective as of the last day of such applicable period. For purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a “ Test Period ”) pursuant to any determination of the Total Leverage Ratio for all purposes or any determination of Consolidated EBITDA for purposes of Section 7.16 , if during such Test Period (or in the case of pro-forma calculations, during the period from the last day of such Test Period to and including the date as of which such calculation is made) any Group Company shall have made one or a series of related Asset Dispositions involving assets having an aggregate fair market value of $5,000,000 or more or a Permitted Acquisition, Permitted Joint Venture, or Investment permitted by Section 7.06 , Consolidated EBITDA for such Test Period shall be calculated after giving effect thereto on a Pro-Forma Basis, giving effect to projected or anticipated cost savings or synergies and with respect to Asset Dispositions including cost savings from head count reduction, closure of facilities and similar restructuring charges permitted or required by Regulations S-K or S-X under the Securities Act or otherwise agreed to by the Administrative Agent in its reasonable discretion.

“ Consolidated Funded Indebtedness ” means at any date the Funded Indebtedness of Holdings and its Consolidated Subsidiaries as of such date, determined on a consolidated basis in accordance with GAAP.

“ Consolidated Interest Expense ” means, for any period, the total interest expense of Holdings and its Consolidated Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, interest capitalized during construction, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments under Capital Leases and the implied interest component of Synthetic Lease Obligations (regardless of whether accounted for as interest expense under GAAP), all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptances and net costs (included in interest expense) in respect of Swap Obligations constituting interest rate swaps, collars, caps or other arrangements requiring payments contingent upon interest rates of Holdings and its Consolidated Subsidiaries), in each case determined on a consolidated basis for such period; provided that any interest on Indebtedness of another Person that is guaranteed by

 

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Holdings or any of its Consolidated Subsidiaries or secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien on, or payable out of the proceeds of the sale of or production from, assets of Holdings or any of its Consolidated Subsidiaries (whether or not such guarantee or Lien is called upon) shall be included.

“ Consolidated Net Income ” means, for any period, the net income (or net loss) after taxes and before dividends of Holdings and its Consolidated Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from the calculation of Consolidated Net Income for any period (i) the income (or loss) of any Person in which any other Person (other than Holdings or any of its Wholly-Owned Consolidated Subsidiaries) has an ownership interest, except to the extent that any such income is actually received in cash by Holdings or such Wholly-Owned Consolidated Subsidiary in the form of Restricted Payments during such period, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Consolidated Subsidiary of Holdings or is merged with or into or consolidated with Holdings or any of its Consolidated Subsidiaries or that Person’s assets are acquired by Holdings or any of its Consolidated Subsidiaries, except as provided in the definitions of “Consolidated EBITDA” and “Pro-Forma Basis” herein and (iii) the income of any Subsidiary of Holdings (other than a Loan Party) to the extent that the declaration or payment of Restricted Payments 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.

“ Consolidated Scheduled Debt Payments ” means, for any period, the sum of all regularly scheduled payments of principal on the Loans, the First Lien Loans and all other Consolidated Funded Indebtedness of Holdings and its Consolidated Subsidiaries for such period (including, without limitation, the principal component of Capital Lease Obligations, Purchase Money Indebtedness and Synthetic Lease Obligations (regardless of whether accounted for as indebtedness under GAAP) paid or payable during such period), but excluding payments due on First Lien Revolving Loans and First Lien Swing Line Loans during such period; provided that Consolidated Scheduled Debt Payments for any period shall not include voluntary prepayments of Consolidated Funded Indebtedness, mandatory prepayments of the Loans pursuant to Section 2.09(c) , mandatory prepayments of First Lien Term B Loans pursuant to Section 2.09(c) of the First Lien Credit Agreement (as in effect on the date hereof) or other mandatory prepayments (other than by virtue of scheduled amortization) of Consolidated Funded Indebtedness (but Consolidated Scheduled Debt Payments for a period shall be adjusted to reflect the effect on scheduled payments of principal for such period of the application of any prepayments of Consolidated Funded Indebtedness during or preceding such period).

“ Consolidated Subsidiary ” means with respect to any Person at any date any Subsidiary (for avoidance of doubt, other than an Unrestricted Subsidiary) of such Person or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date in accordance with GAAP.

“ Contractual Obligation ” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

 

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“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “ Controlling ” and “ Controlled ” have meanings correlative thereto.

“ Credit Exposure ” means, as applied to each Lender and with respect to its Loans:

(i) at any time prior to the termination of the Commitments of the Lenders, the sum of the Commitment Percentage of such Lender multiplied by the Committed Amount; and

(ii) at any time after the termination of the Commitments of the Lenders the principal balance of the outstanding Loans of such Lender.

For purposes of the foregoing, (i) the interest of any Lender holding a Loan in which any other Lender has a Participation Interest pursuant to Section 10.06(d) shall be calculated net of all such Participation Interests under Section 10.06(d) of other Lenders and (ii) the Participation Interest of any Lender pursuant to Section 10.06(d) in a Loan held by any other Lender shall be counted as if such Lender holding a Participation Interest under Section 10.06(d) held a proportionate part of the related Loan directly.

“ Credit Extension ” means a Borrowing.

“ Debt Equivalents ” of any Person means (i) any Equity Interest of such Person which by its terms (or by the terms of any security for which it is convertible or for which it is exchangeable or exercisable), or upon the happening of any event or otherwise (including an event which would constitute a Change of Control), (A) matures or is mandatorily redeemable or subject to any mandatory repurchase requirement, pursuant to a sinking fund or otherwise or (B) is convertible into or exchangeable for Indebtedness or Debt Equivalents, in each case in whole or in part, on or prior to the 90 day anniversary of the Maturity Date and (ii) if such Person is a Subsidiary of the Borrower but not a Subsidiary Guarantor, any Preferred Stock of such Person; provided , however , that any Equity Interests that would not constitute Debt Equivalents but for provisions thereof giving holders thereof (or the holders of any security into or for which such Equity Interests are convertible, exchangeable or exercisable) the right to require the issuer thereof to redeem such Equity Interests upon the occurrence of a Change of Control or an Asset Disposition occurring prior to the 180th day after the Maturity Date shall not constitute Debt Equivalents if such Equity Interests provide that the issuer thereof will not redeem any such Equity Interests pursuant to such provisions prior to the payment in full of the Second Lien Credit Obligations (other than contingent indemnity obligations).

“ Debt Issuance ” means the issuance by any Group Company of any Indebtedness.

“ Default ” means any condition or event that constitutes an Event of Default or that, with the giving of notice, the passage of applicable grace periods, or both, would be an Event of Default.

“ Default Rate ” means when used with respect to Second Lien Credit Obligations an interest rate equal to (A) the Interest Rate plus (B) 2.00% per annum.

 

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“ Defaulting Lender ” means any Lender that (i) has failed to make a Loan within one Business Day of the date required to be funded by it hereunder, (ii) has otherwise failed to pay to the Administrative Agent or any Lender any other amount required to be paid by it hereunder or any other Loan Document within one Business Day of the date when due, unless the subject of a good faith dispute or (iii) has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding.

“ Deposit Account ” has the meaning specified in the Security Agreement.

“ Discharge of First Lien Finance Obligations ” means “Discharge of Senior Finance Obligations” as defined in the First Lien Credit Agreement.

“ Discharge of Second Lien Credit Obligations ” means (i) payment in full in cash of the principal of and interest (including interest accruing on or after the commencement of any Insolvency or Liquidation Proceeding, whether or not a claim for such interest is, or would be, allowed in such Insolvency or Liquidation Proceeding) and premium, if any, on all Indebtedness outstanding under the Loan Documents and termination of all commitments to lend or otherwise extend credit under the Loan Documents, and (ii) payment in full in cash of all other Second Lien Credit Obligations that are due and payable or otherwise accrued and owing at or prior to the time such principal and interest are paid (including legal fees and other expenses, costs or charges accruing on or after the commencement of any Insolvency or Liquidation Proceeding, whether or not a claim for such fees, expenses, costs or charges is, or would be, allowed in such Insolvency or Liquidation Proceeding).

“ Disqualified Stock ” means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any event: (1) matures or is mandatorily redeemable (other than redeemable only for Capital Stock of such Person which is not itself Disqualified Stock) pursuant to a sinking fund obligation or otherwise; (2) is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Stock; or (3) is mandatorily redeemable or must be purchased upon the occurrence of certain events or otherwise in whole or in part; in each case on or prior to the Maturity Date; provided, however, that any Equity Interests that would not constitute Disqualified Stock but for provisions thereof giving holders thereof (or the holders of any security into or for which such Equity Interests is con-vertible, exchangeable or exercisable) the right to require the issuer thereof to redeem such Equity Interests upon the occurrence of a change in control or an asset sale occurring prior to the 180 ^th day after the Maturity Date shall not constitute Disqualified Stock if such Equity Interests provide that the issuer thereof will not redeem any such Equity Interests pursuant to such provisions prior to the repayment in full of the Second Lien Credit Obligations (other than contingent indemnity obligations).

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

“ Domestic Subsidiary ” means with respect to any Person each Subsidiary of such Person that is organized under the laws of the United States, the District of Columbia or any State, and “ Domestic Subsidiaries ” means any two or more of them.

 

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“ Effective Date ” means the date this Agreement becomes effective in accordance with Section 10.10 .

“ Eligible Assignee ” means (i) a Lender, (ii) an Affiliate of a Lender, (iii) an Approved Fund and (iv) any other Person (other than a natural person and other than a Competitor) approved by (A) the Administrative Agent, and (B) unless an Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include Holdings, the Borrower or any of Holdings’ or the Borrower’s Subsidiaries or Competitors.

“ Employee Benefit Arrangements ” means in any jurisdiction the benefit schemes or arrangements in respect of any employees or past employees operated by any Group Company or in which any Group Company participates and which provide benefits on retirement, ill-health, injury, death or voluntary withdrawal from or termination of employment, including termination indemnity payments and life assurance and post-retirement medical benefits, other than Plans and Foreign Pension Plans.

“ Environmental Laws ” means any and all Federal, state, local, and foreign statutes, Laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

“ Environmental Liability ” means any liability, contingent or otherwise (including any liability for damages, costs of remediation, fines, penalties or indemnities), of any Group Company directly or indirectly resulting from or based on (i) violation of any Environmental Law, (ii) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Material, (iii) exposure to any Hazardous Material, (iv) the release or threatened release of any Hazardous Material into the environment or (v) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“ Equity Equivalents ” means with respect to any Person any rights, warrants, options, convertible securities, exchangeable securities, indebtedness or other rights, in each case exercisable for or convertible or exchangeable into, directly or indirectly, Equity Interests of such Person or securities exercisable for or convertible or exchangeable into Equity Interests of such Person, whether at the time of issuance or upon the passage of time or the occurrence of some future event.

“ Equity Interests ” means all shares of capital stock, partnership interests (whether general or limited), limited liability company membership interests, beneficial interests in a trust and any other interest or participation that confers on a Person the right to receive a share of profits or losses, or distributions of assets, of an issuing Person, but excluding any debt securities convertible into such Equity Interests.

 

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“ Equity Issuance ” means (i) any sale or issuance by any Group Company to any Person other than Holdings or a Subsidiary of Holdings of any Equity Interests or any Equity Equivalents (other than any such Equity Equivalents that constitute Indebtedness) and (ii) the receipt by any Group Company of any cash capital contributions, whether or not paid in connection with any issuance of Equity Interests of any Group Company, from any Person other than Holdings or a Subsidiary of Holdings.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulation promulgated thereunder.

“ ERISA Affiliate ” means each entity that is a member of a “controlled group of corporations,” under “common control” or an “affiliated service group” with a Group Company within the meaning of Section 414(b), (c) or (m) of the Code, or required to be aggregated with a Group Company under Section 414(o) of the Code or is under “common control” with a Group Company, within the meaning of Section 4001(a)(14) of ERISA.

“ ERISA Event ” means:

(i) a reportable event as defined in Section 4043 of ERISA and the regulations issued under such Section with respect to a Plan, excluding, however, such events as to which the PBGC by regulation has waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event;

(ii) the requirements of Section 4043(b) of ERISA apply with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of any Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days;

(iii) the failure to meet the minimum funding standard of Section 412 of the Code with respect to any Plan (whether or not waived in accordance with Section 412(d) of the Code), the application for a minimum funding waiver under Section 303 of ERISA (or for years to which the Pension Protection Act of 2006 (the “ PPA ”) applies, Section 302(c) of ERISA) with respect to any Plan, the failure to make by its due date a required installment under Section 412(m) of the Code (or for years to which the PPA applies, Section 430(j) of the Code) with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan;

(iv) (A) the incurrence of any material liability by a Group Company pursuant to Title I of ERISA or to the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), or the occurrence or existence of any event, transaction or condition that could reasonably be expected to result in the incurrence of any such material liability by a Group Company pursuant to Title I of ERISA or to such penalty or excise tax provisions of the Code; or (B) the incurrence of any material liability by a Group Company or an ERISA Affiliate pursuant to Title IV of ERISA or the occurrence or existence of any event, transaction or condition that could reasonably be expected to result in the incurrence of any such material liability or imposition of any lien on any of the rights, properties or assets of a Group Company or any ERISA Affiliate pursuant to Title IV of ERISA or to Section 401(a)(29) or 412 of the Code (or for years to which the PPA applies, Section 430(k) of the Code);

 

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(v) the provision by the administrator of any Plan of a notice pursuant to Section 4041(a)(2) of ERISA (or the reasonable expectation of such provision of notice) of intent to terminate such Plan in a distress termination described in Section 4041(c) of ERISA, the institution by the PBGC of proceedings to terminate any Plan or the occurrence of any event or condition which could reasonably be expected to constitute grounds under ERISA for the termination of a Plan by the PBGC, or the appointment of a trustee by the PBGC to administer any Plan;

(vi) the withdrawal of a Group Company or ERISA Affiliate in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential material liability therefor, or the receipt by a Group Company or ERISA Affiliate 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;

(vii) the imposition of material liability (or the reasonable expectation thereof) on a Group Company or ERISA Affiliate pursuant to Section 4062, 4063, 4064 or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA;

(viii) the assertion of a material claim (other than routine claims for benefits) against any Plan other than a Multiemployer Plan or the assets thereof, or against a Group Company or, with respect to a Plan subject to Title IV of ERISA, an ERISA Affiliate, in connection with any Plan;

(ix) the receipt from the United States Internal Revenue Service of notice of the failure of any Plan (or any Employee Benefit Arrangement intended to be qualified under Section 401(a) of the Code) to qualify under Section 401(a) of the Code, or the failure of any trust forming part of any Plan to qualify for exemption from taxation under Section 501(a) of the Code and, with respect to Multiemployer Plans, notice thereof to any Group Company; and

(x) the establishment or amendment by a Group Company of any Welfare Plan that provides post-employment welfare benefits in a manner that would reasonably be expected to result in a Material Adverse Effect.

“ Event of Default ” has the meaning specified in Section 8.01 .

“ Excess Cash Flow ” means for any period an amount equal to:

(i) Consolidated EBITDA for such period determined without regard to any amount included therein for such period pursuant to clause (iv ) of the definition of “Consolidated EBITDA”; plus

 

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(ii) all cash extraordinary or non-recurring gains, if any, during such period (whether or not accrued in such period) (other than in respect of Asset Dispositions); plus

(iii) (x) the decrease, if any, in Consolidated Adjusted Working Capital less (y) the decrease, if any, in the principal amount of First Lien Revolving Loans and First Lien Swing Line Loans, in each case from the first day to the last day of such period; minus

(iv) the amount, if any, which, in the determination of Consolidated Net Income for such period, has been included in respect of income or gain from Asset Dispositions of Holdings and its Consolidated Subsidiaries; minus

(v) the aggregate amount (without duplication and in each case except to the extent paid, directly or indirectly, with proceeds of any Equity Issuance, Debt Issuance (other than First Lien Revolving Loans) or with the proceeds of any Asset Disposition not included in the determination of Consolidated Net Income for the applicable period or with any amount referred to in clause (iii)(K ) of the definition of “Consolidated EBITDA” by any Group Company) of (A) the sum of (x) cash payments during such period in respect of Consolidated Capital Expenditures and (y) the aggregate amounts of all cash payments in respect of such Consolidated Capital Expenditures made during the first 90 days of such next succeeding period (it being understood and agreed that any cash payments in respect of Consolidated Capital Expenditures deducted from Excess Cash Flow pursuant to this clause (v)(A)(y) shall not thereafter be deducted pursuant to clause (v)(A)(x) above in the determination of Excess Cash Flow for the period during which such payments were actually paid), (B) cash payments during such period in respect of (t) Investments permitted under Section 7.06(a)(xxii) ; (u) Investments permitted under Section 7.06(a)(xii)(y) ; (v) Investments permitted under Section 7.06(a)(xviii) ; (w) Investments permitted under Section 7.06(a)(xxv) ; (x) Permitted Acquisitions allowed under Section 7.06(a)(xiv) ; (y) Permitted Joint Ventures allowed under Section 7.06(a)(xv) and (z) Investments in Foreign Subsidiaries permitted hereunder and Investments permitted under Section 7.06(a)(xi) , (C) prepayments of Indebtedness (other than intercompany Indebtedness, First Lien Term B Loans, First Lien Revolving Loans, First Lien Swing Line Loans or Loans), provided that (x) such prepayments are otherwise permitted hereunder and (y) if such Indebtedness consists of a revolving line of credit, the commitments under such line of credit are permanently reduced by the amount of such prepayment during such period, (D) Consolidated Scheduled Debt Payments actually paid by Holdings and its Consolidated Subsidiaries during such period, (E) Consolidated Interest Expense actually paid in cash by Holdings and its Consolidated Subsidiaries during such period, (F) Consolidated Cash Taxes (exclusive of any taxes referred to in clause (viii ) below deducted in respect of the determination of Excess Cash Flow for a period prior to the period for which Excess Cash Flow is being determined) actually paid by Holdings and its Consolidated Subsidiaries during such period, (G) the aggregate amount of all Restricted Payments allowed under Section 7.07(iii) , amounts under clauses (iv)  and (v)  of Section 7.07 actually paid in cash during such period (or, in the case of clause (v) , with respect to such period, provided that any amount so deducted shall not be deducted again in a subsequent

 

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period), (H) Management Fees actually paid in cash during such period, (I) the aggregate amount of all financial advisory fees, accounting fees, legal fees and other similar advisory and consulting fees and related out-of-pocket expenses incurred as a result of the Transaction, any Qualifying IPO, any Permitted Acquisition, Permitted Joint Venture or Investment permitted by Section 7.06 and actually paid in cash by Holdings and its Consolidated Subsidiaries during such period, in each case to the extent added to Consolidated Net Income in the determination of Consolidated EBITDA for such period not to exceed an aggregate of $1,000,000, (J) [intentionally omitted], (K) earn-out obligations paid in connection with Permitted Acquisitions to the extent such obligations have not been deducted in determining Consolidated Net Income for the period Excess Cash Flow is determined, (L) all business interruption insurance proceeds, if any, (M) cash payments in respect of hedging agreements and interest rate agreements, (N) cash charges resulting from severance, stay or sign on bonuses, restructuring, consolidation, transition, consulting, advisory and other similar transition costs and expenses, integration and other adjustments made as a result of Permitted Acquisitions and other Investments made under Section 7.06 to the extent not deducted in determining Consolidated EBITDA for such period provided that the amounts referred to in this clause (N)  reported in any fiscal year ending after December 31, 2006 shall not, in the aggregate, exceed $2,000,000 during any fiscal year and $4,000,000 in the aggregate since the First Lien First Amendment Closing Date; (O) [intentionally omitted], (P) payments received pursuant to the Acquisition Agreement; (Q) Consolidated Pre-Opening Expenses deducted in calculating Consolidated Net Income for such period not to exceed an aggregate of $1,000,000 per year beginning with fiscal year 2009, (R) [intentionally omitted], (S) gains and losses resulting from currency fluctuations, (T) Store Closing Costs not to exceed an aggregate of $3,000,000 per year beginning with fiscal year 2009, (U) restructuring-related expenses (including cash charges arising out of strategic market reviews, management bonuses, stay or sign on bonuses or consolidation) not to exceed $1,500,000 in the aggregate, (V) the cumulative effect of changes in accounting principles and (W) expenses related to severance or the discontinuance of any portion of operations, employees and/or management not to exceed an aggregate amount during any four consecutive fiscal quarters greater than (1) as of the fiscal quarter ending on March 29, 2009, $3,500,000, (2) as of the fiscal quarter ending on June 28, 2009, $3,000,000, (3) as of the fiscal quarter ending on September 27, 2009, $2,750,000, (4) as of the fiscal quarter ending on December 27, 2009, $2,500,000 and (5) as of any fiscal quarter ending thereafter, $1,500,000; minus

(vi) all cash extraordinary or non-recurring losses and losses from discontinued operations, if any, during such period (whether or not accrued in such period); minus

(vii) (x) the increase, if any, in Consolidated Adjusted Working Capital less (y) the increase, if any, in the principal amount of First Lien Revolving Loans and First Lien Swing Line Loans, in each case from the first day to the last day of such period; minus

(viii) an amount equal to the income and withholding taxes (as estimated in good faith by a senior financial or senior accounting officer of the Borrower giving

 

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effect to the overall tax position of Holdings and its Subsidiaries) payable in the period following the period for which Excess Cash Flow is determined in respect of that amount of Excess Cash Flow as is attributable to the actual repatriation to the Borrower of undistributed earnings of those Subsidiaries of the Borrower that are “controlled foreign corporations” under Section 956 of the Code to enable it to prepay the First Lien Loans, the Loans and/or Cash Collateralize First Lien L/C Obligations as required under Section 2.09(c)(ii) in respect of Excess Cash Flow for such period; minus amounts paid to any Seller under the Acquisition Agreement as described on Schedule A of the First Lien Credit Agreement.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“ Excluded Taxes ” means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (i) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes) by a jurisdiction (or any political subdivision thereof) as a result of such recipient being organized or having its principal office in such jurisdiction or, in the case of any Lender, in having its Lending Office in such jurisdiction, (ii) any branch profits taxes under Section 884 of the Code or similar taxes imposed by a jurisdiction in which the Lender is located and (iii) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 10.13 or a participant under Section 2.13 ), any U.S. federal withholding tax (A) that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 3.01 or (B) is attributable to such Foreign Lender’s failure to comply with Section 3.01(e) .

“ Exempt Deposit Accounts ” means (i) deposit accounts the balance of which consists exclusively of (A) withheld income taxes and federal, state or local employment taxes in such amounts as are required in the reasonable judgment of the Borrower to be paid to the Internal Revenue Service or state or local government agencies within the following two months with respect to employees of any of the Loan Parties and (B) amounts required to be paid over to an employee benefit plan pursuant to DOL Reg. Sec. 2510.3-102 on behalf of or for the benefit of employees of one or more Loan Parties, (ii) all segregated Deposit Accounts constituting (and the balance of which consists solely of funds set aside in connection with) taxes accounts, payroll accounts, fiduciary benefits and trust accounts, (iii) all local depository accounts and (iv) deposit accounts the aggregate balance of which is less than $250,000.

“ Existing Indebtedness ” has the meaning specified in Section 7.01(i) .

“ Existing Notes ” means the Borrower’s existing 11% Senior Notes due September 15, 2009.

“ Failed Loan ” has the meaning specified in Section 2.03(d) .

 

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“ Federal Funds Rate ” means, for any day, the rate per annum 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 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 Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent.

“ Finance Party ” means each Lender, each Agent and each Indemnitee and their respective successors and assigns, and “ Finance Parties ” means any two or more of them, collectively.

“ First Lien Administrative Agent ” means the “Administrative Agent” as defined in the First Lien Credit Agreement.

“ First Lien Amendment ” is defined in the Recitals .

“ First Lien Borrower ” means the “Borrower” as defined in the First Lien Credit Agreement.

“ First Lien Closing Date ” means the “Closing Date” as defined in the First Lien Credit Agreement.

“ First Lien Collateral Agent ” means the “Administrative Agent” as defined in the First Lien Credit Agreement.

“ First Lien Collateral Documents ” means the “Collateral Documents” as defined in the First Lien Credit Agreement.

“ First Lien Consolidated Indebtedness ” means on any date, the “Funded Indebtedness” as defined in the First Lien Credit Agreement secured by a first-priority Lien (which for the avoidance of doubt excludes all of the Second Lien Credit Obligations).

“ First Lien Credit Agreement ” means the Credit Agreement, dated as of January 31, 2007 among the Borrower, each lender from time to time party thereto, Bank of America, N.A., as administrative agent, collateral agent, swing line lender and l/c issuer, Credit Suisse, as syndication agent, and Banc of America Securities LLC and Credit Suisse Securities (USA) LLC, as joint lead arrangers and joint book managers, Natixis and Bank of Ireland, as co-documentation agents, as may be amended, restated, modified, increased or otherwise supplemented from time to time.

“ First Lien Credit Obligations ” means “Senior Credit Obligations” as defined in the First Lien Credit Agreement.

 

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“ First Lien Finance Documents ” means “Finance Documents” as defined in the First Lien Credit Agreement.

“ First Lien First Amendment Closing Date ” has the meaning set forth in the First Lien Credit Agreement.

“ First Lien First Amendment Effective Date ” has the meaning set forth in the First Lien Credit Agreement.

“ First Lien L/C Obligations ” means “L/C Obligations” as defined in the First Lien Credit Agreement.

“ First Lien Lenders ” means “Lenders” as defined in the First Lien Credit Agreement.

“ First Lien Letters of Credit ” means “Letters of Credit” as defined in the First Lien Credit Agreement.

“ First Lien Loan Documents ” means “Loan Documents” as defined in the First Lien Credit Agreement.

“ First Lien Loan Parties ” means “Loan Parties” as defined in the First Lien Credit Agreement.

“ First Lien Loans ” means “Loans” as defined in the First Lien Credit Agreement.

“ First Lien Leverage Ratio ” means on any day the ratio of (i) (A) First Lien Consolidated Indebtedness as of the last day of the fiscal quarter of Holdings ending on, or most recently preceding, such date, which amount shall be net of Unrestricted Cash to the extent there are no Revolver Outstandings (as defined in the First Lien Credit Agreement) (in each case free and clear of all Liens, other than (w) nonconsensual liens provided for by Law and permitted by Section 7.02 , (x) Liens permitted under Sections 7.02(ii) and (xxiv)  and (y) Liens permitted under Section 7.02(x) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness and (z) Liens permitted under Section 7.02(xxix) as of such date in excess of $1,000,000 that are or would be included on a consolidated balance sheet of Holdings and its Subsidiaries as of such date to (ii) Consolidated EBITDA for the four consecutive fiscal quarters of Holdings ended on, or most recently preceding, such day for which financial statements have been delivered pursuant to Sections 6.01(a) or (b) .

“ First Lien Revolving Committed Amount ” means the “Revolving Committed Amount” as defined in the First Lien Credit Agreement.

“ First Lien Revolving Loans ” means “Revolving Loans” as defined in the First Lien Credit Agreement.

“ First Lien Revolving Outstandings ” means “Revolving Outstandings” as defined in the First Lien Credit Agreement.

 

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“ First Lien Swing Line Loans ” means “Swing Line Loans” as defined in the First Lien Credit Agreement.

“ First Lien Term B Loans ” means “Term B Loans” as defined in the First Lien Credit Agreement.

“ First Lien Transaction Documents ” means “Transaction Documents” as defined in the First Lien Credit Agreement.

“ Foreign Cash Equivalents ” means:

(i) securities issued or fully guaranteed by the United Kingdom or any instrumentality thereof (as long as that the full faith and credit of the United Kingdom is pledged in support of those securities);

(ii) certificates of deposit, eurodollar or UK Sterling time deposits, overnight bank deposits and bankers’ acceptances of any foreign bank, or its branches or agencies (fully protected against currency fluctuations) that, at the time of acquisition, are rated at least “A-1” by S&P or “P-1” by Moody’s, and (ii) certificates of deposit, eurodollar time deposits, banker’s acceptances and overnight bank deposits, in each case of any non-U.S. commercial bank having capital and surplus in excess of $500,000,000 and a Thomson BankWatch Rating of at least “B”;

(iii) repurchase obligations with a term of not more than seven days with respect to securities of the types described in clause (i ) or (ii)  with a bank or trust company (including any of the Lenders) or recognized securities dealer having capital and surplus in excess of $500,000,000 in which the Borrower or one or more of its Subsidiaries shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations; and

(iv) investments, classified in accordance with GAAP as current assets, in shares of any money market fund that has all or substantially all of its assets invested continuously in the types of investments referred to in clauses (i ) through ( iii ) above which are administered by reputable financial institutions having capital of at least $500,000,000; provided , however , that the maturities of all obligations of the type specified in clauses (i ) through ( iii ) above shall not exceed the lesser of the time specified in such clauses.

“ Foreign Lender ” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is a resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

“ Foreign Pension Plan ” means any plan, fund (including, without limitation, any superannuation fund) or other similar program established or maintained outside the United States by any Group Company primarily for the benefit of employees of any Group Company residing outside the United States, which plan, fund or other similar program provides, or results

 

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in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and which plan is not subject to ERISA or the Code, not including plans, funds or other similar programs which require employee participation pursuant to applicable law.

“ Foreign Subsidiary ” means with respect to any Person any Subsidiary of such Person that is not a Domestic Subsidiary of such Person.

“ Fund ” means any Person (other than a natural person) that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course.

“ Funded Indebtedness ” means, with respect to any Person and without duplication, (i) all Indebtedness of such Person of the types referred to in clauses (i ), ( ii ), ( iii ), ( v ) and ( vii ) of the definition of “Indebtedness” in this Section 1.01 , (ii) all Indebtedness of others of the type referred to in clause (i ) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien on, or payable out of the proceeds of production from, any property or asset of such Person, whether or not the obligations secured thereby have been assumed by such Person, (iii) all Guaranty Obligations of such Person with respect to Indebtedness of others of the type referred to in clause (i ) above and (iv) all Indebtedness of the type referred to in clause (i ) above of any other Person (including any partnership in which such Person is a general partner and any unincorporated joint venture in which such Person is a joint venturer) to the extent such Person would be liable therefor under any applicable law or any agreement or instrument by virtue of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person shall not be liable therefor.

“ GAAP ” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination.

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

“ Group Company ” means any of Holdings, the Borrower and the Borrower’s Subsidiaries (regardless of whether or not such Subsidiaries are consolidated with the Borrower for purposes of GAAP), and “ Group Companies ” means all of them, collectively.

 

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“ Guaranty ” means the Guaranty, substantially in the form of Exhibit E hereto, by Holdings and the Subsidiary Guarantors in favor of the Administrative Agent, as the same may be amended, modified or supplemented from time to time.

“ Guaranty Obligation ” means, with respect to any Person, without duplication, any obligation (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guarantying, intended to guaranty, or having the economic effect of guarantying, any Indebtedness of any other Person in any manner, whether direct or indirect, and including, without limitation, any obligation, whether or not contingent, (i) to purchase any such Indebtedness or any property constituting security therefor, (ii) to advance or provide funds or other credit support for the payment or purchase of such Indebtedness or obligation or to maintain working capital, solvency or other balance sheet condition of such other Person (including, without limitation, maintenance agreements, support agreements, comfort letters, take or pay arrangements, put agreements, performance guaranties or similar agreements or arrangements) for the benefit of the holder of Indebtedness of such other Person, (iii) to lease or purchase property, securities or services primarily for the purpose of assuring the owner of such Indebtedness or (iv) to otherwise assure or hold harmless the owner of such Indebtedness against loss in respect thereof. The amount of any Guaranty Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness in respect of which such Guaranty Obligation is made.

“ Hazardous Materials ” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants or environmental contaminants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas and all other substances or wastes regulated pursuant to any Environment Law because of their hazardous or deleterious properties.

“ Holdings ” means Sbarro Holdings, LLC, a Delaware limited liability company, and its successors.

“ Indebtedness ” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

(i) all obligations of such Person for borrowed money;

(ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

(iii) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person to the extent of the value of such property (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business);

(iv) all obligations, other than intercompany items, of such Person to pay the deferred purchase price of property or services (other than trade accounts payable and accrued expenses arising in the ordinary course of business and due within six months of the incurrence thereof);

 

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(v) the Attributable Indebtedness of such Person in respect of Capital Lease Obligations, Sale/Leaseback Transactions and Synthetic Lease Obligations (regardless of whether accounted for as indebtedness under GAAP);

(vi) all obligations, contingent or otherwise, of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit, letter of guaranty, bankers’ acceptance, surety bond, performance bond or similar instrument;

(vii) all obligations of the types specified in clauses (i ) through ( vi ) above of others secured by (or for which the holder of such obligations has an existing right, contingent or otherwise, to be secured by) a Lien on, or payable out of the proceeds of production from, any property or asset of such Person, whether or not such obligation is assumed by such Person; provided that the amount of any Indebtedness of others that constitutes Indebtedness of such Person solely by reason of this clause (vii)  shall not for purposes of this Agreement exceed the greater of the book value or the fair market value of the properties or assets subject to such Lien;

(viii) all Guaranty Obligations of such Person;

(ix) all Debt Equivalents of such Person; and

(x) the Indebtedness of any other Person (including any partnership in which such Person is a general partner and any unincorporated joint venture in which such Person is a joint venturer) to the extent such Person would be liable therefor under applicable Law or any agreement or instrument by virtue of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person shall not be liable therefor;

provided that (i) Indebtedness shall not include (A) deferred compensation arrangements, (B) earn-out obligations until matured or earned and not paid and reflected on the balance sheet as a liability, (C) non-compete or consulting obligations incurred in connection with Permitted Acquisitions, (D) obligations under any Swap Agreement, (E) deemed Indebtedness pursuant to FASB 133 or 150, (F) any Existing Notes that have not been validly tendered in connection with the Tender Offer and (G) obligations owing to the Sellers under the Acquisition Agreement and (ii) the amount of any Limited Recourse Indebtedness of any Person shall be equal to the lesser of (A) the aggregate principal amount of such Limited Recourse Indebtedness for which such Person provides credit support of any kind (including any undertaking agreement or instrument that would constitute Indebtedness), is directly or indirectly liable as a guarantor or otherwise or is the lender and (B) the fair market value of any assets securing such Indebtedness or to which such Indebtedness is otherwise recourse.

“ Indemnified Taxes ” means Taxes other than Excluded Taxes.

“ Indemnitees ” has the meaning specified in Section 10.04(b) .

“ Information ” has the meaning specified in Section 10.07 .

 

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“ Insolvency or Liquidation Proceeding ” means (i) any voluntary or involuntary case or proceeding under the Bankruptcy Code or any other Bankruptcy Law with respect to any Loan Party, (ii) any other voluntary or involuntary insolvency, reorganization or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding with respect to any Loan Party or with respect to a material portion of their respective assets, (iii) any liquidation, dissolution, reorganization or winding up of any Loan Party whether voluntary or involuntary and whether or not involving insolvency or bankruptcy or (iv) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of any Loan Party.

“ Insurance Proceeds ” means all insurance proceeds (other than business interruption insurance proceeds), damages, awards, claims and rights of action with respect to any Casualty.

“ Intercompany Note ” means a promissory note contemplated by Section 7.06(a)(x) or (xi) , substantially in the form of Exhibit G hereto, and “ Intercompany Notes ” means any two or more of them.

“ Intercreditor Agreement ” means the Intercreditor Agreement, substantially in the form of Exhibit I between the Administrative Agent and the First Lien Administrative Agent, as amended, modified, replaced, restated or otherwise supplemented from time to time.

“ Interest Payment Date ” means the last Business Day of each of March, June, September and December to occur while the Loan is outstanding.

“ Investment ” in any Person means (i) the acquisition (whether for cash, property, services, assumption of Indebtedness, securities or otherwise) of assets (other than inventory, machinery, equipment, capital expenditures and other assets in the ordinary course of business), Equity Interests, Equity Equivalents, Debt Equivalents, Indebtedness or other securities of such Person, (ii) any deposit with, or advance, loan or other extension of credit to or for the benefit of such Person (other than deposits made in connection with Operating Leases or the purchase of equipment or inventory, each in the ordinary course of business) or (iii) any other capital contribution to such Person, including by way of Guaranty Obligations of such Person, any support for a letter of credit issued on behalf of such Person incurred for the benefit of such Person. For the purposes of Article VII , the outstanding amount of any Investment by any Person in another Person shall be calculated as the excess of (i) the initial amount of such Investment (including the fair market value of all property transferred by such Person as part of such Investment) over (ii) the sum of (A) all returns of principal or capital thereof received by the investing Person on or prior to such time (including returns of principal or capital in the form of cash dividends, cash distributions and cash repayments of Indebtedness) and (B) all liabilities of the investing Person constituting all or a part of the initial amount of such Investment expressly transferred prior to such time in connection with the sale or disposition of such Investment, but only to the extent the investing Person is fully released of such liabilities by such transfer.

“ Investor Group ” means the Sponsor Group and the limited partners thereof and members of management of the Borrower.

 

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“ Laws ” means, collectively, all applicable international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directives, licenses, authorizations and permits of any Governmental Authority.

“ Lender ” means each bank or other lending institution listed on Schedule 2.01 and each Eligible Assignee that becomes a Lender pursuant to Section 10.06(b) and their respective successors.

“ Lien ” means any security interest, mortgage, pledge, hypothecation, collateral assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to Real Property, and any financing lease having substantially the same economic effect as any of the foregoing). Solely for the avoidance of doubt, the filing of a UCC financing statement that is a protective lease filing in respect of an operating lease that does not constitute a security interest in the leased property or otherwise give rise to a Lien does not constitute a Lien solely on account of being filed in a public office.

“ Limited Recourse Indebtedness ” means with respect to any Person, Indebtedness to the extent: (i) such Person (A) provides no credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (B) is not directly or indirectly liable as a guarantor or otherwise or (C) does not constitute the lender; and (ii) no default with respect thereto would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Loans or the Notes) of such Person to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity.

“ Loan ” means a Loan made under Section 2.01(b) .

“ Loan Documents ” means this Agreement, the Notes, the Guaranty, the Collateral Documents and each Accession Agreement, collectively, in each case as the same may be amended, modified or supplemented from time to time, and all other related agreements and documents executed by a Loan Party in favor of, and delivered to, any Second Lien Credit Party in connection with or pursuant to any of the foregoing.

“ Loan Party ” means each of Holdings, the Borrower and each Subsidiary Guarantor, and “ Loan Parties ” means any combination of the foregoing.

“ Make-Whole Amount ” means, as determined by the Required Lenders, with respect to a Loan at any Repayment Date the excess of (A) the present value at such Repayment Date of (1) the principal amount of the Loan to be repaid (the “ Repayment Amount ”) plus (2) all required remaining scheduled interest payments (whether payable in cash or PIK Interest) due on such Repayment Amount through the Maturity Date, computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (B) the Repayment Amount on such Repayment Date.

 

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“ Management Agreement ” means the Professional Services Agreement dated as of January 31, 2007, by and among MidOcean US Advisor, LP, Holdings and the Borrower, as in effect on the First Lien Closing Date or otherwise amended, restated, modified or supplemented from time to time.

“ Management Fee ” means each of the following fees payable by the Borrower to Sponsor or one of its Affiliates: (i) a management fee in an amount not to exceed 2% of Consolidated EBITDA for the most recently ended fiscal year in each fiscal year, including any “catch-up” payments thereon, (ii) one-time fees, each payable on the date of the consummation of certain transactions, including acquisitions, dispositions, equity and debt financings described in the Management Agreement in an amount not to exceed 1% of the gross amount (or, in the case of revolving facilities, the maximum committed amount) of such financings received by (or made available to) the Loan Parties and (iii) indemnities and reimbursement of reasonable out-of-pocket fees and expenses, in each case pursuant to, and subject to the terms and conditions of, the Management Agreement.

“ Margin Stock ” means “margin stock” as such term is defined in Regulation U.

“ Material Adverse Effect ” means a material adverse change to the business, assets, liabilities, operations, results of operations, or financial condition of such Person and such Person’s Subsidiaries, taken as a whole; provided , however , that the effect of the following shall not be considered in determining whether a “Material Adverse Effect” has occurred or is reasonably likely to occur with respect to any Group Party: any change, effect, circumstance or event resulting from or arising in connection with (w) changes in laws of general applicability or interpretations thereof by courts or governmental authorities, (x) changes in general economic conditions, (y) changes affecting the restaurant or retail industries generally and (z) any effects resulting from the public announcement of this Agreement or the transactions contemplated hereby, except, in the case of clauses (w) , (x)  and (y) , to the extent such change, effect, circumstance or event has a disproportionate adverse effect on the Group Companies as compared to other Persons engaged in the same business.

“ Maturity Date ” means July 31, 2014.

“ Maximum Accrual ” is defined in Section 2.06(e) .

“ Moody’s ” means Moody’s Investors Service, Inc., a Delaware corporation, and its successors or, absent any such successor, such nationally recognized statistical rating organization as the Borrower and the Administrative Agent may select.

“ Multiemployer Plan ” means a “multiemployer plan” as defined in Section 3(37) or 4001(a)(3) of ERISA.

 

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“ Net Cash Proceeds ” means:

(i) with respect to any Asset Disposition (other than an Asset Disposition consisting of a lease where one or more Group Companies is acting as lessor entered into in the ordinary course of business), Casualty or Condemnation, (A) the gross amount of all cash proceeds (including cash Insurance Proceeds and cash Condemnation Awards in the case of any Casualty or Condemnation, except to the extent and for so long as such Insurance Proceeds or Condemnation Awards constitute Reinvestment Funds) actually paid to or actually received by any Group Company in respect of such Asset Disposition, Casualty or Condemnation (including any cash proceeds received as income or other proceeds of any noncash proceeds of any Asset Disposition, Casualty or Condemnation as and when received), less (B) the sum of (1) the amount, if any, of all taxes (other than income taxes) and all income taxes (as estimated by a senior financial or accounting officer of Holdings and its Subsidiaries) and customary fees, legal fees, brokerage fees, commissions, costs and other expenses (other than those payable to any Group Company or to Affiliates of any Group Company except for (x) those payable pursuant to the Management Agreement and otherwise not prohibited hereunder and (y) those payable on terms and conditions as favorable to the applicable Group Company as would be obtainable by it in a comparable arms’-length transaction with an independent, unrelated third party) that are incurred in connection with such Asset Disposition, Casualty or Condemnation and are payable by any Group Company, but only to the extent not already deducted in arriving at the amount referred to in clause (i)(A ) above, (2) appropriate amounts that must be set aside as a reserve in accordance with GAAP against any indemnities, liabilities (contingent or otherwise) associated with such Asset Disposition, Casualty or Condemnation, (3) if applicable, the amount of any Indebtedness secured by a Permitted Lien that has been repaid or refinanced in accordance with its terms with the proceeds of such Asset Disposition, Casualty or Condemnation and (4) any payments to be made by any Group Company as agreed between such Group Company and the purchaser of any assets subject to an Asset Disposition, Casualty or Condemnation in connection therewith; and

(ii) with respect to any Equity Issuance or Debt Issuance, the gross amount of cash proceeds paid to or received by any Group Company in respect of such Equity Issuance or Debt Issuance as the case may be (including cash proceeds subsequently as and when received at any time in respect of such Equity Issuance or Debt Issuance from non-cash consideration initially received or otherwise), net of underwriting discounts and commissions or placement fees, investment banking fees, legal fees, consulting fees, accounting fees and other customary fees and expenses directly incurred by any Group Company in connection therewith (other than those payable to any Group Company or any Affiliate of any Group Company except for (x) those payable pursuant to the Management Agreement and otherwise not prohibited hereunder and (y) those payable on terms and conditions as favorable to the applicable Group Company as would be obtainable by it in a comparable arms’-length transaction with an independent, unrelated third party).

“ Nominal Shares ” means (i) for any Subsidiary of the Borrower that is not a Domestic Subsidiary, nominal issuances of Equity Interests in an aggregate amount not to exceed 5.0% of

 

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the Equity Interests or Equity Equivalents of such Subsidiary on a fully-diluted basis and (ii) in any case, director’s qualifying shares, in each case to the extent such issuances are required by applicable Laws.

“ Note ” means a promissory note, substantially in the form of Exhibit B hereto, evidencing the obligations of the Borrower to repay outstanding Loans, as such note may be amended, modified or supplemented from time to time.

“ Notice of Borrowing ” means a request by the Borrower for a Borrowing, substantially in the form of Exhibit A hereto.

“ Notice of Intent to Cure ” has the meaning specified in Section 6.02(b)(i)(A) .

“ Operating Lease ” means, as applied to any Person, a lease (including leases which may be terminated by the lessee at any time) of any property (whether real, personal or mixed) by such Person as lessee which is not a Capital Lease.

“ Organization Documents ” means, (i) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-United States jurisdiction); (ii) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (iii) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

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

“ Participant ” has the meaning specified in Section 10.06(d) .

“ Participant Register ” has the meaning specified in Section 10.06(d) .

“ Participation Interest ” means a Credit Extension by a Lender by way of a purchase of a participation interest in any Loans as provided in Section 2.13 .

“ PBGC ” means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any entity succeeding to any or all of its functions under ERISA.

“ Perfection Certificate ” means with respect to any Loan Party a certificate, substantially in the form of Exhibit F-3 to this Agreement, completed and supplemented with the schedules and attachments contemplated thereby and duly executed on behalf of such Loan Party by a Responsible Officer of such Loan Party.

 

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“ Permitted Acquisition ” means

(a) a Business Acquisition; provided that:

(i) the Equity Interests or property or assets acquired in such acquisition relate to a line of business similar to the business of the Borrower or any of its Subsidiaries engaged in on the First Lien Closing Date or reasonably related, ancillary or complementary thereto;

(ii) within 30 days after (or such later date as may be agreed to by the Administrative Agent, in its sole discretion) the date of the consummation of such Business Acquisition, each applicable Loan Party and the acquired entity and its Subsidiaries shall have executed and delivered to the Administrative Agent or the Collateral Agent, as applicable, all items in respect of the Equity Interests or property or assets acquired in such acquisition (and/or the seller thereof) required to be delivered by Section 6.12 ;

(iii) in the case of an acquisition of the Equity Interests of another Person, (A) except in the case of the incorporation of a new Subsidiary, the board of directors (or other comparable governing body) of such other Person shall have duly approved such acquisition and (B) the Equity Interests acquired shall constitute all (other than Nominal Shares) of the total Equity Interests of the issuer thereof;

(iv) no Event of Default shall have occurred and be continuing immediately before or immediately after giving effect to such acquisition, and the Borrower shall have delivered to the Administrative Agent a Pro-Forma Compliance Certificate demonstrating that, upon giving effect to such acquisition on a Pro-Forma Basis, the Borrower shall be in compliance with all of the financial covenant specified in Sections 7.16 hereof as of the last day of the most recent period of four consecutive fiscal quarters of the Borrower for which financial statements are required to be delivered pursuant to Section 6.01(a) or (b)  which precedes or ends on the date of such acquisition; and

(v) after giving effect to such acquisition, the First Lien Revolving Committed Amount shall be at least $7,500,000 greater than the total First Lien Revolving Outstandings;

(b) any acquisition consented to by the Required Lenders; and

(c) the acquisition of franchisees in an amount after giving effect to all such acquisitions not to exceed $2,500,000 in the aggregate (other than Expenditures included in Consolidated Capital Expenditures), plus any Excess Cash Flow not required to be paid to the First Lien Lenders and the Lenders hereunder, plus the proceeds of any Equity Issuances of Holdings issued to make such acquisition.

Notwithstanding the foregoing, unless otherwise agreed to in writing by the Required Lenders, (x) from and after the First Lien First Amendment Effective Date, (1) the aggregate amount of any acquisition (whether individually or together with any related acquisitions) shall not exceed

 

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$5,750,000 and (2) the aggregate amount of all Permitted Acquisitions shall not exceed $11,500,000 and (y) no acquisition shall be deemed to be a Permitted Acquisition unless immediately after giving effect to such acquisition the Total Leverage Ratio shall be less than the Total Leverage Ratio immediately prior to such acquisition.

“ Permitted Joint Venture ” means a joint venture, in the form of a corporation, limited liability company, business trust, joint venture, association, company or partnership, entered into by the Borrower or any of its Subsidiaries which (i) is engaged in a line of business related, ancillary or complementary to those engaged in by the Borrower and its Subsidiaries and (ii) is formed or organized in a manner that limits the exposure of Holdings, the Borrower and its Subsidiaries for the liabilities thereof to (A) the Investments of the Borrower and its Subsidiaries therein permitted under Section 7.06 and (B) any Indebtedness of any Permitted Joint Venture or any Guaranty Obligations by Holdings or any of its Subsidiaries in respect of such Indebtedness, which Indebtedness or Guaranty Obligations are permitted at the time under Section 7.01 .

“ Permitted Liens ” has the meaning specified in Section 7.02 .

“ Permitted Refinancing ” means, with respect to any Person, any modification, refinancing, refunding, renewal or extension of any Indebtedness of such Person; provided that (i) the principal amount (or accreted value, if applicable) thereof does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so modified, refinanced, refunded, renewed or extended except by an amount equal to any interest capitalized in connection with, any premium or other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such modification, refinancing, refunding, renewal or extension and by an amount equal to any existing commitments unutilized thereunder or as otherwise permitted pursuant to Section 7.01 , (ii) such modification, refinancing, refunding, renewal or extension has a final maturity date equal to or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being modified, refinanced, refunded, renewed or extended, (iii) if the Indebtedness being modified, refinanced, refunded, renewed or extended is subordinated in right of payment to the Second Lien Credit Obligations, such modification, refinancing, refunding, renewal or extension is subordinated in right of payment to the Second Lien Credit Obligations on terms at least as favorable on the whole to the Lenders as those contained in the documentation governing the Indebtedness being modified, refinanced, refunded, renewed or extended, (iv) the terms and conditions (including, if applicable, as to collateral) of any such modified, refinanced, refunded, renewed or extended Indebtedness are not, taken as a whole, materially less favorable to the Loan Parties or the Lenders than the terms and conditions of the Indebtedness being modified, refinanced, refunded, renewed or extended, (v) such modification, refinancing, refunding, renewal or extension is incurred by the Person who is the obligor on the Indebtedness being modified, refinanced, refunded, renewed or extended, and (vi) at the time thereof, no Default shall have occurred and be continuing.

“ Permitted Subordinated Indebtedness ” shall mean unsecured Indebtedness of Holdings and its Subsidiaries that shall (i) have a stated maturity that is at least one year later than the maturity date of any Loan and (ii) be subordinated in right of payment to the Second Lien Credit Obligations at prevailing market terms applicable to high yield subordinated indebtedness or otherwise on terms reasonably acceptable to the Administrative Agent.

 

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“ Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“ Plan ” means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code maintained by or contributed to by any Group Company or any ERISA Affiliate, including a Multiemployer Plan.

“ Platform ” has the meaning specified in Section 6.02 .

“ Pledge Agreement ” means the Pledge Agreement, substantially in the form of Exhibit F-2 hereto, dated as of the date hereof among Holdings, the Borrower, the Subsidiary Guarantors and the Collateral Agent, as the same may be amended, modified or supplemented from time to time.

“ Pledged Collateral ” means the “Collateral” as defined in the Pledge Agreement.

“ PPA ” has the meaning assigned to such term in the definition of “ERISA Event”

“ Preferred Stock ” means, as applied to the Equity Interests of a Person, Equity Interests of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over the Equity Interests of any other class of such Person.

“ Pro-Forma Basis ” means, for purposes of calculating compliance of any transaction with any provision hereof which refers to a Pro-Forma Basis, that the transaction in question shall be deemed to have occurred as of the first day of the most recent period of four consecutive fiscal quarters of Holdings which precedes or ends on the date of such transaction and with respect to which the Administrative Agent has received the financial information for Holdings and its Consolidated Subsidiaries required under Section 6.01(a) or (b) , as applicable, and the Compliance Certificate required by Section 6.02(b) for such period. In connection with any calculation of the Total Leverage Ratio or the financial covenant set forth in Section 7.16 or elsewhere upon giving effect to a transaction on a “Pro-Forma Basis,” (i) any Indebtedness incurred by Holdings or any of its Subsidiaries in connection with such transaction (or any other transaction which occurred during the relevant four fiscal quarter period) shall be deemed to have been incurred or repaid as the case may be as of the first day of the relevant four fiscal-quarter period, (ii) if such Indebtedness has a floating or formula rate, then the rate of interest for such Indebtedness for the applicable period for purposes of the calculations contemplated by this definition shall be determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of such calculations and (iii) income statement items (whether positive or negative) attributable to all property acquired in such transaction or to the Investment comprising such transaction, as applicable, shall be included as if such transaction has occurred as of the first day of the relevant four-fiscal-quarter period, after giving effect to cost savings reasonably acceptable to the Administrative Agent, (iv) such other pro-forma adjustments which would be permitted or required by Regulations S-K and S-X under the Securities Act shall be taken into account and (v) such other adjustments as may be reasonably agreed between Holdings and the Administrative Agent shall be taken into account.

 

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“ Pro-Forma Compliance Certificate ” means a certificate of a Responsible Officer or chief accounting officer of Holdings delivered to the Administrative Agent in connection with any “transaction” for which a calculation on a “Pro-Forma Basis” is permitted or required hereunder and containing reasonably detailed calculations demonstrating, upon giving effect to the applicable transaction on a Pro-Forma Basis, compliance, as applicable, with the Total Leverage Ratio and the financial covenant set forth in Section 7.16 , as applicable, as of the last day of the most recent period of four consecutive fiscal quarters of Holdings which precedes or ends on the date of the applicable transaction and with respect to which the Administrative Agent shall have received the consolidated financial information for Holdings and its Consolidated Subsidiaries required under Section 6.01(a) or (b) , as applicable, and the Compliance Certificate required by Section 6.02(b) for such period.

“ Purchase Money Indebtedness ” means Indebtedness of the Borrower or any of its Subsidiaries incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property used in the business of the Borrower or such Subsidiary.

“ Qualified Capital Stock ” means any Equity Interests of Holdings that does not include a cash dividend and is not mandatorily redeemable by Holdings or any of its Subsidiaries or redeemable at the option of the holder of such Equity Interests, in each case prior to the 181st day following the Maturity Date (other than in connection with an asset sale or change of control, so long as the definitions of asset sale and change of control in the instruments governing such Equity Interests are no more restrictive with respect to Holdings and its Subsidiaries than the corresponding definitions herein and so long as the Second Lien Credit Obligations (other than contingent indemnification obligations) are either repaid or waived with respect to such asset sale or change of control prior to the redemption of such Equity Interests).

“ Qualifying IPO ” means an underwritten primary public offering (other than a public offering pursuant to a registration statement on Form S-8 (or any successor form)) of the common stock of Holdings (i) pursuant to an effective registration statement filed with the SEC in accordance with the Securities Act (whether alone or in conjunction with a secondary public offering) and (ii) resulting in gross proceeds of at least $75,000,000.

“ Real Property ” means, with respect to any Person, all of the right, title and interest of such Person in and to land, improvements and fixtures, including Leaseholds.

“ Register ” has the meaning specified in Section 10.06(c) .

“ Registered Public Accounting Firm ” has the meaning specified in the Securities Laws and shall be independent of the Borrower as prescribed by the Securities Laws.

“ Registration Rights Agreement ” means the Registration Rights Agreement dated as of the First Lien Closing Date among the Borrower, the Subsidiary Guarantors, Credit Suisse Securities (USA) LLC and Bank of America Securities LLC, relating to the Senior Notes, as amended, modified, restated or otherwise modified from time to time.

“ Regulation S-X ” shall mean Regulation S-X under the Securities Act of 1933, as amended.

 

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“ Regulation T, U or X ” means Regulation T, U or X, respectively, of the Board of Governors of the Federal Reserve System as amended, or any successor regulation.

“ Reinstatement Date ” has the meaning specified in Section 7.09(i) .

“ Reinvestment Funds ” means, with respect to any Net Cash Proceeds of Insurance Proceeds, any Condemnation Award or any Asset Disposition in respect of the single event or series of related events giving rise thereto, that portion of such funds as shall, according to a certificate of a Responsible Officer of the Borrower delivered to the Administrative Agent within 30 days after the occurrence of the Casualty, Condemnation or Asset Disposition giving rise thereto, be reinvested within 365 days (or if the Borrower has entered into a commitment to apply such proceeds to a reinvestment within such time period to the extent such amounts are actually reinvested, within six months of the expiration of such 365 days) after the occurrence of the Casualty, Condemnation or Asset Disposition giving rise thereto in the repair, restoration or replacement of the properties that were the subject of such Casualty, Condemnation or Asset Disposition; provided that no Event of Default shall have occurred and be continuing on the date of such reinvestment notice or, if the Borrower or one or more of its Subsidiaries shall have then entered into one or more continuing agreements with a Person not an Affiliate of any of them for the repair, restoration or replacement of the properties that were the subject of such Casualty, Condemnation or Asset Disposition, none of the Administrative Agent or the Collateral Agent shall have commenced any action or proceeding to exercise or seek to exercise any right or remedy with respect to any Collateral (including any action of foreclosure, enforcement, collection or execution or by any proceeding under any Insolvency or Liquidation Proceeding).

“ Related Parties ” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees and advisors of such Person and of such Person’s Affiliates.

“ Relevant Percentage ” shall have the meaning set forth in Section 2.01(c) .

“ Repayment Amount ” has the meaning specified in the defined term “ Make Whole Amount ”.

“ Repayment Date ” means the date fixed for the repayment in whole or in part, of any Loan by or pursuant to this Agreement.

“ Required Lenders ” means, at any date of determination, Lenders whose aggregate Credit Exposure constitutes more than 50% of the Credit Exposure of all Lenders at such time; provided , however , that if any Lender shall be a Defaulting Lender at such time then there shall be excluded from the determination of Required Lenders such Lender and its Credit Exposure at such time.

“ Responsible Officer ” means the chief executive officer, president, senior vice president, vice president, chief financial officer, treasurer, controller, assistant treasurer, secretary or assistant secretary of a Loan Party. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

 

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“ Restricted Payment ” means (i) any dividend or other distribution (whether in cash, securities or other property), direct or indirect, on account of any class of Equity Interests or Equity Equivalents of any Group Company, now or hereafter outstanding, (ii) any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation, termination or similar payment, purchase or other acquisition for value, direct or indirect, of any class of Equity Interests or Equity Equivalents of any Group Company, now or hereafter outstanding and (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire any class of Equity Interests or Equity Equivalents of any Group Company, now or hereafter outstanding.

“ S&P ” means Standard & Poor’s Ratings Group, a division of McGraw Hill, Inc., a New York corporation, and its successors or, absent any such successor, such nationally recognized statistical rating organization as the Borrower and the Administrative Agent may select.

“ Sale/Leaseback Transaction ” means any direct or indirect arrangement with any Person or to which any such Person is a party providing for the leasing to Holdings or any of its Subsidiaries of any property, whether owned by Holdings or any of its Subsidiaries as of the Closing Date or later acquired, which has been or is to be sold or transferred by Holdings or any of its Subsidiaries to such Person or to any other Person from whom funds have been, or are to be, advanced by such Person on the security of such property.

“ SEC ” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

“ Second Lien Credit Obligations ” means, with respect to each Loan Party, without duplication:

(i) in the case of the Borrower, all principal of and interest (including, without limitation, any interest which accrues after the commencement of any proceeding under any Insolvency or Liquidation Proceeding with respect to the Borrower, whether or not allowed or allowable as a claim in any such proceeding) on any Loan under, or any Note issued pursuant to, this Agreement or any other Loan Document;

(ii) all fees, expenses, indemnification obligations and other amounts of whatever nature now or hereafter payable by such Loan Party (including, without limitation, any amounts which accrue after the commencement of any proceeding under any Insolvency or Liquidation Proceeding with respect to such Loan Party, whether or not allowed or allowable as a claim in any such proceeding) pursuant to this Agreement or any other Loan Document;

(iii) all expenses of the Agents as to which one or more of the Agents have a right to reimbursement by such Loan Party under Section 10.04(a) of this Agreement or under any other similar provision of any other Loan Document, including, without limitation, any and all sums advanced by the Collateral Agent to preserve the Collateral or preserve its security interests in the Collateral to the extent permitted under any Loan Document or applicable Law;

 

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(iv) all amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement by such Loan Party under Section 10.04(b) of this Agreement or under any other similar provision of any other Loan Document; and

(v) in the case of Holdings and each Subsidiary Guarantor, all amounts now or hereafter payable by Holdings or such Subsidiary Guarantor and all other obligations or liabilities now existing or hereafter arising or incurred (including, without limitation, any amounts which accrue after the commencement of any proceeding under any Insolvency or Liquidation Proceeding with respect to the Borrower, Holdings or such Subsidiary Guarantor, whether or not allowed or allowable as a claim in any such proceeding) on the part of Holdings or such Subsidiary Guarantor pursuant to this Agreement, the Guaranty or any other Loan Document;

together in each case with all renewals, modifications, consolidations or extensions thereof.

“ Second Lien Credit Party ” means each Lender, the Administrative Agent, the Collateral Agent and each Indemnitee and their respective successors and assigns, and “ Second Lien Credit Parties ” means any two or more of them, collectively.

“ Securities Laws ” means the Securities Act of 1933, the Securities Exchange Act of 1934 and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the Public Company Accounting Oversight Board, as each of the foregoing may be amended and in effect on any applicable date hereunder.

“ Security Agreement ” means the Security Agreement, substantially in the form of Exhibit F-1 hereto, dated as of the date hereof among Holdings, the Borrower, the Subsidiary Guarantors and the Collateral Agent, as the same may be amended, modified or supplemented from time to time.

“ Sellers ” shall have the meaning set forth in the First Lien Credit Agreement.

“ Senior Notes ” means the 10.375% Senior Notes due 2015 issued by the Borrower in aggregate principal amount of $150,000,000 (as such amount may be increased in accordance with Section 7.01(ii) hereof) issued and sold on the First Lien Closing Date pursuant to the Senior Notes Documents and any notes exchanged therefor pursuant to the Registration Rights Agreement, together with any notes issued in connection with a Permitted Refinancing (or the incurrence of any Senior Notes permitted under Section 7.01(ii) hereof) of the Senior Notes or any replacement notes issued in accordance with the terms of the Senior Notes Indenture.

“ Senior Notes Documents ” means the Senior Notes, the Senior Notes Indenture, the guarantees of the Senior Notes and all other agreements, instruments and other documents pursuant to which the Senior Notes have been or will be issued or otherwise setting forth the terms of the Senior Notes.

“ Senior Notes Indenture ” means the Indenture dated as of the First Lien Closing Date between the Borrowers, the guarantors party thereto and The Bank of New York, as trustee as in effect on the date of this Agreement and as thereafter amended, modified, restated, refinanced and supplemented from time to time in accordance with and subject to the terms hereof.

 

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“ Solvent ” means, with respect to any Person as of a particular date, that on such date (i) such Person is able generally to pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (ii) the value of the assets of such Person (both at fair value and present fair saleable value in each case calculated on a going concern basis) is greater than the total amount of liabilities (including contingent and unliquidated liabilities) and (iii) such Person does not have unreasonably small capital. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities shall be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (in each case as interpreted in accordance with fraudulent conveyance, bankruptcy, insolvency and similar laws and other applicable Law).

“ Sponsor ” means MidOcean Partners III, L.P., MidOcean Partners III-A, L.P. and MidOcean Partners III-D, L.P. and its successors, together with the Sponsor Approved Funds.

“ Sponsor Approved Funds ” means, with respect to the Sponsor, any Fund that is administered or managed by (i) the Sponsor, (ii) an Affiliate of the Sponsor or (iii) an entity that administers or manages the Sponsor.

“ Sponsor Group ” means the Sponsor and any of its Subsidiaries or Affiliates other than Affiliates that are operating companies or Controlled by operating companies.

“ Store Closing Costs ” means each of the following costs attributable to stores closed within the prior twelve months: (i) operating losses, (ii) construction and moving expenses, (iii) lease termination expenses, (iv) employee severance costs, and (v) other related expenses reasonably acceptable to the Administrative Agent.

“ Subordinated Indebtedness ” of any Person means all Indebtedness which (i) the principal of which by its terms is not required to be repaid, in whole or in part, before six months after the Maturity Date, (ii) is subordinated in right of payment to such Person’s indebtedness, obligations and liabilities to the Finance Parties under the Loan Documents pursuant to payment and subordination provisions reasonably satisfactory in form and substance to the Administrative Agent and (iii) is issued pursuant to credit documents having covenants, subordination provisions and events of default that are taken as a whole in no event less favorable, including with respect to rights of acceleration, to such Person than the terms hereof or are otherwise reasonably satisfactory in form and substance to the Administrative Agent.

“ Subsidiary ” means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (i) if a corporation, more than 50% of the total voting power of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees 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, or (ii) if a partnership, limited liability company, association or business entity other than a corporation, more than 50% of the

 

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partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have more than 50% ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons shall be allocated more than 50% of partnership, association or other business entity gains or losses or shall be or control the managing director, manager or a general partner of such partnership, association or other business entity. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower. Notwithstanding the foregoing (except for the definition of Unrestricted Subsidiary contained herein), any Unrestricted Subsidiary, any Permitted Joint Venture and any Applicable Subsidiary (unless such Applicable Subsidiary shall have become a Subsidiary Guarantor in accordance with Sections 6.12 and 6.16 hereunder) shall be deemed not to be a Subsidiary of the Borrower or any of its Subsidiaries for purposes of this Agreement.

“ Subsidiary Guarantor ” means each Subsidiary of Holdings on the Closing Date (other than the Borrower and a Foreign Subsidiary) and each Subsidiary of Holdings (other than the Borrower and a Foreign Subsidiary, and for avoidance of doubt, an Unrestricted Subsidiary) that becomes a party to the Guaranty after the Closing Date by execution of an Accession Agreement, and “ Subsidiary Guarantors ” means any two or more of them.

“ Subsidiary Redesignation ” has the meaning specified in Section 6.14 .

“ Swap Agreement ” means (i) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement and (ii) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement or any other master agreement (any such master agreement, together with any related schedules, a “ Master Agreement ”), including any such obligations or liabilities under any Master Agreement.

“ Swap Creditor ” means any Lender or any Affiliate of any Lender from time to time party to one or more Swap Agreements permitted hereunder with a Loan Party (even if any such Lender for any reason ceases after the execution of such agreement to be a Lender hereunder), and its successors and assigns, and “ Swap Creditors ” means any two or more of them, collectively.

“ Swap Obligations ” of any Person means all obligations (including, without limitation, any amounts which accrue after the commencement of any bankruptcy or insolvency proceeding with respect to such Person, whether or not allowed or allowable as a claim under any

 

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proceeding under any Insolvency or Liquidation Proceeding) owing under any Swap Agreement, excluding any amounts which such Person is entitled to setoff against its obligations under applicable Law.

“ Swap Termination Value ” means, at any date and in respect of any one or more Swap Agreements, after taking into account the effect of any legally enforceable netting agreements relating to such Swap Agreements, (i) for any date on or after the date such Swap Agreements have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (ii) for any date prior to the date referenced in clause (i ), the amount(s) determined as the mark-to-market value(s) for such Swap Agreements, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Agreements (which may include any Lender).

“ Synthetic Lease Obligation ” means the monetary obligation of a Person under (i) a so-called synthetic, off-balance sheet or tax retention lease or (ii) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such person (without regard to accounting treatment).

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

“ Tender Offer ” has the meaning specified in the recitals hereto.

“ Threshold Amount ” means $6,000,000.

“ Total Leverage Ratio ” means on any day the ratio of (i) (A) Consolidated Funded Indebtedness as of the last day of the fiscal quarter of Holdings ending on, or most recently preceding, such date, minus (B) the amount of Holdings’ and its Consolidated Subsidiaries’ cash and Cash Equivalents (in each case free and clear of all Liens, other than (w) nonconsensual liens provided for by Law and permitted by Section 7.02 , (x) Liens permitted under Sections 7.02(ii) and (xxiv)  and (y) Liens permitted under Section 7.02(x) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness and (z) Liens permitted under Section 7.02(xxix) ) as of such date in excess of $1,000,000 that are or would be included on a consolidated balance sheet of Holdings and its Subsidiaries as of such date, plus (C) the aggregate amount of all Net Cash Proceeds of Equity Issuances of Qualified Capital Stock included in the determination of Consolidated EBITDA for the period of four consecutive fiscal quarters then ended in accordance with clause (iv)  of the definition of “Consolidated EBITDA” which Net Cash Proceeds have theretofore been utilized to repay Consolidated Funded Indebtedness during such period, to (ii) Consolidated EBITDA for the four consecutive fiscal quarters of Holdings ended on, or most recently preceding, such day for which financial statements have been (or were required to have been) delivered pursuant to Section 6.01(a) or (b) .

“ Transaction ” means the events contemplated by the Transaction Documents.

 

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“ Transaction Documents ” means the Loan Documents and the First Lien Amendment, collectively, and “ Transaction Document ” means any one of them.

“ Treasury Rate ” means, with respect to a Repayment Date, the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) that has become publicly available at least two Business Days prior to such Repayment Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from such Repayment Date to the Maturity Date; provided , however , that if the period from such Repayment Date to the Maturity Date is not equal to the constant maturity of the United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from such Repayment Date to the Maturity Date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.

“ UCC ” shall mean the Uniform Commercial Code as in effect from time to time (except as otherwise specified) in any applicable state or jurisdiction.

“ Unfunded Liabilities ” means, except as otherwise provided in Section 5.12(a)(i)(B) , (i) with respect to each Plan, the amount (if any) by which the present value of all nonforfeitable benefits under each Plan exceeds the current value of such Plan’s assets allocable to such benefits, all determined in accordance with the respective most recent valuations for such Plan based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87.

“ United States ” means the United States of America, including each of the States and the District of Columbia, but excluding its territories and possessions.

“ Unrestricted Cash ” means cash or Cash Equivalents of any of the Loan Parties (a) that would not appear as “restricted” on a consolidated balance sheet of any of the Loan Parties and (b) that is not subject to a Lien in favor of a Person other than the Lenders or the First Lien Collateral Agent or the First Lien Lenders.

“ Unrestricted Subsidiary ” means any Subsidiary of the Borrower properly designated as an Unrestricted Subsidiary pursuant to Section 6.14 .

“ U.S. Patriot Act ” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. 107-56 (signed into Law October 26, 2001)), as the same may be amended, supplemented, modified, replaced or otherwise in effect from time to time.

“ Voting Securities ” means Equity Interests of any Person having ordinary power to vote in the election of members of the board of directors, managers, trustees or other controlling Persons of such Person (irrespective of whether, at the time, Equity Interests of any other class or classes of such Person shall have or might have voting power by reason of the happening of any contingency).

 

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“ Weighted Average Life to Maturity ” means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (i) the sum of the products obtained by multiplying (A) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (B) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (ii) the then outstanding principal amount of such Indebtedness.

“ Welfare Plan ” means a “welfare plan” as such term is defined in Section 3(1) of ERISA.

“ Wholly-Owned Subsidiary ” means, with respect to any Person at any date, any Subsidiary of such Person all of the shares of capital stock or other ownership interests of which (except Nominal Shares) are at the time directly or indirectly owned by such Person.

Section 1.02 Other Interpretative Provisions . With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

(a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “ include ,” “ includes ” and “ including ” shall be deemed to be followed by the phrase “ without limitation .” The word “ will ” shall be construed to have the same meaning and effect as the word “ shall .” Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “ herein ,” “ hereof ” and “ hereunder ” and words of similar import when used in any Loan Document shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such Law and any reference to any law or regulation shall, unless otherwise specified, refer to such Law or regulation as amended, modified or supplemented from time to time and (vi) the words “ asset ” and “ property ” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

(b) In the computation of periods of time from a specified date to a later specified date, the word “ from ” means “ from and including ,” the words “ to ” and “ until ” each mean “ to but excluding ” and the word “ through ” means “ to and including .”

(c) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

 

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Section 1.03 Accounting Terms and Determinations .

(a) Generally . All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, except as otherwise specifically prescribed herein or as disclosed to the Administrative Agent.

(b) Changes in GAAP . If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either (x) the Borrower or (y) within 30 days after delivery of any financial statements reflecting any change in GAAP (or after the Lenders have been informed of the change in GAAP affecting such financial statements, if later), the Administrative Agent or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and any other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

Section 1.04 Times of Day . Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

Section 1.05 Classes and Types of Borrowings . The term “Borrowing” denotes the aggregation of Loans of one or more Lenders made to the Borrower pursuant to Article II on the same date.

ARTICLE II

THE CREDIT FACILITIES

Section 2.01 Commitments to Lend .

(a) [ Intentionally Omitted ].

(b) Loans . Subject to the terms and conditions set forth herein, each Lender severally agrees to make a Loan to the Borrower on the Closing Date in a principal amount not exceeding its Commitment. The Borrowing shall be made from the Lenders ratably in proportion to their respective Commitments. The Commitments are not revolving in nature, and amounts repaid or prepaid prior to the Maturity Date may not be reborrowed.

(c) Notwithstanding any other provision of this Agreement, all Loans shall be made at 98.04 percent (98.04%) of the initial principal amount thereof (the “ Relevant Percentage ” of the initial principal amount), but, for the avoidance of doubt, for all purposes of this Agreement, the initial principal amount of any such Loan shall be equal to 100 percent of such principal amount. The making of any Loan at the Relevant Percentage of its initial

 

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principal amount shall satisfy an amount of the commitment equal to the full initial principal amount of that Loan. A subsequent increase in the principal amount of a Loan, pursuant to Section 2.06(d) or otherwise, shall not affect the amount of the Commitments satisfied by the making of that Loan, or the amount of the remaining Commitments.

Section 2.02 Notice of Borrowings .

(a) Borrowings . The Borrower shall give the Administrative Agent a Notice of Borrowing not later than 12:00 P.M. on the date of the proposed Borrowing, which shall be a single drawing on the Closing Date, specifying:

(i) the date of such Borrowing, which shall be a Business Day;

(ii) the aggregate amount of such Borrowing; and

(iii) the location (which must be in the United States) and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.03 .

Section 2.03 Notice to Lenders; Funding of Loans .

(a) Notice to Lenders . Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Lender of such Lender’s ratable share (if any) of the Borrowing referred to therein, and such Notice of Borrowing shall not thereafter be revocable by the Borrower.

(b) Funding of Loans . (i) Not later than 1:00 P.M. on the date of Borrowing, each Lender participating therein shall make available its share of such Borrowing, in Federal or other immediately available funds, to the Administrative Agent at the Administrative Agent’s Office. Unless the Administrative Agent determines that any applicable condition specified in Article IV has not been satisfied, the Administrative Agent shall make the funds so received available to the Borrower in like funds as received by the Administrative Agent either by wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower in the applicable Notice of Borrowing, or, if a Borrowing shall not occur on such date because any condition precedent herein shall not have been met, promptly return the amounts received from the Lenders in like funds, without interest.

(c) Funding by the Administrative Agent in Anticipation of Amounts Due from the Lenders . Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsection (b ) of this Section 2.03 , and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding

 

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amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the Borrower but excluding the date of payment to the Administrative Agent, at (i) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation and (ii) in the case of a payment to be made by the Borrower, the interest rate applicable thereto pursuant to Section 2.06 . If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender pays its share of the applicable Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan included in such Borrowing. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent. A notice of the Administrative Agent to a Lender or the Borrower with respect to any amount owing under this subsection (c ) shall be conclusive, absent manifest error.

(d) Failed Loans . If any Lender shall fail to make any Loan (a “ Failed Loan ”) which such Lender is otherwise obligated hereunder to make to the Borrower on the date of Borrowing thereof, and the Administrative Agent shall not have received notice from the Borrower or such Lender that any condition precedent to the making of the Failed Loan has not been satisfied, then, until such Lender shall have made or be deemed to have made (pursuant to the last sentence of this subsection (d )) the Failed Loan in full or the Administrative Agent shall have received notice from the Borrower or such Lender that any condition precedent to the making of the Failed Loan was not satisfied at the time the Failed Loan was to have been made, whenever the Administrative Agent shall receive any amount from the Borrower for the account of such Lender, (i) the amount so received (up to the amount of such Failed Loan) will, upon receipt by the Administrative Agent, be deemed to have been paid to the Lender in satisfaction of the obligation for which paid, without actual disbursement of such amount to the Lender, (ii) the Lender will be deemed to have made the same amount available to the Administrative Agent for disbursement as a Loan to the Borrower (up to the amount of such Failed Loan) and (iii) the Administrative Agent will disburse such amount (up to the amount of the Failed Loan) to the Borrower or, if the Administrative Agent has previously made such amount available to the Borrower on behalf of such Lender pursuant to the provisions hereof, reimburse itself (up to the amount of the amount made available to the Borrower); provided , however , that the Administrative Agent shall have no obligation to disburse any such amount to the Borrower or otherwise apply it or deem it applied as provided herein unless the Administrative Agent shall have determined in its sole discretion that to so disburse such amount will not violate any Law, rule, regulation or requirement applicable to the Administrative Agent.

Section 2.04 Evidence of Loans .

(a) Lender and Administrative Agent Accounts; Notes . The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not,

 

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however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Second Lien Credit Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a single Note, substantially in the form of Exhibit B , payable to the order of such Lender for the account of its Lending Office in an amount equal to the aggregate unpaid principal amount of such Lender’s Loans, as applicable, which shall evidence such Lender’s Loans in addition to such accounts or records. Each Lender having one or more Notes shall record the date, amount and the date and amount of each payment of principal made by the Borrower with respect thereto, and may, if such Lender so elects in connection with any transfer or enforcement of any Note, endorse on the reverse side or on the schedule, if any, forming a part thereof appropriate notations to evidence the foregoing information with respect to each outstanding Loan evidenced thereby; provided that the failure of any Lender to make any such recordation or endorsement or any error in any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under any such Note. Each Lender is hereby irrevocably authorized by the Borrower so to endorse each of its Notes and to attach to and make a part of each of its Notes a continuation of any such schedule as and when required.

Section 2.05 [ Intentionally Omitted ].

Section 2.06 Interest .

(a) [ Intentionally Omitted ].

(b) Rates Applicable to Loans . Subject to the provisions of subsection (c) below, the Loans shall bear interest on the outstanding principal amount thereof at a rate of 15% per annum compounding quarterly.

(c) Additional Interest . (x) immediately upon an Event of Default, all Loans shall bear interest at the Default Rate and (y) if any Second Lien Credit Obligation is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such overdue amount shall thereafter bear interest at the Default Rate, in each case, until such Default or Event of Default has been cured or waived, to the fullest extent permitted by applicable Laws.

(d) Interest Payments . Except as set forth in subsection (e) of this Section 2.06, interest on the Loans shall be due and payable in arrears on each Interest Payment Date applicable thereto and at maturity, and at such other times as may be specified herein; provided, that on each Interest Payment Date after the Closing Date through the third anniversary of the Closing Date, accrued interest expense will be payable in kind (“PIK Interest”). On any Interest Payment Date occurring after the third anniversary of the Closing Date, at the election of the Borrower, accrued interest expense will be payable either (A) in cash or (B) PIK Interest so long as the First Lien Leverage Ratio is equal or lesser than 2.75:1.00 after giving pro forma effect to such payment and if the First Lien Leverage Ratio is greater than 2.75:1.00 the Borrower shall be deemed to have elected to pay accrued interest in kind. PIK Interest payable to each Lender shall

 

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be added to the principal amount of the Loan of such Lender in arrears on such Interest Payment Date and such increased principal amount of the Loan shall thereafter bear interest at the rate then accruing on the principal amount of the Loan as provided in subsection (b) of this Section 2.06 and shall thereafter be treated in all respects as outstanding principal of the Loan. Accrued PIK Interest on the Loans shall be payable in cash on the date the principal of the Loans becomes due and payable, whether on the Maturity Date of the Loan, or upon earlier prepayment, acceleration or otherwise. The Administrative Agent’s determination of the principal amount of the Loans outstanding at any time shall be conclusive and binding, absent manifest error. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Insolvency or Liquidation Proceeding. Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

(e) AHYDO Payments . Notwithstanding anything to the contrary herein, if at the end of any accrual period (as defined in Code §1272(a)(5)) ending after the fifth anniversary of the Closing Date, the aggregate amount of accrued and unpaid original issue discount (as defined in Code Section 1273(a)(1)) on the Loans would, but for this paragraph, exceed an amount equal to the product of the Loan’s issue price (as defined in Code Sections 1273(b) and 1274(a)) multiplied by the yield to maturity (as defined in Treasury Regulation Section 1.1272-1(b)(1)(i)) (the “Maximum Accrual”), all accrued and unpaid interest, including PIK Interest, and original issue discount on the Term Loan as of the end of such accrual period in excess of an amount equal to the Maximum Accrual shall be paid in cash by Borrower to the Lender (the “AHYDO Interest Payment”). For the avoidance of doubt, this Section 2.6(e) shall be construed so as to cause the Loans to not be treated as having been issued with “significant original issue discount” within the meaning of IRC Section 163(i)(2).

Section 2.07 [ Intentionally Omitted ].

Section 2.08 Maturity of Loans .

(a) Maturity of Revolving Loans . Loans shall mature on the Maturity Date and any Second Lien Credit Obligation (together with accrued interest thereon and fees in respect thereof) shall be due an payable on such date.

Section 2.09 Prepayments .

(a) Voluntary Prepayment of Loans . The Borrower shall have the right voluntarily to prepay Loans in whole or in part from time to time, subject to the terms of the Intercreditor Agreement; in an amount specified in a notice to the Administrative Agent no later than three days prior to the applicable Repayment Date, by payment of the principal amount of the Loans outstanding on such Repayment Date (or portion thereof), together with the accrued and unpaid interest thereon and fees (if any) plus the Make Whole Amount; provided , however , that each partial prepayment of Loans shall be in a minimum principal amount of $500,000 or a whole multiple of $100,000 in excess thereof. Each payment pursuant to this Section shall be applied as set forth in Section 2.09(e) .

(b) [ Intentionally Omitted ].

 

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(c) Mandatory Prepayments .

(i) Change of Control . If a Change of Control occurs on or prior to the Maturity Date, the Borrower shall prepay the Loans in an amount, specified in a notice to the Administrative Agent no later than three days prior to the Repayment Date, which shall be equal to the principal amount of the Loans o