Bob Evans Farms, Inc.
BOB EVANS FARMS INC (Form: 10-Q, Received: 03/04/2014 16:41:34)
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 24, 2014

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     

Commission file number 0-1667

 

 

Bob Evans Farms, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   31-4421866

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

8111 Smith’s Mill Road, New Albany, Ohio 43054

(Address of principal executive offices Zip Code)

(614) 491-2225

(Registrant’s telephone number, including area code)

(Former name, former address and formal fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   x      No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes   x      No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated Filer   x    Accelerated Filer   ¨
Non-Accelerated Filer   ¨   (Do not check if a smaller reporting company)    Smaller Reporting Company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes   ¨      No   x

As of February 21, 2014, the registrant had 24,687,893 common shares outstanding.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

Part I – Financial Information

  

Item1.

  Financial Statements   
 

Consolidated Balance Sheets

     3   
 

Consolidated Statements of Net Income

     4   
 

Consolidated Statements of Cash Flows

     5   
  Notes to the Consolidated Financial Statements      6   

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      15   

Item 3.

  Quantitative and Qualitative Disclosures about Market Risk      29   

Item 4.

  Controls and Procedures      29   

Part II – Other Information

  

Item 1.

  Legal Proceedings      31   

Item 1A.

  Risk Factors      31   

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      31   

Item 3.

  Defaults Upon Senior Securities      32   

Item 4.

  Mine Safety Disclosures      32   

Item 5.

  Other Information      32   

Item 6.

  Exhibits      32   

Signatures

     33   

Index to Exhibits

     34   


Table of Contents

BOB EVANS FARMS, INC.

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

 

     (in thousands)  
     Unaudited        
     January 24, 2014     April 26, 2013  
           (recast & adj.)  

Assets

    

Current Assets

  

 

Cash and equivalents

   $ 5,409     $ 9,010  

Accounts receivable, net

     36,034       33,958  

Inventories

     24,133       22,491  

Deferred income taxes

     18,512       13,089  

Federal and state income taxes

     55,079       63,900  

Prepaid expenses

     4,117       5,232  

Current assets held for sale

     4,431       —    
  

 

 

   

 

 

 

Total Current Assets

     147,715       147,680  

Property, Plant and Equipment

     1,567,229       1,465,144  

Less accumulated depreciation

     701,109       676,758  
  

 

 

   

 

 

 

Net Property, Plant and Equipment

     866,120       788,386  

Other Assets

    

Deposits and other

     8,468       6,624  

Long-term note receivable

     15,716       13,815  

Long-term investments

     31,588       29,723  

Goodwill

     19,634       19,634  

Other intangible assets

     3,309       3,427  

Long-term assets held for sale

     —         10,706  
  

 

 

   

 

 

 

Total Other Assets

     78,715       83,929  
  

 

 

   

 

 

 
   $ 1,092,550     $ 1,019,995  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Current Liabilities

    

Credit facility borrowings

   $ 372,829     $ 201,433  

Accounts payable

     22,567       23,058  

Accrued property, plant and equipment purchases

     6,064       11,078  

Accrued non-income taxes

     16,668       16,346  

Accrued wages and related liabilities

     24,803       30,219  

Self-insurance

     22,256       21,072  

Deferred revenue

     17,167       12,915  

Other accrued expenses

     29,461       24,763  
  

 

 

   

 

 

 

Total Current Liabilities

     511,815       340,884  

Long-Term Liabilities

    

Deferred compensation

     36,133       32,140  

Federal and state income taxes

     9,604       9,443  

Deferred income taxes

     42,157       38,601  

Deferred rent and other

     6,318       6,391  

Long-term debt

     831       816  
  

 

 

   

 

 

 

Total Long-Term Liabilities

     95,043       87,391  

Stockholders’ Equity

    

Common stock, $.01 par value; authorized 100,000 shares; issued 42,638 shares at January 24, 2014, and April 26, 2013

  

 

426

 

 

 

426

 

Capital in excess of par value

     223,898       215,593  

Retained earnings

     840,306       844,312  

Treasury stock, 16,952 shares at January 24, 2014, and 15,220 shares at April 26, 2013, at cost

     (578,938     (468,611
  

 

 

   

 

 

 

Total Stockholders’ Equity

     485,692       591,720  
  

 

 

   

 

 

 
   $ 1,092,550     $ 1,019,995  
  

 

 

   

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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Table of Contents

CONSOLIDATED STATEMENTS OF NET INCOME

UNAUDITED

 

     (Dollars in thousands, except per share amounts)  
     Three Months Ended     Nine Months Ended  
     January 24, 2014     January 25, 2013     January 24, 2014     January 25, 2013  
           (recast & adj.)           (recast & adj.)  

Net Sales

   $ 340,132     $ 343,321     $ 1,002,181     $ 996,317  

Cost of sales

     117,751       113,955       337,345       313,739  

Operating wage and fringe benefit expenses

     102,422       102,946       304,790       305,743  

Other operating expenses

     49,081       48,610       148,039       147,294  

Selling, general and administrative expenses

     40,832       40,638       113,176       112,149  

Depreciation and amortization expense

     22,092       17,023       57,603       48,642  

Impairment of assets held for sale

     —         —         12,380       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income

     7,954       20,149       28,848       68,750  

Net interest expense

     875       7,451       859       10,980  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income From Continuing Operations Before Income Taxes

     7,079       12,698       27,989       57,770  

Provision (benefit) for income taxes

     1,002       (12,381     7,283       2,918  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income From Continuing Operations

     6,077       25,079       20,706       54,852  

Loss from discontinued operations, net of income taxes

     (354     (80,219     (488     (83,572
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income (Loss)

   $ 5,723     $ (55,140   $ 20,218     $ (28,720
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings Per Share—Income from Continuing Operations:

        

Basic

   $ 0.23     $ 0.90     $ 0.77     $ 1.94  

Diluted

   $ 0.23     $ 0.89     $ 0.77     $ 1.94  

Loss Per Share—Loss from Discontinued Operations:

        

Basic

   $ (0.01   $ (2.87   $ (0.02   $ (2.96

Diluted

   $ (0.01   $ (2.85   $ (0.02   $ (2.95

Earnings (Loss) Per Share—Net Income:

        

Basic

   $ 0.22     $ (1.97   $ 0.75     $ (1.02

Diluted

   $ 0.22     $ (1.96   $ 0.75     $ (1.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash Dividends Paid Per Share

   $ 0.310     $ 0.275     $ 0.895     $ 0.800  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted Average Shares Outstanding

        

Basic

     26,336       27,994       26,970       28,203  

Dilutive Stock Options

     41       142       93       142  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     26,377       28,136       27,063       28,345  
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

 

     (in thousands)  
     Nine Months Ended  
     January 24, 2014     January 25, 2013  
           (recast & adj.)  

Operating activities :

    

Net income (loss)

   $ 20,218     $ (28,720

Less loss from discontinued operations

     488       83,572  
  

 

 

   

 

 

 

Income from continuing operations

     20,706       54,852  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     57,603       48,642  

Loss on disposal/impairment of fixed assets

     16,504       3,324  

Gain on long-term investments

     (1,865     (494

Deferred compensation

     26       755  

Stock-based compensation expense

     5,165       5,528  

Deferred income taxes

     (1,867     13,282  

Deferred rent

     (73     223  

Changes in current assets and current liabilities:

    

Accounts receivable

     (2,076     (10,642

Inventories

     (1,642     (3,210

Prepaid expenses

     1,116       (2,555

Accounts payable

     (491     (7,333

Federal and state income taxes

     8,982       (35,844

Accrued wages and related liabilities

     (5,416     (2,917

Self-insurance

     1,184       (165

Accrued non-income taxes

     322       903  

Deferred revenue

     4,252       5,401  

Other accrued expenses

     3,228       16,447  
  

 

 

   

 

 

 

Net cash provided by operating activities

     105,658       86,197  

Investing activities:

    

Purchase of property, plant and equipment

     (157,275     (70,767

Acquisition of business

     —         (53,208

Proceeds from sale of property, plant and equipment

     6,900       9,744  

Purchase of long-term investments

     —         (314

Deposits and other

     209       (1,514
  

 

 

   

 

 

 

Net cash used in investing activities

     (150,166     (116,059

Financing activities:

    

Cash dividends paid

     (24,220     (22,538

Net increase in credit facility borrowings

     171,396       189,031  

Proceeds from debt

     —         1,000  

Payments of debt issuance costs

     (2,039     —    

Principal payments on long-term debt

     —         (135,716

Repurchase of common stock

     (114,049     (36,902

Proceeds from issuance of stock awards

     12,866       3,725  

Cash paid for shares net settled related to stock-based compensation

     (4,691     (1,998

Excess tax benefits from stock-based compensation

     2,132       295  
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     41,395       (3,103

Net cash used in continuing operations

     (3,113     (32,965

Net cash (used in) provided by operating activities of discontinued operations

     (488     9,858  

Net cash used in investing activities of discontinued operations

     —         (5,306
  

 

 

   

 

 

 

Net cash (used in) provided by discontinued operations

     (488     4,552  

Cash and equivalents at the beginning of the period

     9,010       32,846  
  

 

 

   

 

 

 

Cash and equivalents at the end of the period

   $ 5,409     $ 4,433  
  

 

 

   

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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Table of Contents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

1. Summary of Significant Accounting Policies

Unaudited Consolidated Financial Statements: The accompanying unaudited consolidated financial statements of Bob Evans Farms, Inc. (“Bob Evans”) and its subsidiaries (collectively, Bob Evans and its subsidiaries are referred to as the “Company,” “we,” “us” and “our”) are presented in accordance with the requirements of Form 10-Q and, consequently, do not include all of the disclosures normally required by U.S. generally accepted accounting principles or those normally made in our Form 10-K filing. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of our financial position and results of operations have been included. The consolidated financial statements are not necessarily indicative of the results of operations for a full fiscal year. The fiscal year 2013 financial statements have been recast in accordance with Accounting Standards Codification (“ASC”) 205-20-55 to recognize the Mimi’s Café operations within discontinued operations and to recognize assets held for sale. See Note 2 for additional information. Additionally, the consolidated statements of net income, consolidated balance sheets and consolidated statements of cash flows have been adjusted for prior years and first quarter errors related to property, plant and equipment, deferred income taxes and federal and state income tax receivables and other individually less significant items. This was disclosed in our Form 10-Q filed for the three and six month periods ended October 25, 2013. No other significant changes have occurred in the financial disclosures made in our Form 10-K for the fiscal year ended April 26, 2013 (refer to the Form 10-K for a summary of significant accounting policies followed in the preparation of the consolidated financial statements). Throughout the Unaudited Consolidated Financial Statements and Notes to the Consolidated Financial Statements, dollars are in thousands, except per share amounts.

Property, Plant and Equipment: Property, plant and equipment are recorded at cost less accumulated depreciation. The straight-line depreciation method is used for nearly all capitalized assets, although some assets purchased prior to fiscal 1995 continue to be depreciated using accelerated methods. Depreciation is calculated at rates adequate to amortize costs over the estimated useful lives of buildings and improvements (15 to 50 years) and machinery and equipment (3 to 30 years). Improvements to leased properties are depreciated over the shorter of their useful lives or the lease terms.

During the third quarter of the current year, a correction of an error of $1,466 related to depreciation of property, plant and equipment was recorded. The error was identified in our continuing efforts to remediate our internal controls over financial reporting related to property, plant and equipment accounting and relates to the first and second quarters of the current year. The correction of $1,466 will have no impact on the estimated fiscal 2014 results, the trend of earnings and is considered immaterial in relation to the consolidated financial statements as a whole for the quarterly period ended October 25, 2013, and the quarterly period ended July 26, 2013.

We evaluate property, plant and equipment held and used in the business for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. Impairment is determined by comparing the estimated fair value for the asset group to the carrying amount of its assets. If impairment exists, the amount of impairment is measured as the excess of the carrying amount over the estimated fair values of the assets. Generally, the estimated fair value is determined based on appraisals, which we deem to be Level 3 inputs under the Fair Value Measurements and Disclosures Topic of ASC 820. See Note 8 for further information.

Goodwill and Other Intangible Assets: Goodwill, which represents the cost in excess of fair market value of net assets acquired, was $19,634 as of January 24, 2014, and April 26, 2013. Other intangible assets were $3,309 and $3,427 as of January 24, 2014, and April 26, 2013, respectively. The goodwill and intangible assets are related to the BEF Foods segment. Of the $3,309 of intangible assets, $2,761 represents trademark assets and trained workforce intangibles that are not subject to amortization and $548 represents definite-lived non-compete agreements that are amortized on a straight-line basis over the estimated economic life of five years. Goodwill and trademark intangible assets are tested for impairment at the beginning of the fourth quarter each year or on a more frequent basis when events occur or circumstances change between the annual tests that would more likely than not reduce the fair value of the reporting unit below its carrying value.

 

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Earnings Per Share: Basic earnings-per-share computations are based on the weighted-average number of shares of common stock outstanding during the period presented in accordance with ASC 260. Diluted earnings-per-share calculations reflect the assumed exercise and conversion of employee stock options.

The numerator in calculating both basic and diluted earnings per share for each period was reported net income. The denominator was based on the weighted-average number of common shares outstanding.

Stock-Based Compensation: We account for stock-based compensation in accordance with the Stock Compensation topic of ASC 718. Accordingly, stock-based compensation awards are measured on the fair value of the award on the grant date and are recognized over the vesting period of the award on a straight-line basis.

Reporting Segments: We have two business segments: Bob Evans Restaurants and BEF Foods. See Note 4 for detailed segment information.

Long-term Investments: Long-term investments include assets held under certain deferred compensation arrangements, which primarily represent the cash surrender value of company-owned life insurance policies. An offsetting liability for the amount of the cash surrender value of company-owned life insurance is included in the deferred compensation liability amount on the Consolidated Balance Sheets. Purchases of company-owned life insurance policies are recorded as investing activities within the statement of cash flows. Long term investments totaled $31,588 and $29,723 as of January 24, 2014, and April 26, 2013, respectively. Change in the cash surrender value for these investments is reflected within the “Selling, general and administrative expenses” line (“SG&A”) in the Consolidated Statements of Net Income, and resulted in gains of $1,092 and $1,869 in the three and nine months ended January 24, 2014, and gains of $295 and $812 in the three and nine months ended January 25, 2013, respectively.

Financial Instruments: The fair value of our financial instruments (other than long-term debt) approximated their carrying value at January 24, 2014. See Note 8. We do not use derivative financial instruments for speculative purposes.

Commitments and Contingencies: We rent certain restaurant and other facilities under operating leases having initial terms that primarily expire approximately 20 years from commencement. The leases typically contain renewal clauses of five to 30 years exercisable at our option. Most of the leases also contain either fixed or inflation-adjusted escalation clauses.

We are self-insured for most casualty losses and employee health-care claims up to certain stop-loss limits per claim. We have accounted for liabilities of casualty losses, including both reported claims and incurred but not reported claims, based on information provided by independent actuaries. We have accounted for our employee health-care claims liability through a review of incurred and paid claims history. We do not believe that our calculation of casualty losses and employee health-care claims liabilities would change materially under different conditions and/or different methods. However, due to the inherent volatility of actuarially determined casualty losses and employee health-care claims, it is reasonably possible that we could experience changes in estimated losses, which could be material to quarterly net income.

Reclassification: In order to conform with our current period presentation, we reclassified $4,018 of carryout supplies expense incurred in the first and second quarter of fiscal 2014 and $2,606 and $6,572 of carryout supplies expense incurred in the three and nine months ended January 25, 2013, respectively, from the operating expenses line to the cost of sales line on the Consolidated Statements of Net Income. We believe that carryout supplies are better classified as a cost of sales expense rather than an other operating expense.

Discontinued Operations: In accordance with ASC 205-20, we use a single accounting model to account for all long-lived assets to be disposed of (by sale, abandonment, or distribution to owners). This includes asset disposal groups meeting the criteria for presentation as a discontinued operation. The criteria for reporting discontinued operations are as follows: 1) the Company has disposed of a component of their business or has met the held-for-sale criteria, 2) there are no ongoing operations or cash flows of the component and 3) the Company will not have continuing involvement in the operations of the component after the disposal transaction. A long-lived asset group classified as held for sale is measured at the lower of its carrying value or fair value less cost to sell. We classify the results of operations of a component classified as held for sale in discontinued operations in the period in which they occur, less applicable income taxes. See Note 2 for additional information regarding the classification of Mimi’s Café as a discontinued operation.

 

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New Accounting Standard: In July 2013, the FASB issued Accounting Standards Update (“ASU”) No. 2013-11, Presentation of an Unrecognized Tax Benefit, which states that an entity must offset any deferred tax asset recorded for a net operating loss with items recorded as unrecognized tax benefits. As such, an entity is required to net the balance sheet presentation of the net operating loss deferred tax asset with the unrecognized tax benefit. This netting is considered by jurisdiction and by legal entity. This standard is effective for interim and annual periods beginning after December 15, 2013, and is not anticipated to affect our consolidated financial statements.

2. Discontinued Operations

We sold Mimi’s Café, previously disclosed as a reporting segment, to SWH Mimi’s Café Holding Company, Inc., a wholly owned subsidiary of Le Duff America, Inc. (“Le Duff”), in the fourth quarter of fiscal 2013. As part of the sale, we entered into a transition services agreement with Le Duff whereby we provided corporate support services and a supply agreement whereby we provided food products. The transition services agreement was originally expected to expire in December 2013, and the supply agreement was originally expected to expire in February 2014.

In accordance with FASB ASC 205-20, Discontinued Operations, there is an assessment period for one year after a component has been disposed of, whereby an entity must reassess if they have significant continuing cash flows or significant continuing involvement in the operations of the component after the disposal to assess if the segment should be classified as continuing operations. As a result of having significant continuing cash flows, due to the two agreements noted above, the Mimi’s Café reporting segment was not initially presented within discontinued operations. On July 23, 2013, the Company received a notice from SWH Mimi’s Café, LLC that it was terminating this supply agreement with BEF Foods, Inc. The transition services agreement timing did not change significantly and expired in January 2014. As a result of this termination notice, the Company determined that it no longer had significant cash flows from Mimi’s Café operations, thus Mimi’s Café should be presented within discontinued operations for all years presented in the financial statements, effective with the Form 10-Q filed for the three months ended July 26, 2013.

We recorded a loss from discontinued operations, net of income taxes, of $354 and $488 for the three months and nine months ended January 24, 2014, respectively. For the three months and nine months ended January 25, 2013, we recorded a loss from discontinued operations, net of income taxes, of $80,219 and $83,572, respectively.

Discontinued operations only include the revenues and expenses that are specifically identified with Mimi’s Café, and excludes any allocation of corporate costs, including general and administrative expenses, which represented $793 and $2,133 in the three and nine months ended January 25, 2013, respectively.

The results of Mimi’s Café consist of the following:

 

     (in thousands)     (in thousands)  
     Three Months Ended     Nine Months Ended  
     Jan. 24, 2014     Jan. 25, 2013     Jan. 24, 2014     Jan. 25, 2013  

Net sales

   $ —        $ 91,119      $ —        $ 258,715   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from discontinued operations before income taxes

   $ (461   $ (67,590   $ (641   $ (73,149

(Benefit) provision for income taxes

     (107     12,629       (153     10,423  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from discontinued operations, net of income taxes

   $ (354   $ (80,219   $ (488   $ (83,572
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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3. Stock-Based Compensation

Stock-based compensation expense for continuing operations, included in S,G&A within the Consolidated Statements of Net Income, was $1,587 and $2,152 for the three months ended January 24, 2014, and January 25, 2013, respectively, and $5,165 and $5,528 for the nine months ended January 24, 2014, and January 25, 2013, respectively.

4. Reporting Segments

Information on our reporting segments is summarized as follows:

 

     (in thousands)  
     Three Months Ended     Nine Months Ended  
     Jan. 24, 2014     Jan. 25, 2013     Jan. 24, 2014     Jan. 25, 2013  
           (recast & adj.)           (recast & adj.)  

Sales:

        

Bob Evans Restaurants

   $ 240,506      $ 245,494      $ 725,557      $ 739,762   

BEF Foods

     103,485       105,517        287,523       279,331   

Intersegment net sales of food products

     (3,859     (7,690 ) 1       (10,899     (22,776 ) 2  
  

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal of BEF Foods

     99,626       97,827        276,624       256,555   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 340,132      $ 343,321      $ 1,002,181      $ 996,317   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income:

        

Bob Evans Restaurants

   $ 6,578      $ 16,988      $ 24,972      $ 53,440   

BEF Foods

     1,376       3,161        3,876       15,310   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 7,954      $ 20,149      $ 28,848      $ 68,750   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

1   Intersegment net sales of food products includes $4,072 of sales to discontinued operations
2   Intersegment net sales of food products includes $11,435 of sales to discontinued operations

5. Taxes

The provision for income taxes is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items. The effective income tax rate for continuing operations was 14.2% for the three months ended January 24, 2014, versus (97.5%) in the corresponding period a year ago. The Company’s effective income tax rate for continuing operations was 26.0% for the nine months ended January 24, 2014, versus 5.1% for the corresponding period a year ago. The quarterly rate is less than expected due to the impact that the reduction in our projected full year earnings had on our full year effective tax rate.

The change in tax rates over the prior years are primarily attributable to the tax impact of a corporate conversion implemented during the third quarter of fiscal 2013 and the reduction of book income for impairment charge of Mimi’s Café, which resulted in the Company recording a significant benefit for the fiscal year 2013. Tax expense on the third quarter pretax loss based on a forecasted annual negative effective tax rate resulted from a one-time permanent tax benefit on the conversion of Mimi’s Café.

During the third quarter of the current year, a correction of an error related to a Pre-Filing Agreement filed with the Internal Revenue Service was recorded. The error was identified during the return preparation process and related to an event recorded in the year ending April 26, 2013. The correction of the error of $862 is not expected to be material to the estimated results for fiscal 2014, nor expected to affect the trend of earnings and is considered immaterial in relation to the consolidated financial statements as a whole for fiscal year 2014.

 

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6. Debt

On January 2, 2014, we entered into a $750,000 Revolving Credit Facility Amended and Restated Credit Agreement (“Credit Agreement”). The Credit Agreement represents a syndicated secured revolving credit facility under which up to $750,000 will be available, with a letter of credit sub-facility of $50,000, and an accordion option to increase the revolving credit commitment to $1,050,000. It is secured by the stock pledges of certain material subsidiaries. This agreement replaced our existing variable-rate revolving credit facility. Borrowings under the Credit Agreement bear interest, at Borrower’s option, at a rate based on LIBOR or the Base Rate, plus a margin based on the Leverage Ratio, ranging from 1.00% to 2.00% per annum for LIBOR, and ranging from 0.00% to 1.00 % per annum for Base Rate. The Base Rate means for any day, a fluctuating per annum rate of interest equal to the highest of (i) the Federal Funds Open Rate, plus 0.5%, (ii) the Prime Rate, or (iii) the Daily LIBOR Rate, plus 1.0%. We are also required to pay a commitment fee of 0.15% per annum to 0.25% per annum of the average unused portion of the total lender commitments then in effect. We incurred financing costs of $2,068 associated with this refinancing, which along with previous unamortized debt financing costs of $760 are being amortized over five years.

The Credit Agreement has a Leverage Ratio covenant and a Coverage Ratio financial covenant. The Company was in compliance with the applicable ratio requirements and other covenants at January 24, 2014. Our effective interest rate for the Credit Agreement is 1.57% and 1.50% respectively for the three and nine months ended January 24, 2014. Of our total Credit Agreement, $13,399 is reserved for certain stand-by letters of credit. As of January 24, 2014, we had $372,829 outstanding on the Credit Agreement. The Credit Agreement has a maturity date of January 1, 2019. The primary purposes of the Credit Agreement are for trade and stand-by letters of credit in the ordinary course of business as well as working capital, refinancing of existing indebtedness, if any, capital expenditures, joint ventures and acquisitions, stock repurchases and other general corporate purposes.

On August 28, 2012, we obtained an interest-free loan of $1,000, due ten years from the date of borrowing, with no prepayment penalty. We have imputed interest based on our current borrowing rate. The loan provided funds to assist with the construction costs of our new corporate headquarters. This loan is considered a Level 2 fair value input. See Note 8.

7. Restructuring and Severance Charges

We recorded pretax restructuring and severance charges in continuing operations totaling $1,288 and $1,492 for the three months ended January 24, 2014, and January 25, 2013, respectively, and $4,370 and $6,234 for the nine months ended January 24, 2014, and January 25, 2013, respectively. These costs, reflected in S,G&A, related to organizational realignments and closures of production facilities. Additionally, we reduced stock compensation expense by $453 as an offset to our restructuring charges.

In May 2012, we announced our intention to close BEF Foods production plants in Springfield and Bidwell, Ohio. The action to close the food production facilities is intended to increase efficiency by consolidating production to our high capacity food production facility in Sulphur Springs, Texas.

On September 27, 2013, we announced the closure of our food production plant in Richardson, Texas, reducing our fresh sausage plant network to two facilities that have sufficient capacity to optimize our fresh sausage distribution network to meet our volume needs.

As of January 24, 2014, we anticipate that we will incur and pay an additional $777 related to restructuring and severance charges incurred in BEF Foods segment. These additional severance charges will be recognized based on completion of required service.

The components of the restructuring and severance charges are summarized below by reporting segment for the nine months ended January 24, 2014, and January 25, 2013:

 

     Bob Evans
Restaurants
    BEF Foods     Total  

Balance, April 26, 2013

   $ 1,260     $ 2,560     $ 3,820  

Restructuring and severance charges incurred

     1,838       2,532       4,370  

Adjustments

     (131     —         (131

Amounts paid

     (2,380     (3,410     (5,790
  

 

 

   

 

 

   

 

 

 

Balance, January 24, 2014

   $ 587     $ 1,682     $ 2,269  
  

 

 

   

 

 

   

 

 

 

 

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     Bob Evans
Restaurants
    BEF Foods     Total  

Balance, April 27, 2012

   $ —       $ —       $ —    

Restructuring and severance charges incurred

     1,050       5,184       6,234  

Amounts paid

     (982     (3,192     (4,174
  

 

 

   

 

 

   

 

 

 

Balance January 25, 2013

   $ 68     $ 1,992     $ 2,060  
  

 

 

   

 

 

   

 

 

 

8. Fair Value Measurements

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and is a market-based measurement based on assumptions of the market participants. As a basis for these assumptions, we classify fair value measurements under the following fair value hierarchy:

 

    Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that are publicly accessible. Active markets have frequent transactions with enough volume to provide ongoing pricing information.

 

    Level 2 inputs are other than level 1 inputs that are directly or indirectly observable. These can include unadjusted quoted prices for similar assets or liabilities in active markets, unadjusted quoted prices for identical assets or liabilities in inactive markets or other observable inputs.

 

    Level 3 inputs are unobservable inputs.

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of the periods presented:

 

     (in thousands)  
     January 24, 2014  
     Total      Level 1      Level 2      Level 3  

Assets

           

Cash and equivalents (1)

   $ 5,409       $ 5,409       $ —         $ —     

Short-term note receivable (2)

     18        —          18        —    

Long-term note receivable (3)

     15,716        —          231        15,485  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 21,143       $ 5,409       $ 249       $ 15,485   

Liabilities

           

Long-term debt (4)

   $ 831       $ —         $ 831       $ —     
     (in thousands)  
     April 26, 2013  
     Total      Level 1      Level 2      Level 3  

Assets

           

Cash and equivalents (1)

   $ 9,010       $ 9,010       $ —         $ —     

Short-term note receivable (2)

     18        —          18        —    

Long-term note receivable (3)

     13,815        —          245        13,570  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 22,843       $ 9,010       $ 263       $ 13,570   

Liabilities

           

Long-term debt (4)

   $ 816       $ —         $ 816       $ —     

 

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(1)   Cash and equivalents primarily represent cash deposits as well as credit card receivables that generally settle in less than three days.
(2)   Short-term note receivable is current portion of a note receivable from the sale of land with an interest rate of 7%.
(3)   Long-term note receivable includes a note receivable from the sale of land with an interest rate of 7% (Level 2), and a promissory note from SWH Mimi’s Café Holding Company, LLC that is valued using a discounted cash flow model (Level 3).
(4)   The fair value of our interest-free long-term debt is based on the current interest rates offered for similar instruments. This loan provided funds to assist with the construction costs of our new corporate headquarters.

The following table presents the activity related to level 3 fair value measurements for the periods presented:

 

    

(in thousands)

January 24, 2014

 
     Long-term note receivable  

Carrying value at the beginning of the period

   $ 13,570   

Plus:

  

Accretion (1)

     1,500  

Interest, net realized/unrealized gains (1)

     415  
  

 

 

 

Carrying value at the end of the period

   $ 15,485   
    

 

(in thousands)

April 26, 2013

 
     Long-term note receivable  

Carrying value at the beginning of the period

   $ —     

Note from SWH Mimi’s Café Holding Company, LLC.

     13,570  
  

 

 

 

Carrying value at the end of the period

   $ 13,570   

 

(1)   Reflected in the line “Net interest expense” in the Consolidated Statements of Net Income.

We use our weighted average cost of capital as the discount rate to value the promissory note from SWH Mimi’s Café Holding Company, LLC, which is an unobservable input. A reasonable change in this discount rate would not have a significant impact on the fair value of the promissory note.

In addition to the financial assets and liabilities that are measured at fair value on a recurring basis, we measure certain assets and liabilities at fair value on a nonrecurring basis, including, long-lived assets that have been reduced to fair value when they are held for sale and long-lived assets that are written down to fair value when they are impaired.

We evaluate the carrying amount of long-lived assets held and used in the business periodically and when events and circumstances warrant such a review, to ascertain if any assets have been impaired. The carrying amount of a long-lived asset or asset group is considered impaired when the carrying value of the asset or asset group exceeds the estimated fair value of the asset or asset group. The impairment loss recognized is the excess of the carrying value of the asset or asset group over its fair value, based on a discounted cash flow analysis using our weighted average cost of capital, and is recorded in S,G&A. The estimation of future cash flows requires significant estimates of factors that include future restaurant activities, sub-lease estimates and real estate appraisals. Assets that are written down to fair value when impaired are not subsequently adjusted to fair value unless further impairment occurs. The inputs to determine the fair value are considered level 3 measurements.

 

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Based on our purchase agreement, effective July 25, 2013, and subject to customary due diligence, to sell nonoperating property, plant and equipment at 29 locations for $3,450, we determined that indicators of impairment existed during the three months ended July 26, 2013, for our held for sale asset group. As a result of signing the purchase agreement, we determined that the long-lived asset group’s then-current carrying value of $11,969 was greater than the fair value (the selling price less estimated selling costs). This resulted in pretax noncash assets held for sale impairment charges in the Bob Evans Restaurants business segment of $9,380 incurred during the first and second quarters of fiscal 2014. These impairment charges are included in the “Impairment of assets held for sale” line in the Consolidated Statements of Net Income and the fair value of the remaining assets are included in the “Current assets held for sale” line in the consolidated balance sheets, as of October 25, 2013. Upon being classified as held for sale, depreciation ceased for these assets.

As of January 24, 2014, we have closed on the sale of 28 of the 29 nonoperating properties.

On September 27, 2013, we announced our plans to close our food production plant in Richardson, Texas. Based on the estimated value of the facility, we determined that the long-lived asset group’s then-current carrying value of $8,111 was greater than the fair value of $5,111 (the selling price less estimated selling costs). This resulted in a pretax, noncash assets held for sale impairment charge in the BEF Foods segment of $3,000 during the three months ended October 25, 2013. The long-lived asset group related to this plant is included at its fair value in the “Current assets held for sale” line in the consolidated balance sheets, as of October 25, 2013. Upon being classified as held for sale, depreciation ceased for these assets.

To be consistent with current period presentation, we have reclassified the assets for three nonoperating locations and the Richardson plant to the “Long-term assets held for sale” line in the consolidated balance sheets as of April 26, 2013.

In January 2014 we incurred noncash asset impairment charges of $1,769 in the Bob Evans Restaurant segment, a result of current profitability trends at five restaurant locations. These impairment charges are recorded in the SG&A line on the Consolidated Statement of Income. We use our weighted average cost of capital as the discount rate in our fair value measurements for the impairment charges incurred in the third quarter. A reasonable change in this discount rate would not have a significant impact on these fair value measurements.

The following table represents impairments for those assets re-measured to fair value on a non-recurring basis:

 

     (in thousands)  
     Impairments     Impairments  
     Three Months Ended     Nine Months Ended  
     January 24, 2014     January 25, 2013     January 24, 2014     January 25, 2013  

Bob Evans Restaurants

        

Assets held for use

   $ 1,769 1     $ 2,371 2     $ 4,133 3     $ 3,598 6  

Assets held for sale

     —            9,380 4    

BEF Foods

        

Assets held for sale

   $ —        $ —        $ 3,000 5     $ —     

 

1   $1,769 relates to impairment of five operating locations
2   $1,717 and $654 relate to impairment of three operating and five nonoperating locations respectively
3   $4,133 relates to impairment of seven operating locations
4   $9,380 relates to impairment of 29 nonoperating locations
5   $3,000 relates to impairment of one nonoperating location
6   $1,717 and $1,881 relate to impairment of three operating and six nonoperating locations respectively

 

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9. Commitments and Contingencies

We are subject to various claims and contingencies related to lawsuits and other matters arising out of the normal course of business. We are of the opinion that there are no matters pending or threatened that are expected to have a material adverse effect, individually or in the aggregate, on our consolidated financial condition or results of operations.

In August 2012, a former Bob Evans Restaurant employee filed an action against Bob Evans Farms, Inc. (“Bob Evans”) in the United States District Court for the Southern District of Ohio (the “Ohio District Court”). The lead plaintiff alleged that Bob Evans violated the Fair Labor Standards Act by failing to pay overtime compensation during the period of time the employee worked as an assistant manager. The lead plaintiff sought to maintain the suit as a collective action on behalf of other similarly situated assistant managers. Thirteen other former employees have since opted into the case, although three have subsequently withdrawn (including the original lead plaintiff). The Court has since approved the substitution of another former employee as the lead plaintiff. Plaintiffs filed a motion for conditional certification, Bob Evans filed a motion in opposition to the same, and the Ohio District court granted conditional certification on December 5, 2013. The proceedings remain in the early stages with significant uncertainty as to factual issues, outcome of legal proceedings and likely number of opt-in plaintiffs and/or damages claimed. We do not believe based on currently available information, that the outcome of this matter will have a material adverse effect on our financial condition, though an adverse outcome could be material to our results of operations for a particular period. We believe the claims are without merit and intend to vigorously contest the action.

10. Supplemental Cash Flow Information

Cash paid for income taxes and interest for the nine months ended January 24, 2014, and January 25, 2013, is summarized as follows:

 

    

(in thousands)

Nine Months Ended

 
     January 24, 2014      January 25, 2013  

Income taxes paid, net

   $ 1,221       $ 33,170   
  

 

 

    

 

 

 

Interest paid

   $ 3,031       $ 11,439   
  

 

 

    

 

 

 

Non cash investing activities is summarized as follows:

     
    

(in thousands)

Nine Months Ended

 
     January 24, 2014      January 25, 2013  

Accretion of long-term note receivable

   $ 1,500       $ —     
  

 

 

    

 

 

 

11. Subsequent Events

On February 25, 2014, the Board of Directors authorized a stock repurchase program for Fiscal 2015 of up to $100,000. The Fiscal 2015 program will authorize the Company to repurchase its outstanding common stock pursuant to plans approved by the Board under SEC Rules 10b-18 and 10b5-1, and in the open market or through privately negotiated transactions.

On February 25, 2014, the Board of Directors approved a quarterly cash dividend of $0.310 per share, payable on March 24, 2014, to shareholders of record at the close of business on March 10, 2014.

We announced on March 4, 2014, a strategic realignment and reduction of personnel at Bob Evans Restaurants, BEF Foods and at our corporate office as part of our comprehensive plan to reduce SG&A expense and deliver on our commitment of 300 to 350 basis points of margin improvement by fiscal year 2018.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

General Overview

In our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), we use the terms “Bob Evans,” “Company,” “we,” “us” and “our” to collectively refer to Bob Evans Farms, Inc., a Delaware corporation, and its subsidiaries. The following terms used herein are registered trademarks or service marks of Bob Evans: Bob Evans ® , Bob Evans Restaurants ® , Bob Evans Special Touch ® , Best Brand Builders SM , Farm Fresh ® , Kettle Creations ® , Owens ® and Taste of the Farm ® . We may use other trademarks or service marks in this document.

As of January 24, 2014, we owned and operated 562 Bob Evans Restaurants in 19 states. Bob Evans Restaurants are primarily located in the Midwest, Mid-Atlantic and Southeast regions of the United States. Revenue in the Bob Evans Restaurants segment is recognized at the point of sale, other than revenue from the sale of gift cards, which is deferred and recognized upon redemption.

We sold Mimi’s Café, previously disclosed as a reporting segment, to SWH Mimi’s Café Holding Company, Inc., a subsidiary of Le Duff America, Inc. (“Le Duff”) in the fourth quarter of fiscal 2013. As part of the sale, we entered into a transition services agreement with Le Duff America, Inc. where we provided corporate support services and a supply agreement where we provided food products. The transition services agreement was originally expected to expire in December of 2013 and the supply agreement was originally expected to expire in February of 2014.

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-20, Discontinued Operations, there is an assessment period for one year after a component has been disposed of, whereby an entity must reassess if they have significant continuing cash flows or significant continuing involvement in the operations of the component after the disposal upon the occurrence of a triggering event. As a result of having significant continuing cash flows, due to the two agreements noted above, the Mimi’s Café business segment was not initially presented within discontinued operations. On July 23, 2013, the Company received a notice from SWH Mimi’s Café, LLC that it was terminating the supply agreement with BEF Foods, Inc. The transition services agreement timing did not change significantly and expired in January 2014. As a result of this termination notice, the Company determined that they no longer had significant cash flows from Mimi’s Café operations, thus Mimi’s Café should be presented within discontinued operations for all years presented in the financial statements, effective with the Form 10-Q filed for the three months ended July 26, 2013. The fiscal year 2013 financial statements have been appropriately recast to reflect the Mimi’s Café operations within discontinued operations.

In our BEF Foods segment, we produce and distribute pork sausage products and a variety of complementary homestyle refrigerated side dishes and frozen food items under the Bob Evans, Owens and Country Creek brand names in fifty states, and to third parties who distribute to Mexico. These food products are distributed primarily to warehouses that distribute to grocery stores throughout the United States. Additionally, we manufacture and sell similar products to foodservice accounts, including Bob Evans Restaurants and other restaurants and food sellers. Revenue in the BEF Foods segment is recognized when products are received by our customers. All revenue is presented net of sales tax.

This MD&A and other written or oral statements that we make from time to time may contain forward-looking statements that set forth anticipated results based on management’s plans and assumptions. Statements in this MD&A that are not historical facts are forward-looking statements. These statements are often indicated by words such as “expects,” “anticipates,” “believes,” “estimates,” “intends” and “plans.” Forward-looking statements involve various important assumptions, risks and uncertainties. Actual results may differ materially from those predicted by the forward-looking statements because of various factors and possible events, including the assumptions, risks and uncertainties discussed in our Annual Report on Form 10-K for the fiscal year ended April 26, 2013, under the heading “Item 1A. Risk Factors,” and as supplemented in our other filings with the Securities and Exchange Commission. We note these factors for investors as contemplated by the Private Securities Litigation Reform Act of 1995. It is

 

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impossible to predict or identify all of the risk factors that we face. Consequently, you should not consider any such list to be a complete set of all potential assumptions, risks or uncertainties. Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update any forward-looking statement for circumstances or events that occur after the date on which the statement is made. Any further disclosures we make in our filings with the Securities and Exchange Commission should also be consulted.

Three Months Ended January 24, 2014 as Compared to Three Months Ended January 25, 2013

The following table reflects data for the three months ended January 24, 2014, compared to the prior year’s three months ended January 25, 2013. The consolidated information is derived from the accompanying Consolidated Statements of Net Income. The table also includes data for our two segments – Bob Evans Restaurants and BEF Foods. The ratios presented reflect the underlying dollar values expressed as a percentage of the applicable net sales amounts.

 

     Consolidated Results     Bob Evans Restaurants     BEF Foods  
(in thousands)    Q3 2014     Q3 2013     Q3 2014     Q3 2013     Q3 2014     Q3 2013  
           (recast &
adj.)
          (recast &
adj.)
          (recast &
adj.)
 

Net sales

   $ 340,132      $ 343,321      $ 240,506      $ 245,494      $ 99,626      $ 97,827   

Operating income

   $ 7,954      $ 20,149      $ 6,578      $ 16,988      $ 1,376      $ 3,161   

Cost of sales

     34.6     33.2     26.1     25.3     55.3     52.9

Operating wages

     30.1     30.0     37.8     37.5     11.6     11.1

Other operating

     14.4     14.2     16.7     16.6     8.9     7.9

S,G&A

     12.0     11.8     9.4     8.1     18.3     21.2

Depreciation and amortization

     6.5     5.0     7.3     5.5     4.6     3.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income from continuing operations

     2.3     5.9     2.7     6.9     1.4     3.2

Sales

Consolidated net sales from continuing operations decreased 0.9% to $340.1 million for the three months ended January 24, 2014, compared to $343.3 million in the corresponding period last year. The net sales decrease was comprised of an increase of $1.8 million in BEF Foods segments’ net sales, more than offset by a decrease of $5.0 million in Bob Evans Restaurants.

Bob Evans Restaurants’ net sales decreased $5.0 million, a 2.0% decrease, for the three months ended January 24, 2014, compared to the corresponding period last year. The decrease in net sales in the three months ended January 24, 2014, was primarily the result of a decline in same-store sales of 1.8% primarily due to severe winter weather conditions experienced during the quarter, compared to a same-store sales increase of 1.6% for the three months ended January 25, 2013. Additionally, six restaurants closed since the corresponding period last year, partially offset by sales from three new restaurants opened during fiscal 2014 and the majority of our restaurants being open on Thanksgiving in the third quarter 2014.

Same-store sales computations for a given year are based on net sales of restaurants that are open for at least 18 months prior to the start of that year. Net sales of restaurants to be rebuilt are excluded for all periods in the same-store sales computation when construction of the replacement building commences. Net sales of closed restaurants are excluded from the same-store sales computation in the period in which the restaurants are closed; with the exception of closed restaurant days for restaurants undergoing the Farm Fresh Refresh remodel initiative, which are included in the same-store sales base.

 

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The following chart summarizes the restaurant openings and closings during the last seven quarters for Bob Evans Restaurants:

 

     Beginning      Opened      Closed      Ending  

Fiscal 2014

           

1 st quarter

     560        1        1        560  

2 nd quarter

     560        1        —          561  

3 rd quarter

     561        1        —          562  

Fiscal 2013

           

1 st quarter

     565        2        2        565  

2 nd quarter

     565        —          —          565  

3 rd quarter

     565        —          —          565  

4 th quarter

     565        —          5        560  

In the three months ended January 24, 2014, we opened one new Bob Evans Restaurant and remodeled 39 existing locations. Our Farm Fresh Refresh remodeling initiative is designed to drive dine-in sales and expand high potential growth layers, such as carryout, catering and bakery sales. We continue to focus on improvement of same-store sales at Bob Evans Restaurants and believe our broad sales layer initiatives offer value and menu innovation across the breakfast, lunch and dinner day parts, which are key to this focus. We offer $9.99 Three-Course Dinners, $20 Family Meals-to-Go and our $5 Carryout-to-Go. In December 2013 we introduced a $7.99 Knife & Fork Sandwich value platform. We expect to complete the Farm Fresh Refresh remodeling initiative for all Bob Evans Restaurants during fiscal 2014, except for the six general store-format restaurants, which we have decided to exclude from the Farm Fresh Refresh program. We expect to open up to four new restaurants in fiscal 2014, of which three have already opened and one more is expected to open in the fourth quarter, and up to 10 new restaurants in fiscal 2015.

In the BEF Foods segment, we believe there are opportunities to increase product volume through accelerating product innovation, the expansion of production facilities, expanding our selection of food products at each distribution point, insourcing additional Bob Evans Restaurants needs and through acquisitions. The insourcing relationship not only benefits the BEF Foods segment through potential increases in total pounds sold, it also offers consistency to our guests, reduces product preparation time and helps insulate Bob Evans Restaurants from arbitrary price increases from outside suppliers.

The BEF Foods segment experienced a sales increase of $1.8 million, or 1.8%, in the three months ended January 24, 2014, compared to the corresponding period last year. The increase in net sales in the three months ended January 24, 2014, was primarily due to price increases driven by sow costs, partially offset by a decrease in pounds sold of 11.1%, which reflected the impact of a supplier dispute and start-up inefficiencies related to the expansion at the Sulphur Springs facility which temporarily impacted the segment’s food service sales and to a lesser extent, retail sales. During the first quarter of the fiscal year, the buyer of Mimi’s Café notified the Company they were terminating their supply agreement with BEF Foods.

The expansions of our Lima, Ohio, and our Sulphur Springs, Texas, production facilities were completed during the second quarter of fiscal 2014. We expect to see continued efficiencies and growth in our refrigerated side dish and precooked food products. We anticipate the efficiencies gained will enable us to focus on product innovation for future growth and margin improvements.

On September 27, 2013, we announced the closure of our food production plant in Richardson, Texas, reducing our fresh sausage plant network to two facilities to optimize our fresh sausage production network.

On May 29, 2012, we announced an additional phase to our plant optimization initiatives with the plan to close our ready-to-eat manufacturing plant in Bidwell, Ohio, and our soup and gravy manufacturing plant in Springfield, Ohio. We have ceased operations at these two facilities and have consolidated the volume in Sulphur Springs, Texas, as part of that plant’s expansion.

 

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Cost of Sales

Consolidated cost of sales (cost of materials) from continuing operations was 34.6% of net sales in the three months ended January 24, 2014, compared to 33.2% of net sales in the corresponding period a year ago.

Bob Evans Restaurants’ cost of sales, predominantly food costs was 26.1% of net sales for the three months ended January 24, 2014, compared to 25.3% of net sales in the corresponding period a year ago. The increase in cost of sales as a percentage of net sales was primarily due to increased discount activity, commodity cost increases, mix and the severe winter weather. The commodity cost increases were driven by pork and beef items, partially offset by declines in beverages, and desserts.

BEF Foods’ cost of sales ratio was 55.3% of net sales in the three months ended January 24, 2014, compared to 52.9% of net sales in the corresponding period a year ago. The increase was due primarily to the $4.5 million increase in sow costs and start-up costs related to the expansion at our Sulphur Springs facility. Sow costs averaged $72.36 per hundredweight, in the three months ended January 24, 2014, compared to $58.72 per hundredweight, in the corresponding period last year.

Operating Wage and Fringe Benefit Expenses

Consolidated operating wage and fringe benefit expenses (“operating wages”) from continuing operations were 30.1% of net sales in the three months ended January 24, 2014, compared to 30.0% of net sales in the corresponding period last year.

Bob Evans Restaurants’ operating wages were 37.8% of net sales in the three months ended January 24, 2014, compared to 37.5% of net sales, in the corresponding period last year. Operating wages were higher as a percentage of net sales due to inefficiency due to sales deleverage, the severe winter weather and increased discount activity, partially offset by savings from the workforce transformation initiatives.

In BEF Foods, operating wages were 11.6% of net sales for the three months ended January 24, 2014, compared to 11.1% of net sales in the corresponding period last year. The increase in the operating wages ratio was primarily due to an increase in wage expense, due to additional labor hours incurred as part of plant start-up costs related to the expansion at our Sulphur Springs facility, partially offset by a reduction in performance-based compensation.

Other Operating Expenses

Consolidated other operating expenses from continuing operations were 14.4% of net sales for the three months ended January 24, 2014, compared to 14.2% in the corresponding period last year. Approximately 82% of other operating expenses in the three months ended January 24, 2014, occurred in Bob Evans Restaurants. The most significant components of other operating expenses were utilities, restaurant advertising, non-income based taxes, restaurant supplies, repairs and maintenance, rent, credit/debit/gift card processing fees, snow removal and preopening expenses related to our Farm Fresh Refresh remodeling initiative, and new restaurant openings.

Bob Evans Restaurants’ other operating expenses were 16.7% of net sales for the three months ended January 24, 2014, compared to 16.6% of net sales in the corresponding period last year as a result of costs incurred due to severe winter weather.

BEF Foods’ other operating expenses were 8.9% of net sales for the three months ended January 24, 2014, compared to 7.9% of net sales in the corresponding period last year. The increase in the other operating expense ratio was due primarily to start-up costs related to the expansion at the Sulphur Springs facility and higher repairs and maintenance costs.

 

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Selling, General and Administrative Expenses (“S,G&A”)

Consolidated S,G&A expenses from continuing operations were 12.0% of net sales for the three months ended January 24, 2014, compared to 11.8% of net sales in the corresponding period last year. The most significant components of consolidated S,G&A expenses were non-restaurant wages and fringe benefits, transportation costs, impairment and restructuring and severance costs.

Bob Evans Restaurants’ S,G&A expenses were 9.4% of net sales for the three months ended January 24, 2014, compared to 8.1% of net sales in the corresponding period last year. The increase in SG&A expenses as a percent of net sales is primarily due to $1.3 million in allocated professional fees, which includes costs related to strengthening the Company’s internal processes and controls over financial reporting and shareholder activism.

BEF Foods’ S,G&A expenses were 18.3% of net sales for the three months ended January 24, 2014, compared to 21.2% of net sales in the corresponding period last year. The decrease in SG&A expenses is due primarily to a $3.9 million reduction in advertising expenses, partially offset by $0.4 million of additional allocated professional fees, primarily related to strengthening the Company’s internal processes and controls over financial reporting and shareholder activism.

Depreciation and Amortization

Consolidated depreciation and amortization expenses (“D&A”) from continuing operations were 6.5% of net sales for the three months ended January 24, 2014, compared to 5.0% of net sales in the corresponding period last year.

Bob Evans Restaurants’ D&A expenses were 7.3% of net sales for the three months ended January 24, 2014, compared to 5.5% of net sales in the corresponding period last year. The increase in the D&A ratio is primarily the result of $2.5 million in depreciation expense due to an increase in depreciable assets related to Bob Evans Restaurants’ Farm Fresh Refresh remodeling initiative and new restaurant development. We remodeled 39 existing Bob Evan Restaurants in the third quarter ended January 24, 2014, as part of our Farm Fresh Refresh remodeling initiative. We also opened one new restaurant during the third quarter. We expect to complete the Farm Fresh Refresh remodeling initiative for all Bob Evans Restaurants during fiscal 2014, except for the six general store-format restaurants, which we have decided to exclude from the Farm Fresh Refresh program. We expect to expand our new restaurant opening program in fiscal 2015 with an evolved design and upgraded site selection process intended to drive average unit volumes in excess of our current average unit volume.

BEF Foods’ D&A expenses were 4.6% of net sales for the three months ended January 24, 2014, compared to 3.6% of net sales in the corresponding period last year. The increase in D&A ratio is primarily the result of an increase in depreciable assets related to our Lima, Ohio, and Sulphur Springs, Texas, plant expansions.

 

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Interest

Net interest expense from continuing operations for the three months ended January 24, 2014, compared to the corresponding period last year was as follows:

 

     Three Months Ended  

(in thousands)

   January 24, 2014     January 25, 2013  

Gross interest expense:

    

Fixed-rate debt

   $ 93      $ 7,231   

Variable-rate debt

     1,400       482  

Capitalized interest

     (69     (262
  

 

 

   

 

 

 

Total interest expense

     1,424       7,451  

Gross interest income

    

Accretion

     (419     —    

Other

     (130     —    
  

 

 

   

 

 

 

Total interest income

     (549     —    
  

 

 

   

 

 

 

Net interest expense (income)

   $ 875      $ 7,451   
  

 

 

   

 

 

 

At January 24, 2014, $372.8 million and $0.8 million were outstanding on our revolving credit facility and on our other long-term debt, respectively. The other long-term debt represents an interest-free loan of $1.0 million due ten years from the date of borrowing that we obtained in the second quarter of fiscal 2013. We have imputed interest on the long-term debt based on our current borrowing rate.

A change in market interest rates will impact our credit facility when there is an outstanding balance. For example, a 1% increase in the benchmark rate used for our credit facility would increase our annual interest expense by approximately $3.7 million, assuming the $372.8 million outstanding at the end of the three months ended January 24, 2014, was outstanding for the entire year.

Taxes

The provision for income taxes is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items. The effective income tax rate from continuing operations was 14.2% for the three months ended January 24, 2014, versus (97.5%) in the corresponding period a year ago. The quarterly rate is less than expected due to the impact that the reduction in our projected full year earnings had on our full year effective tax rate.

The increased tax rates over the prior year is primarily attributable to the tax impact of a corporate conversion implemented during the third quarter of fiscal 2013 and the reduction of book income for the impairment charge of Mimi’s Café, which resulted in the Company recording a significant benefit for the fiscal year 2013. Tax expense on third quarter pretax loss is based on a forecasted annual negative effective tax rate that resulted from a one-time permanent tax benefit on the corporate conversion and impairment of Mimi’s Café.

During the third quarter of the current year, a correction of an error related to a Pre-Filing Agreement filed with the Internal Revenue Service was recorded. The error was identified during the return preparation process and related to an event recorded in the year ending April 26, 2013. The correction of the error of $0.9 million is not expected to be material to the estimated results for fiscal 2014, not expected to affect the trend of earnings and is considered immaterial in relation to the consolidated financial statements as a whole for fiscal year 2014.

On a full year basis, we anticipate our effective rate to be between 25% and 27%. Our effective income tax rate is evaluated each quarter. The effective income tax rate for the quarter may or may not represent the expected annual effective income tax rate for the entire fiscal year and includes the impact of discrete items for the quarter.

 

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Loss From Discontinued Operations

We sold Mimi’s Café, previously disclosed as a reporting segment, to Le Duff in the fourth quarter of fiscal 2013. As part of the sale, we entered into a transition services agreement with Le Duff whereby we were to provide corporate support services and a supply agreement whereby we were to provide food products. The transition services agreement was originally expected to expire in December 2013 and the supply agreement was originally expected to expire in February 2014.

In accordance with FASB ASC 205-20, Discontinued Operations, there is an assessment period for one year after a component has been disposed of, whereby an entity must reassess if they have significant continuing cash flows or significant continuing involvement in the operations of the component after the disposal to assess if the segment should be classified as continuing operations. As a result of having significant continuing cash flows, due to the two agreements noted above, the Mimi’s Café reporting segment was not initially presented within discontinued operations. On July 23, 2013, the Company received a notice from SWH Mimi’s Café, LLC that it was terminating this supply agreement with BEF Foods, Inc. The transition services agreement timing did not change significantly and expired in January 2014. As a result of this termination notice, the Company determined they no longer had significant cash flows from Mimi’s Café operations, thus Mimi’s Café should be presented within discontinued operations for all years presented in the financial statements, effective with the Form 10-Q filed for the three months ended July 26, 2013.

In the third quarter, we recorded a loss, net of income tax, from discontinued operations, of $0.3 million in the Consolidated Statements of Net Income. For the prior year, the loss from discontinued operations, net of tax was $80.2 million. The loss from discontinued operations in the prior year was primarily a result of an impairment recorded on Mimi’s Café long-lived assets.

Discontinued operations only include the revenues and expenses that are specifically identified with Mimi’s Café and excludes any allocation of corporate costs, including certain general and administrative expenses, which represent $0.8 million for the three months ended January 25, 2013. The general and administrative expenses excluded from the loss on discontinued operations were reallocated to our Bob Evans Restaurants and BEF Foods segments in the amount of $0.6 million and $0.2 million, respectively, for the three months ended January 25, 2013.

Nine Months Ended January 24, 2014 as Compared to Nine Months Ended January 25, 2013

The following table reflects data for the nine months ended January 24, 2014, compared to the prior year’s nine months ended January 25, 2013. The consolidated information is derived from the accompanying Consolidated Statements of Net Income. The table also includes data for our two segments – Bob Evans Restaurants and BEF Foods. The ratios presented reflect the underlying dollar values expressed as a percentage of the applicable net sales amounts.

 

     Consolidated Results     Bob Evans Restaurants     BEF Foods  
(in thousands)    Q3 YTD
2014
    Q3 YTD
2013
    Q3 YTD
2014
    Q3 YTD
2013
    Q3 YTD
2014
    Q3 YTD
2013
 
           (recast & adj)           (recast & adj)           (recast)  

Net sales

   $ 1,002,181      $ 996,317      $ 725,557      $ 739,762      $ 276,624      $ 256,555   

Operating income

   $ 28,848      $ 68,750      $ 24,972      $ 53,440      $ 3,876      $ 15,310   

Cost of sales

     33.7     31.5     25.5     24.9     55.0     50.5

Operating wages

     30.4     30.7     37.7     37.6     11.3     10.8

Other operating

     14.8     14.8     17.0     17.2     8.9     7.9

S,G&A

     11.3     11.3     8.6     7.8     18.4     21.3

Depreciation and amortization

     5.8     4.9     6.4     5.3     4.0     3.6

Impairment of assets held for sale

     1.2     0.0     1.3     0.0     1.1     0.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income from continuing operations

     2.9     6.9     3.4     7.2     1.4     6.0

 

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Sales

Consolidated net sales from continuing operations increased 0.6% to $1,002.2 million for the nine months ended January 24, 2014, compared to $996.3 million in the corresponding period last year. The net sales increase was comprised of a decrease of $14.2 million and an increase of $20.1 million in Bob Evans Restaurants and BEF Foods segments’ net sales, respectively. Bob Evans Restaurants experienced a same-store sales decline of 1.4% in the nine months ended January 24, 2014, compared to a same-store sales increase of 1.2% in the nine months ended January 25, 2013, with unfavorable traffic, partially offset by favorable menu mix and pricing.

Bob Evans Restaurants’ net sales decreased $14.2 million, a 1.9% decrease, in the nine months ended January 24, 2014, compared with the corresponding period last year. The decrease in net sales was primarily the result of a 1.4% same-store sales decline, partially the result of severe winter weather conditions experienced in the third quarter. Six restaurants closed since the corresponding period last year, partially offset by three restaurants opened since the corresponding period last year. Additionally, sales declined as a result of an increase in closed restaurant days resulting from our acceleration of the Farm Fresh Refresh remodel initiative and an increase in promotional activity, which is a reduction to gross sales. Our closed restaurant days increased to 1,086 days compared to 802 days in the corresponding period last year.

Same-store sales computations for a given year are based on net sales of restaurants that are open for at least 18 months prior to the start of that year. Net sales of restaurants to be rebuilt are excluded for all periods in the same-store sales computation when construction commences on the replacement building. Net sales of closed restaurants are excluded from the same-store sales computation in the period in which the restaurants are closed with the exception of closed restaurant days for restaurants undergoing the Farm Fresh Refresh remodel initiative, which are included in the same-store sales base.

During the nine months ended January 24, 2014, we opened three new Bob Evans Restaurants, closed one restaurant damaged by a sink hole, and remodeled 165 existing locations. Our Farm Fresh Refresh remodeling initiative is designed to drive dine-in sales and expand high potential growth sales layers, such as carryout, catering and bakery sales. We continue to focus on improvement of same-store sales at Bob Evans Restaurants and believe our broad sales layer initiatives offer value and menu innovation across the breakfast, lunch and dinner day parts, which are key to this focus. We offer $9.99 Three-Course Dinners, $20 Family Meals-to-Go and our $5 Soups and Sides Carryout-to-Go. In December 2013, we introduced a $7.99 Knife & Fork Sandwich value platform. We expect to complete the Farm Fresh Refresh remodeling initiative for all Bob Evans Restaurants during fiscal 2014, except for the six general store-format restaurants, which we have decided to exclude from the Farm Fresh Refresh program. We expect to open up to four new restaurants in fiscal 2014, of which three have already opened and one more is expected to open in the fourth quarter, and up to 10 new restaurants in fiscal 2015.

The BEF Foods segment experienced a sales increase of $20.1 million, or 7.8%, during the nine months ended January 24, 2014, compared to the corresponding period last year. The increase in net sales in the nine months ended January 24, 2014, is a result of pricing and mix, offset by a 0.8% decrease in total pounds sold. The sales decline was due to the sale of the SWH facility in California that had been supporting Mimi’s Café.

We believe there are opportunities to increase product volume through accelerating product innovation, the expansion of production facilities, expanding our selection of food products at each distribution point, insourcing additional Bob Evans Restaurants needs and acquisitions. The insourcing relationship not only benefits the BEF Foods segment through potential increases in total pounds sold, it also offers consistency to our restaurant guests, reduces product preparation and helps insulate Bob Evans Restaurants from arbitrary price increases from outside suppliers.

 

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The expansion of our Lima, Ohio, and our Sulphur Springs, Texas, production facilities were completed during the second quarter of fiscal 2014. We expect to see continued efficiencies and growth in our refrigerated side dishes and pre-cooked food products. We anticipate the efficiencies gained will enable us to continue our focus on product innovation for future growth and margin improvements.

On May 29, 2012, we announced an additional phase to our plant optimization initiatives with the plan to close our ready-to-eat manufacturing plant in Bidwell, Ohio, and our soup and gravy manufacturing plant in Springfield, Ohio. We ceased operations at these two facilities and have consolidated the volume in Sulphur Springs, Texas, as part of that plant’s expansion.

On September 27, 2013, we announced the closure of our food production plant in Richardson, Texas, reducing our fresh sausage plant network to two facilities to optimize our fresh sausage production network.

Cost of Sales

Consolidated cost of sales (cost of materials) from continuing operations was 33.7% of net sales in the nine months ended January 24, 2014, compared to 31.5% of net sales in the corresponding period a year ago.

Bob Evans Restaurants’ cost of sales, predominantly food costs, were 25.5% of net sales for the nine months ended January 24, 2014, compared to 24.9% of net sales in the corresponding period a year ago. The Bob Evans Restaurants’ cost of sales ratio increased due to commodity cost increases, primarily driven by bacon and other pork-related items and beef. We responded to these commodity cost increases late in the first quarter of fiscal 2014 by designing an updated menu that focuses on higher margin items, such as beverages, breakfasts and less costly proteins, primarily poultry. The cost of sales ratio was also negatively impacted by the increased promotional activity, which is reflected as a reduction of gross sales and the third quarter severe winter weather effect.

BEF Foods’ cost of sales ratio was 55.0% of net sales in the nine months ended January 24, 2014, compared to 50.5% of net sales in the corresponding period a year ago. The increase in the BEF Foods’ cost of sales ratio was due primarily to higher sow costs, an increase of $15.6 million, partially offset by the effect of the Lima, Ohio, plant acquisition. Prior to the acquisition of the Lima, Ohio, plant, substantially all costs related to acquiring product from the Lima, Ohio, plant were included in inventories upon receipt of goods, then expensed to cost of sales upon shipment to customers, as BEF Foods was buying a finished product. Subsequent to the acquisition, as an owned facility, rather than as a co-packer, labor costs are included in operating wages; and utilities, freight, and hauling costs are included in other operating expenses. Sow costs averaged $71.41 per hundredweight, in the nine months ended January 24, 2014, compared to $52.19 per hundredweight, in the corresponding period last year.

Operating Wage and Fringe Benefit Expenses

Consolidated operating wages from continuing operations were 30.4% of net sales in the nine months ended January 24, 2014, compared to 30.7% of net sales in the corresponding period last year.

Bob Evans Restaurants’ operating wages were 37.7% of net sales in the nine months ended January 24, 2014, compared to 37.6% of net sales, in the corresponding period last year. The operating wages ratio in the nine months ended January 24, 2014, increased as a percentage of sales due to sales deleverage from same-store sales declines, the third quarter severe winter weather effect, implementation costs for the new workforce management program and increased promotional activity.

In BEF Foods, operating wages were 11.3% of net sales for the nine months ended January 24, 2014, compared to 10.8% of net sales in the corresponding period last year. The increase in the operating wages ratio was primarily due to an increase in labor hours in the third quarter and to additional operating wages and fringe benefits associated with our acquisition of the Lima, Ohio, plant, early in the second quarter of fiscal 2013. Prior to the acquisition of the Lima, Ohio plant, substantially all costs related to acquiring product from the Lima, Ohio, plant were included in inventories upon receipt of goods, then expensed to cost of sales upon shipment to customers, as BEF Foods was buying a finished product. Subsequent to the acquisition of the Lima, Ohio, plant, as an owned facility rather than a supplier, Lima, Ohio’s, labor costs were included in operating wages, resulting in an increase in operating wages.

 

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Other Operating Expenses

Consolidated other operating expenses from continuing operations were 14.8% of net sales for both the nine months ended January 24, 2014, and the corresponding period last year. Approximately 83% of other operating expenses in the nine months ended January 24, 2014, occurred in Bob Evans Restaurants. The most significant components of other operating expenses were utilities, restaurant advertising, restaurant supplies, repairs and maintenance, non-income based taxes, rent, credit/debit/gift card processing fees, insurance and preopening expenses related to our Farm Fresh Refresh remodeling initiative and new restaurant openings.

Bob Evans Restaurants’ other operating expenses were 17.0% of net sales for the nine months ended January 24, 2014, compared to 17.2% of net sales in the corresponding period last year. The decrease in the other operating expenses ratio is a result of a reduction in advertising expenses, which were reallocated to increased promotional activity that is reflected as a reduction in gross sales and favorable sales tax audit settlements in the states of Ohio and Florida, partially offset by increases in restaurant supplies, the third quarter severe winter weather effect and preopening expenses as part of our Farm Fresh Refresh remodeling initiative.

BEF Foods’ other operating expenses ratio was 8.9% of net sales for the nine months ended January 24, 2014, compared to 7.9% of net sales in the corresponding period last year. The increase in the other operating expense ratio was due primarily to start-up costs related to the expansion at our Sulphur Springs facility, additional other operating expenses associated with our acquisition of the Lima, Ohio, plant early in the second quarter of fiscal 2013 and volume-related increases in production supplies. Prior to the acquisition of the Lima, Ohio, plant, substantially all costs related to acquiring product from the Lima, Ohio, plant, were included in inventories upon receipt of goods, then expensed to cost of sales upon shipment to customers, as BEF Foods was buying a finished product. Subsequent to the acquisition of the Lima, Ohio, plant, as an owned facility rather than a supplier, cost of materials are still included in inventories and cost of sales, however, other production costs are included in other operating expenses.

Selling, General and Administrative Expenses

Consolidated S,G&A expenses from continuing operations were 11.3% of net sales for both the nine months ended January 24, 2014, and the corresponding period last year. The most significant components of consolidated S,G&A expenses are non-restaurant wages and fringe benefits, transportation costs, impairment and restructuring and severance costs.

Bob Evans Restaurants’ S,G&A expenses were 8.6% of net sales for the nine months ended January 24, 2014, compared to 7.8% of net sales in the corresponding period last year. The increase in SG&A expenses as a percent of net sales is primarily due to a $3.4 million increase in allocated professional fees, which primarily includes costs related to strengthening the Company’s internal processes and controls over financial reporting and shareholder activism and an increase of allocated corporate overhead as a result of the Company providing transition services to Mimi’s Café at less than cost.

BEF Foods’ S,G&A expenses were 18.4% of net sales for the nine months ended January 24, 2014, compared to 21.3% of net sales in the corresponding period last year. The decrease in SG&A is due to a $4.7 million reduction in advertising expenses and a $2.7 million reduction in severance and restructuring charges, partially offset by a $1.1 million increase in professional expenditures primarily related to ongoing material weakness, remediation related activities and shareholder activism and an increase of allocated corporate overhead as a result of the Company providing transition services to Mimi’s Café at less than cost.

Depreciation and Amortization

Consolidated D&A from continuing operations was 5.8% of net sales for the nine months ended January 24, 2014, compared to 4.9% of net sales in the corresponding period last year.

Bob Evans Restaurants’ D&A expenses were 6.4% of net sales for the nine months ended January 24, 2014 compared to 5.3% of net sales in the corresponding period last year. The increase in the D&A ratio is primarily the result of an increase in depreciable assets related to Bob Evans Restaurants Farm Fresh Refresh remodeling initiative and new restaurant development. We remodeled 165 restaurants as part of our Farm Fresh Refresh remodeling initiative through nine months of fiscal 2014. We also opened three new restaurant in the nine months ended January 24, 2014. We expect to complete the Farm Fresh Refresh remodeling initiative for all Bob Evans Restaurants during

 

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fiscal 2014, except for the six general store-format restaurants, which we have decided to exclude from the Farm Fresh Refresh program. We believe our new restaurant opening program in fiscal 2015, with an evolved design and upgraded site selection process, will drive average unit volumes in excess of our current average unit volume and are targeting up to ten new units.

BEF Foods’ D&A expenses were 4.0% of net sales for the nine months ended January 24, 2014, compared to 3.6% of net sales in the corresponding period last year. The increase in the D&A expense ratio is due primarily to additional depreciation expense associated with our acquisition of the Lima, Ohio, plant early in the second quarter of fiscal 2013 and our Lima, Ohio and Sulphur Springs, Texas, plant expansions.

Impairment of Assets Held for Sale

We assess the carrying value of our goodwill, other intangible assets and long-lived assets whenever circumstances indicate that a decline in value may have occurred.

Based on our purchase agreement, effective July 25, 2013, and subject to customary due diligence, to sell nonoperating property, plant and equipment at 29 locations for $3.5 million, we determined that indicators of impairment existed during the three months ended July 26, 2013. This resulted in pretax, noncash assets held for sale impairment charges in the Bob Evans Restaurants business segment of $9.4 million incurred during the first and second quarters of fiscal 2014.

As of January 24, 2014, we have closed on the sale of 28 of the 29 nonoperating properties.

On September 27, 2013, we announced plans to close our food production plant in Richardson, Texas. Based on the estimated value of the facility, we determined that the long-lived asset group’s then-current carrying cost was greater than the fair value (the selling price less estimated selling costs). This resulted in a pretax, noncash assets held for sale impairment charge in the BEF Foods segment of $3.0 million during the second quarter of fiscal 2014. The long-lived asset group related to this plant is valued at fair value and reflected as held for sale on our consolidated balance sheets.

Interest

Net interest expense from continuing operations for the nine months ended January 24, 2014, compared to the corresponding period last year, was as follows:

 

     Nine Months Ended  

(in thousands)

   January 24, 2014     January 25, 2013  

Gross interest expense:

    

Fixed-rate debt

   $ 223      $ 10,787   

Variable-rate debt

     3,260       965  

Capitalized interest

     (506     (576
  

 

 

   

 

 

 

Total interest expense

     2,977       11,176  

Gross interest income

    

Accretion

     (1,500     —    

Other

     (618     (196
  

 

 

   

 

 

 

Total interest income

     (2,118     (196
  

 

 

   

 

 

 

Net interest (income) expense

   $ 859      $ 10,980   
  

 

 

   

 

 

 

At January 24, 2014, $372.8 million and $0.8 million was outstanding on our revolving credit facility and on our other long-term debt, respectively. The other long-term debt represents an interest-free loan of $1.0 million due ten years from the date of borrowing, with no prepayment penalty that we obtained in the second quarter of fiscal 2013. We have imputed interest on the long-term debt based on our current borrowing rate.

 

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A change in market interest rates will impact our credit facility when there is an outstanding balance. For example, a 1% increase in the benchmark rate used for our credit facility would increase our annual interest expense by approximately $3.7 million, assuming the $372.8 million outstanding at the end of the three months ended January 24, 2014, was outstanding for the entire year.

Taxes

The Company’s effective tax rate was 26.0% for the nine months ended January 24, 2014 versus 5.1% for the corresponding period a year ago.

The increased tax rates over the prior years are primarily attributable to the tax impact of a corporate conversion implemented during the third quarter of fiscal 2013 and the reduction of book income for the impairment charge of Mimi’s Café, which resulted in the Company recording a significant benefit for the fiscal year 2013. Tax expense on third quarter pretax loss based on a forecasted annual negative effective tax rate that resulted from a one-time permanent tax benefit on the corporate conversion and impairment related to Mimi’s Café.

On a full-year basis, we anticipate our effective rate to be between 25% and 27%. Our effective income tax rate is evaluated each quarter. The effective income tax rate for the quarter may or may not represent the expected annual effective income tax rate for the entire fiscal year and includes the impact of discrete items for the year-to-date period.

Loss From Discontinued Operations

We sold Mimi’s Café, previously disclosed as a reporting segment, to Le Duff in the fourth quarter of fiscal 2013. As part of the sale, we entered into a transition services agreement with Le Duff. whereby we provided corporate support services and a supply agreement whereby we provided food products. The transition services agreement was originally expected to expire in December 2013 and the supply agreement was originally expected to expire in February 2014.

In accordance with FASB ASC 205-20, Discontinued Operations, there is an assessment period for one year after a component has been disposed of, whereby an entity must reassess if they have significant continuing cash flows or significant continuing involvement in the operations of the component after the disposal to assess if the segment should be classified as continuing operations. As a result of having significant continuing cash flows, due to the two agreements noted above, the Mimi’s Café reporting segment was not initially presented within discontinued operations. On July 23, 2013, the Company received a notice from SWH Mimi’s Café, LLC that it was terminating its supply agreement with BEF Foods, Inc. The transition services agreement timing did not change significantly and expired in January 2014. As a result of this termination notice, the Company determined it no longer had significant cash flows from Mimi’s Café operations, thus Mimi’s Café should be presented within discontinued operations for all years presented in the financial statements, effective with the Form 10-Q filed for the three months ended July 26, 2013.

For the nine months ended January 24, 2014, our recast Consolidated Statements of Net Income present a loss, net of tax, from discontinued operations, of $0.5 million. The prior year loss from discontinued operations, net of tax, was $83.6 million. The prior year loss was primarily the result of an impairment recorded on Mimi’s long-lived assets in the third quarter 2013.

Discontinued operations only include the revenues and expenses that are specifically identified with Mimi’s Café and excludes any allocation of corporate costs, including general and administrative expenses, which represent $2.1 million for the nine months ended January 25, 2013. The general and administrative expenses excluded from the loss on discontinued operations were reallocated to our Bob Evans Restaurants and BEF Foods segments in the amount of $1.6 million and $0.5 million, respectively, for the nine months ended January 25, 2013.

Liquidity and Capital Resources

Our primary sources of liquidity are cash generated from operating activities and the borrowing capacity under our $750.0 million revolving credit facility with a consortium of banks, which expires in January 2019. As of January 24, 2014, we had outstanding borrowings of $372.8 million under our credit facility and $13.4 million was reserved for

 

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certain standby letters of credit. The remaining $363.8 million was available for liquidity purposes. As of January 24, 2014, cash and equivalents totaled $5.4 million. We believe future cash generated from operating activities and the borrowing capacity under our revolving credit facility, which can be expanded up to $1.05 billion in the future pursuant to the terms of the Credit Agreement, should provide sufficient liquidity to fund anticipated capital expenditures, ongoing dividends, currently authorized stock repurchases and any other needs during fiscal years 2014 and 2015.

Historically, our working capital requirements have been minimal; overall, our current liabilities (excluding credit facility borrowings) have generally exceeded our current assets (excluding cash and equivalents). This favorable working capital position results from transacting substantially all of our Bob Evans Restaurants segment sales for cash or third-party credit or debit cards; the relatively short trade credit terms with our BEF Foods customers as well as most of our major suppliers and distributors; and the quick turnover of our inventories in both of our reporting segments.

In fiscal year 2014, capital expenditures are expected to approximate $175 million to $200 million, of which $157 million has been incurred during the first nine months. These expenditures primarily relate to plant expansions for BEF Foods; the accelerated Farm Fresh Refresh remodel program for Bob Evans Restaurants; the opening of four new Bob Evans Restaurants; completion of our new corporate headquarters; and the development of an ERP system. During fiscal year 2013, capital expenditures totaled $124.3 million.

During the first nine months of fiscal year 2014, we have paid quarterly cash dividends of $0.275 per share in June 2013 and of $0.31 per share in September and December 2013. While we expect to continue paying regular quarterly cash dividends, the declaration, amount and timing of future dividends will be at the discretion of our Board of Directors.

Our Board of Directors has authorized stock repurchases of up to $225.0 million for fiscal year 2014, of which $114.0 million has been expended during the first nine months to repurchase 2.2 million shares of our common stock. The remaining $111.0 million authorization is expected to be expended during the fourth quarter of this fiscal year. During fiscal year 2013, stock repurchases totaled $63.1 million.

On February 25, 2014, the Board of Directors authorized a stock repurchase program for fiscal 2015 of up to $100.0 million. The Fiscal 2015 program will authorize the Company to repurchase its outstanding common stock pursuant to plans approved by the Board under SEC Rules 10b-18 and 10b5-1, and in the open market or through privately negotiated transactions.

Operating activities

Net cash provided by operating activities was $105.7 million and $86.2 million for the nine months ended January 24, 2014, and January 25, 2013, respectively. The increase in cash provided by operating activities as compared to a year ago is primarily due to federal and state income tax refunds received and reduced estimated tax payments during the first and second quarters, partially offset by a reduction in income from continuing operations as compared to the prior year.

Investing activities

Cash used in investing activities was $150.2 million and $116.1 million for the nine months ended January 24, 2014, and January 25, 2013, respectively.

The increase in cash used in investing activities was primarily due to an increase in capital expenditures of $86.5 million compared to the prior year and lower proceeds received for the sale of long-lived assets of $2.8 million, partially offset by $53.2 million of business acquisition costs incurred in fiscal 2013. Capital expenditures increased during the nine months ended January 24, 2014, primarily due to the expansions of our Lima, Ohio, and Sulphur Springs, Texas, facilities and completion of our new corporate headquarters.

Financing activities

Cash provided by financing activities was $41.4 million in for the nine months ended January 24, 2014, as compared to cash used by financing activities of $3.1 million for the nine months ended January 25, 2013. The increase in the cash provided by financing activities was primarily due to the following:

 

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  a) Principal payments on long-term debt of $135.7 million during the nine months ended January 25, 2013, as compared to none in the current year, partially offset by;

 

  b) A lower net increase in credit facility borrowing of $17.6 million as compared to the prior year, and;

 

  c) Additional repurchases of treasury stock of $77.1 million as compared to the prior year.

Contractual obligations

Future payments on our contractual obligations and outstanding indebtedness as disclosed in our Annual Report on Form 10-K for the fiscal year ended April 26, 2013, has increased primarily due to increased borrowings under our credit facility, which was $372.8 million at the period ended January 24, 2014, as compared to $201.4 million at the period ended April 26, 2013.

Off-Balance Sheet Arrangements

As of January 24, 2014, we have not entered into any “off-balance sheet” arrangements with unconsolidated entities or other persons, as that term is defined by the Securities and Exchange Commission.

Proposed Accounting Standards

In July 2013, the FASB issued Accounting Standards Update (“ASU”) No. 2013-11, Presentation of an Unrecognized Tax Benefit, which states that an entity must offset any deferred tax asset recorded for a net operating loss with items recorded as unrecognized tax benefits. As such, an entity is required to net the balance sheet presentation of the net operating loss deferred tax asset with the unrecognized tax benefit. This netting is considered by jurisdiction and by legal entity. This standard is effective for interim and annual periods beginning after December 15, 2013, and is not anticipated to affect our consolidated financial statements.

Critical Accounting Policies and Estimates

As discussed in Note 1 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, the preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of commitments and contingencies at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. We base these estimates and judgments on our historical experience and other factors we believe to be relevant, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The process of determining significant estimates is fact-specific and takes into account factors such as historical experience, current and expected economic conditions, product mix, and in some cases, actuarial and appraisal techniques. We routinely re-evaluate these significant factors and make adjustments where facts and circumstances dictate. With the exception of the policy noted below, our critical accounting policies have not changed materially from those previously reported in our Annual Report on Form 10-K for the fiscal year ended April 26, 2013.

Discontinued Operations

In accordance with FASB ASC 205-20, we use a single accounting model to account for all long-lived assets to be disposed of (by sale, abandonment, or distribution to owners). This includes asset disposal groups meeting the criteria for presentation as a discontinued operation. The criteria for reporting discontinued operations are as follows: 1) the Company has disposed of a component of their business or has met the held-for-sale criteria, 2) there are no ongoing operations or cash flows of the component and 3) the Company will not have continuing involvement in the operations of the component after the disposal transaction. A long-lived asset group classified as held for sale is measured at the lower of its carrying value or fair value less cost to sell. We classify the results of operations of a component classified as held for sale in discontinued operations in the period in which they occur, less applicable income taxes.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not currently use derivative financial instruments for speculative or hedging purposes. We maintain our cash and cash equivalents in financial instruments with maturities of three months or less when purchased.

We purchase certain commodities such as beef, pork, poultry, seafood, produce and dairy products. These commodities are generally purchased based upon market prices established with suppliers. These purchase arrangements may contain contractual features that fix the price paid for certain commodities. We do not use financial instruments to hedge commodity prices because these purchase arrangements help control the ultimate cost paid and most commodity price aberrations are generally short-term in nature.

A change in market interest rates will impact our credit facility when there is an outstanding balance. For example, a 1% increase in the benchmark rate used for our credit facility would increase our annual interest expense by approximately $3.7 million, assuming the $372.8 million outstanding at the end of the three months ended January 24, 2014, was outstanding for the entire year.

ITEM 4. CONTROLS AND PROCEDURES

Changes in Internal Control Over Financial Reporting

As previously disclosed in our Quarterly Report on Form 10-Q/A for the fiscal quarter ended January 25, 2013, management concluded that there was a material weakness in internal control over financial reporting related to the calculation of impairment of assets held for sale, a complex transaction and infrequent event. Remedial actions have been implemented to address these controls, including adherence to existing control procedures and implementation of enhanced controls related to review and oversight of complex transactions and infrequent events. As new controls are still being implemented and others have not been in place long enough to provide sufficient assurances to support the conclusion that the identified material weakness has been fully remediated, management concluded that, as of January 24, 2014, there was a material weakness in internal controls over financial reporting related to the review and oversight of complex transactions and infrequent events.

As previously disclosed in Item 9A of our Form 10-K for the year ended April 26, 2013, management concluded that there was a material weakness in internal control over financial reporting related to deferred income tax accounting. Remedial actions have been implemented to address these controls, including adherence to existing control procedures and implementation of enhanced controls related to the reconciliation of deferred income tax accounts. As new controls are still being implemented and others have not been in place long enough to provide sufficient assurances to support the conclusion that the identified material weakness has been fully remediated, management concluded that, as of January 24, 2014, there was a material weakness in internal controls over financial reporting related to the reconciliation of deferred income tax accounts.

As previously disclosed in our Quarterly Report in Form 10-Q for the fiscal quarter ended October 25, 2013, management concluded that there was a material weakness in internal controls over financial reporting related to property, plant and equipment accounting. As new controls are still being implemented and others have not been in place long enough to provide sufficient assurances to support the conclusion that the material weakness has been fully remediated, management concluded that as of January 24, 2014, there was a material weakness in internal controls over financial reporting related to property, plant and equipment accounting.

Except as has been described above, there has been no material change in our internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) during the quarter ended January 24, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

With the participation of our management, including Bob Evans’ principal executive officer and principal financial officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(c) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon evaluation, Bob Evans’ principal executive officer and

 

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principal financial officer have concluded that because of the material weakness in internal controls over financial reporting related to the review and oversight of complex transactions and infrequent events, the material weakness in internal controls over financial reporting related to the reconciliation of deferred income tax accounts and the material weakness in internal controls over financial reporting related to property, plant and equipment accounting, disclosures controls and procedures were not effective.

 

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are from time-to-time involved in ordinary and routine litigation, typically involving claims from customers, employees and others related to operational issues common to the restaurant and food manufacturing industries. We are currently involved with a number of pending legal proceedings incidental to our business. Management presently believes that the ultimate outcome of these proceedings, individually or in the aggregate, will not have a material adverse effect on our financial position, cash flows or results of operations.

Although we do not believe the matter to be material, we are involved in litigation with one of our suppliers pursuant to a Complaint and accompanying Motion for Preliminary Injunction styled: Reser’s Fine Foods, Inc. (“Reser’s”) v. Bob Evans Farms, Inc. and Bob Evans Farm Foods, Inc., Case Number 313CV00098AA, dated January 17, 2012, and pending in the United States District Court, Portland Division (the “District Court”). We filed certain counterclaims against the plaintiff on February 22, 2012. On May 4, 2013, the District Court denied Reser’s Motion for Preliminary Injunction. We believe the balance of Reser’s claims are without merit and intend to vigorously contest those claims and pursue our counterclaims. We disclose herein as an accompanying note to the references made during our fiscal 2013 third quarter.

In August 2012, a former Bob Evans Restaurant employee filed an action against Bob Evans Farms, Inc. (“Bob Evans”) in the United States District Court for the Southern District of Ohio (the “Ohio District Court”). The lead plaintiff alleged that Bob Evans violated the Fair Labor Standards Act by failing to pay overtime compensation during the period of time the employee worked as an assistant manager. The lead plaintiff sought to maintain the suit as a collective action on behalf of other similarly situated assistant managers. Thirteen other former employees have since opted into the case, although three have subsequently withdrawn (including the original lead plaintiff). The Court has since approved the substitution of another former employee as the lead plaintiff. Plaintiffs filed a motion for conditional certification, Bob Evans filed a motion in opposition to the same, and the Ohio District Court granted conditional certification on December 5, 2013. The proceedings remain in the early stages with significant uncertainty as to factual issues, outcome of legal proceedings, and likely number of opt-in plaintiffs and/or damages claimed. We do not believe based on currently available information, that the outcome of this matter will have a material adverse effect on our financial condition, though an adverse outcome could be material to our results of operations for a particular period. We believe the claims are without merit and intend to vigorously contest the action.

ITEM 1A. RISK FACTORS.

There have been no material changes from the risk factors disclosed in Part 1, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended April 26, 2013.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

We repurchased 783,413 shares of our common stock for $38.6 million during the three months ended January 24, 2014.

On June 18, 2013, the Board of Directors authorized a stock repurchase program of up to $25.0 million.

On August 16, 2013, the Board of Directors authorized an additional stock repurchase program of up to $150.0 million for the period ending on April 25, 2014. On December 4, 2013, the Board of Directors increased the authorization for the current stock repurchase program to $225.0 million for the period ending on April 25, 2014. Since $114.0 million has been expended, $111.0 million remains authorized. This program will repurchase shares pursuant to a Section 10b-18 and Section 10b5-1 Plans. The Company can also repurchase stock in the open market or through privately negotiated transactions.

 

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Period

   Total Shares
Purchased
     Average Price Paid
Per Share
     Total Shares
Purchased as Part
of Publicly
Announced Plans
or Programs
     Maximum Value of
Shares that May
Yet be Purchased
Under the Plans or
Programs
 

10/26/13-11/29/13

     —        $ —          —        $ 149,509,922  

11/30/13-12/27/13

     36,520        50.88        36,520        147,651,646  

12/28/13-01/24/14

     746,893        49.14        746,893        110,951,477  
  

 

 

       

 

 

    

Total

     783,413      $ 49.22        783,413     
  

 

 

       

 

 

    

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not Applicable

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5. OTHER INFORMATION.

Mr. Randall L. Hicks, President of Bob Evans Farms, LLC (dba Bob Evans Restaurants) announced on March 4, 2014, that he plans on retiring from the Company. His retirement comes after an exemplary career spanning more than three decades with the Company. Mr. Hicks has agreed to continue in his position for several months to facilitate the Company’s transition to new leadership.

ITEM 6. EXHIBITS

SEE INDEX TO EXHIBITS

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    BOB EVANS FARMS, INC.
Date: March 4, 2014     By:  

/s/ Steven A. Davis

    Steven A. Davis
    Chairman and Chief Executive Officer
    (Principal Executive Officer)
Date: March 4, 2014     By:  

/s/ Paul F. DeSantis

    Paul F. DeSantis*
    Chief Financial Officer, Treasurer and Assistant Secretary
    (Principal Financial Officer)
Date: March 4, 2014     By:  

/s/ Sylvester J. Johnson

    Sylvester J. Johnson*
    Senior Vice President, Chief Accounting Officer and Controller
    (Principal Accounting Officer)

 

* Messrs. DeSantis and Johnson have been duly authorized to sign on behalf of the Registrant as its principal financial officer and its principal accounting officer, respectively.

 

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INDEX TO EXHIBITS

Quarterly Report on Form 10-Q

Dated January 24, 2014

Bob Evans Farms, Inc.

 

Exhibit

No.

  

Description

  

Location

    3.2    Bob Evans Farms, Inc. Amended and Restated Bylaws, Amended and Restated Effective January 28, 2014    Incorporated herein by reference to Exhibit 3.2 to Bob Evans Farms, Inc.’s Form 8-K filed January 28, 2014 (File No. 0-1667)
    4.1    $750,000,000 Revolving Credit Facility Amended and Restated Credit Agreement effective January 2, 2014 among Bob Evans Farms, LLC, as borrower; Bob Evans Farms, Inc. and its wholly-owned subsidiary, BEF Foods, Inc., as guarantors; PNC Bank, National Association, as administrative agent, and the other Lends party thereto.    Filed herewith
  31.1    Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer)    Filed herewith
  31.2    Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer)    Filed herewith
  32.1    Section 1350 Certification (Principal Executive Officer)    Filed herewith
  32.2    Section 1350 Certification (Principal Financial Officer)    Filed herewith
101.INS    XBRL Instance Document    Filed herewith
101.SCH    XBRL Taxonomy Extension Schema Document    Filed herewith
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document    Filed herewith
101.LAB    XBRL Taxonomy Extension Label Linkbase Document    Filed herewith
101.PRE    XBRL Taxonomy Presentation Linkbase Document    Filed herewith
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document    Filed herewith

 

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Exhibit 4.1

CUSIP: 09676DAB1

$750,000,000 REVOLVING CREDIT FACILITY

AMENDED AND RESTATED CREDIT AGREEMENT

by and among

BOB EVANS FARMS, LLC, as Borrower

and

THE GUARANTORS PARTY HERETO

and

THE LENDERS PARTY HERETO

and

PNC BANK, NATIONAL ASSOCIATION, as Administrative Agent

and

PNC CAPITAL MARKETS LLC, as Joint Lead Arranger and Sole Bookrunner

and

J.P. MORGAN SECURITIES LLC,

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Joint Lead Arrangers

and

BANK OF AMERICA N.A., JPMORGAN CHASE BANK, N.A. and

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Co-Syndication Agents

and

FIFTH THIRD BANK and

U.S. BANK NATIONAL ASSOCIATION, as Co-Documentation Agents

Dated as of January 2, 2014


TABLE OF CONTENTS

 

     Page  

1. CERTAIN DEFINITIONS

     1   

1.1 Certain Definitions

     1   

1.2 Construction

     28   

1.3 Accounting Principles; Changes in GAAP

     29   

2. REVOLVING CREDIT AND SWING LOAN FACILITIES; INCREMENTAL TERM LOANS

     30   

2.1 Revolving Credit Commitments

     30   

2.1.1 Revolving Credit Loans

     30   

2.1.2 Swing Loan Commitment

     30   

2.2 Nature of Lenders’ Obligations with Respect to Revolving Credit Loans

     30   

2.3 Commitment Fees

     30   

2.4 Reserved

     31   

2.5 Revolving Credit Loan Requests; Swing Loan Requests

     31   

2.5.1 Revolving Credit Loan Requests

     31   

2.5.2 Swing Loan Requests

     31   

2.6 Making Revolving Credit Loans and Swing Loans; Presumptions by the Administrative Agent; Repayment of Revolving Credit Loans; Borrowings to Repay Swing Loans

     31   

2.6.1 Making Revolving Credit Loans

     32   

2.6.2 Presumptions by the Administrative Agent

     32   

2.6.3 Making Swing Loans

     32   

2.6.4 Repayment of Revolving Credit Loans

     32   

2.6.5 Borrowings to Repay Swing Loans

     32   

2.6.6 Swing Loans Under Cash Management Agreements

     33   

2.7 Notes

     33   

2.8 Use of Proceeds

     34   

2.9 Letter of Credit Subfacility

     34   

2.9.1 Issuance of Letters of Credit

     34   

2.9.2 Letter of Credit Fees

     35   

2.9.3 Disbursements, Reimbursement

     35   

2.9.4 Repayment of Participation Advances

     36   

2.9.5 Documentation

     37   

2.9.6 Determinations to Honor Drawing Requests

     37   

2.9.7 Nature of Participation and Reimbursement Obligations

     37   

2.9.8 Indemnity

     39   

2.9.9 Liability for Acts and Omissions

     39   

2.9.10 Issuing Lender Reporting Requirements

     40   

2.9.11 Reserved

     41   

2.10 Defaulting Lenders

     41   

2.11 Reduction of Revolving Credit Commitment

     42   

2.12 Increase in Revolving Credit Commitments; Incremental Term Loans

     43   

2.12.1 Incremental Term Loans; Revolving Commitment Increase

     43   


2.12.2 Treatment of Outstanding Revolving Credit Loans and Letters of Credit

     45   

2.12.3 Incremental Term Loans

     45   

3. RESERVED

     46   

4. INTEREST RATES

     46   

4.1 Interest Rate Options

     46   

4.1.1 Interest Rate Options; Swing Line Interest Rate

     46   

4.1.2 Rate Quotations

     46   

4.1.3 Incremental Term Loan Interest Rate Options

     46   

4.2 Interest Periods

     47   

4.2.1 Amount of Borrowing Tranche

     47   

4.2.2 Renewals

     47   

4.3 Interest After Default

     47   

4.3.1 Letter of Credit Fees, Interest Rate

     47   

4.3.2 Other Obligations

     47   

4.3.3 Acknowledgment

     47   

4.4 LIBOR Rate Unascertainable; Illegality; Increased Costs; Deposits Not Available

     47   

4.4.1 Unascertainable

     47   

4.4.2 Illegality; Increased Costs; Deposits Not Available

     48   

4.4.3 Administrative Agent’s and Lender’s Rights

     48   

4.5 Selection of Interest Rate Options

     49   

5. PAYMENTS

     49   

5.1 Payments

     49   

5.2 Pro Rata Treatment of Lenders

     49   

5.3 Sharing of Payments by Lenders

     50   

5.4 Presumptions by Administrative Agent

     50   

5.5 Interest Payment Dates

     51   

5.6 Voluntary Prepayments

     51   

5.6.1 Right to Prepay

     51   

5.6.2 Replacement of a Lender

     52   

5.6.3 Designation of a Different Lending Office

     53   

5.7 Payments on Incremental Term Loans

     53   

5.8 Increased Costs

     53   

5.8.1 Increased Costs Generally

     53   

5.8.2 Capital Requirements

     54   

5.8.3 Certificates for Reimbursement; Repayment of Outstanding Loans; Borrowing of New Loans

     54   

5.8.4 Delay in Requests

     54   

5.9 Taxes

     54   

5.9.1 Issuing Lender

     55   

5.9.2 Payments Free of Taxes

     55   

5.9.3 Payment of Other Taxes by the Loan Parties

     55   

5.9.4 Indemnification by the Loan Parties

     55   

5.9.5 Indemnification by the Lenders

     55   

5.9.6 Evidence of Payments

     56   


5.9.7 Status of Lenders

     56   

5.9.8 Treatment of Certain Refunds

     58   

5.9.9 Survival

     58   

5.10 Indemnity

     58   

5.11 Settlement Date Procedures

     59   

6. REPRESENTATIONS AND WARRANTIES

     59   

6.1 Representations and Warranties

     59   

6.1.1 Organization and Qualification; Power and Authority; Compliance With Laws; Title to Properties; Event of Default

     59   

6.1.2 Subsidiaries and Owners; Investment Companies

     60   

6.1.3 Validity and Binding Effect

     60   

6.1.4 No Conflict; Material Agreements; Consents

     60   

6.1.5 Litigation

     61   

6.1.6 Financial Statements

     61   

6.1.7 Margin Stock

     61   

6.1.8 Full Disclosure

     62   

6.1.9 Taxes

     62   

6.1.10 Patents, Trademarks, Copyrights, Licenses, Etc

     62   

6.1.11 Liens in the Collateral

     62   

6.1.12 Insurance

     62   

6.1.13 ERISA Compliance

     62   

6.1.14 Environmental Matters

     63   

6.1.15 Solvency

     63   

6.1.16 Senior Debt Status

     63   

6.1.17 Anti-Terrorism Laws

     64   

7. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT

     64   

7.1 First Loans and Letters of Credit

     64   

7.1.1 Deliveries

     64   

7.1.2 Payment of Fees

     65   

7.2 Each Loan or Letter of Credit

     65   

8. COVENANTS

     65   

8.1 Affirmative Covenants

     65   

8.1.1 Preservation of Existence, Etc

     65   

8.1.2 Payment of Liabilities, Including Taxes, Etc

     66   

8.1.3 Maintenance of Properties, Insurance

     66   

8.1.4 Reserved

     66   

8.1.5 Visitation Rights

     66   

8.1.6 Keeping of Records and Books of Account

     66   

8.1.7 Compliance with Laws; Use of Proceeds

     67   

8.1.8 Further Assurances

     67   

8.1.9 Anti-Terrorism Laws

     67   

8.1.10 Keepwell

     67   

8.2 Negative Covenants

     68   

8.2.1 Indebtedness

     68   

8.2.2 Liens; Negative Pledge

     69   

8.2.3 Guaranties

     70   


8.2.4 Loans and Investments

     70   

8.2.5 Restricted Payments

     71   

8.2.6 Liquidations, Mergers, Consolidations, Acquisitions

     71   

8.2.7 Dispositions of Assets or Subsidiaries

     72   

8.2.8 Affiliate Transactions

     73   

8.2.9 Subsidiaries and Equity Pledges

     73   

8.2.10 Continuation of or Change in Business

     73   

8.2.11 Fiscal Year

     74   

8.2.12 Restriction on Subsidiaries

     74   

8.2.13 Changes in Organizational Documents

     74   

8.2.14 Sale and Leaseback Transactions

     74   

8.2.15 Financial Covenants

     74   

8.3 Reporting Requirements

     74   

8.3.1 Quarterly Financial Statements

     75   

8.3.2 Annual Financial Statements

     75   

8.3.3 Compliance Certificate

     75   

8.3.4 Notices

     75   

9. DEFAULT

     76   

9.1 Events of Default

     76   

9.1.1 Payments Under Loan Documents

     76   

9.1.2 Breach of Warranty

     76   

9.1.3 Breach of Negative Covenants or Visitation Rights

     77   

9.1.4 Breach of Other Covenants

     77   

9.1.5 Defaults in Other Material Indebtedness

     77   

9.1.6 Final Judgments or Orders

     77   

9.1.7 Loan Document Unenforceable

     77   

9.1.8 Proceedings Against Assets

     78   

9.1.9 Events Relating to Pension Plans or Multiemployer Plans

     78   

9.1.10 Change in Control

     78   

9.1.11 Insolvency Event

     78   

9.2 Consequences of Event of Default

     78   

9.2.1 Events of Default Other Than Bankruptcy, Insolvency or Reorganization Proceedings

     78   

9.2.2 Bankruptcy, Insolvency or Reorganization Proceedings

     79   

9.2.3 Set-off

     79   

9.2.4 Application of Proceeds

     79   

10. THE ADMINISTRATIVE AGENT

     80   

10.1 Appointment and Authority

     80   

10.2 Rights as a Lender

     80   

10.3 Exculpatory Provisions

     81   

10.4 Reliance by Administrative Agent

     82   

10.5 Delegation of Duties

     82   

10.6 Resignation of Administrative Agent

     82   

10.7 Non-Reliance on Administrative Agent and Other Lenders

     83   

10.8 No Other Duties, etc

     83   

10.9 Administrative Agent’s Fee

     83   


10.10 Authorization to Release Collateral and Guarantors

     84   

10.11 No Reliance on Administrative Agent’s Customer Identification Program

     84   

11. MISCELLANEOUS

     84   

11.1 Modifications, Amendments or Waivers

     84   

11.1.1 Increase of Commitment

     84   

11.1.2 Extension of Payment; Reduction of Principal Interest or Fees; Modification of Terms of Payment

     84   

11.1.3 Release of Collateral or Guarantor

     84   

11.1.4 Miscellaneous

     85   

11.2 No Implied Waivers; Cumulative Remedies

     85   

11.3 Expenses; Indemnity; Damage Waiver

     85   

11.3.1 Costs and Expenses

     85   

11.3.2 Indemnification by the Borrower

     86   

11.3.3 Reimbursement by Lenders

     87   

11.3.4 Waiver of Consequential Damages, Etc.

     87   

11.3.5 Payments

     87   

11.4 Holidays

     87   

11.5 Notices; Effectiveness; Electronic Communication

     88   

11.5.1 Notices Generally

     88   

11.5.2 Electronic Communications

     88   

11.5.3 Change of Address, Etc.

     88   

11.6 Severability

     88   

11.7 Duration; Survival

     89   

11.8 Successors and Assigns

     89   

11.8.1 Successors and Assigns Generally

     89   

11.8.2 Assignments by Lenders

     89   

11.8.3 Register

     91   

11.8.4 Participations

     91   

11.8.5 Certain Pledges; Successors and Assigns Generally

     92   

11.9 Confidentiality

     92   

11.9.1 General

     92   

11.9.2 Sharing Information With Affiliates of the Lenders

     93   

11.10 Counterparts; Integration; Effectiveness

     93   

11.10.1 Counterparts; Integration; Effectiveness

     93   

11.11 CHOICE OF LAW; SUBMISSION TO JURISDICTION; WAIVER OF VENUE; SERVICE OF PROCESS; WAIVER OF JURY TRIAL

     93   

11.11.1 Governing Law

     93   

11.11.2 SUBMISSION TO JURISDICTION

     94   

11.11.3 WAIVER OF VENUE

     94   

11.11.4 SERVICE OF PROCESS

     94   

11.11.5 WAIVER OF JURY TRIAL

     95   

11.12 USA Patriot Act Notice

     95   

11.13 Amendment and Restatement; No Novation

     95   


LIST OF SCHEDULES AND EXHIBITS

 

SCHEDULES

      
SCHEDULE 1.1(A)        PRICING GRID
SCHEDULE 1.1(B)        COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES
SCHEDULE 1.1(P)        PERMITTED LIENS
SCHEDULE 6.1.1        QUALIFICATIONS TO DO BUSINESS
SCHEDULE 6.1.2        SUBSIDIARIES
SCHEDULE 7.1.1        OPINION OF COUNSEL
SCHEDULE 8.2.1        PERMITTED INDEBTEDNESS

EXHIBITS

      
EXHIBIT 1.1(A)        ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1(G)(1)        GUARANTOR JOINDER
EXHIBIT 1.1(G)(2)        GUARANTY AGREEMENT
EXHIBIT 1.1(N)(1)        REVOLVING CREDIT NOTE
EXHIBIT 1.1(N)(2)        SWING LOAN NOTE
EXHIBIT 1.1(P)        PLEDGE AGREEMENT
EXHIBIT 2.5.1        LOAN REQUEST
EXHIBIT 2.5.2        SWING LOAN REQUEST
EXHIBIT 2.12.1        COMMITMENT AND ACCEPTANCE
EXHIBIT 5.9.7(A)        U.S. TAX COMPLIANCE CERTIFICATE (For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
EXHIBIT 5.9.7(B)        U.S. TAX COMPLIANCE CERTIFICATE (For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
EXHIBIT 5.9.7(C)        U.S. TAX COMPLIANCE CERTIFICATE (For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
EXHIBIT 5.9.7(D)        U.S. TAX COMPLIANCE CERTIFICATE (For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
EXHIBIT 8.3.3        QUARTERLY COMPLIANCE CERTIFICATE


AMENDED AND RESTATED CREDIT AGREEMENT

THIS AMENDED AND RESTATED CREDIT AGREEMENT (as hereafter amended, the “ Agreement ”) is dated as of January 2, 2014 and is made by and among BOB EVANS FARMS, LLC, an Ohio limited liability company, successor by conversion to Bob Evans Farms, Inc., an Ohio corporation (the “ Borrower ”), each of the GUARANTORS (as hereinafter defined), the LENDERS (as hereinafter defined), and PNC BANK, NATIONAL ASSOCIATION, in its capacity as administrative agent for the Lenders under this Agreement (hereinafter referred to in such capacity as the “ Administrative Agent ”).

The Borrower, the Guarantors set forth therein, the Lenders set forth therein (the “ Existing Lenders ”) and the Administrative Agent are parties to that certain Credit Agreement dated as of December 16, 2011, as amended (the “ Existing Credit Agreement ”). The Borrower has requested that the Administrative Agent and the Existing Lenders amend and restate the Existing Credit Agreement and to provide a revolving credit facility to the Borrower in an aggregate principal amount not to exceed $750,000,000 with an accordion feature for such revolving credit facility and/or a term loan facility, as set forth more fully herein, of up to $300,000,000. In consideration of their mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the parties hereto amend and restate the Existing Credit Agreement as follows:

1. CERTAIN DEFINITIONS

1.1 Certain Definitions. In addition to words and terms defined elsewhere in this Agreement, the following words and terms shall have the following meanings, respectively, unless the context hereof clearly requires otherwise:

Administrative Agent shall mean PNC Bank, National Association, and its successors and assigns, in its capacity as administrative agent hereunder.

Administrative Agent’s Fee shall have the meaning specified in Section 10.9 [Administrative Agent’s Fee].

Administrative Agent’s Letter shall have the meaning specified in Section 10.9 [Administrative Agent’s Fee].

Affiliate of any Person shall mean any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns ten percent (10%) or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise.

Agreement shall have the meaning set forth in the preamble hereto.

Anti-Terrorism Laws shall mean, as to any Person, any Laws relating to terrorism, trade sanctions programs and embargoes, import/export licensing, money laundering or bribery, and any regulation, order, or directive promulgated, issued or enforced pursuant to such Anti-Terrorism Laws, in each case, applicable to such Person, all as amended, supplemented or replaced from time to time.


Applicable Commitment Fee Rate shall mean the percentage rate per annum based on the Leverage Ratio then in effect according to the pricing grid on Schedule 1.1(A) below the heading “Commitment Fee.”

Applicable Letter of Credit Fee Rate shall mean the percentage rate per annum based on the Leverage Ratio then in effect according to the pricing grid on Schedule 1.1(A) below the heading “Letter of Credit Fee (Standby)” or “Letter of Credit Fee (Commercial)”, as applicable.

Applicable Margin shall mean, as applicable:

(A) the percentage spread to be added to the Base Rate applicable to Loans under the Base Rate Option based on the Leverage Ratio then in effect according to the pricing grid on Schedule 1.1(A) below the heading “Revolving Credit Base Rate Spread” or “Incremental Term Loan Base Rate Spread” (if any), as applicable, or

(B) the percentage spread to be added to the LIBOR Rate applicable to Loans under the LIBOR Rate Option based on the Leverage Ratio then in effect according to the pricing grid on Schedule 1.1(A) below the heading “Revolving Credit LIBOR Rate Spread” or “Incremental Term Loan LIBOR Rate Spread” (if any), as applicable.

Approved Fund shall mean any fund that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of business and that is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that administers or manages a Lender.

Assignment and Assumption Agreement shall mean an assignment and assumption agreement entered into by a Lender and an assignee permitted under Section 11.8 [Successors and Assigns], in substantially the form of Exhibit 1.1(A) .

Authorized Officer shall mean, with respect to the Borrower, Manager, Chief Financial Officer, Controller or Secretary of the Borrower, with respect to the Parent, the Chief Executive Officer, President, Chief Financial Officer, Chief Accounting Officer or Secretary of the Parent, and with respect to BEF Foods, the President, Chief Financial Officer or Controller of BEF Foods, or, with respect to any Loan Party, such other individuals, designated by written notice to the Administrative Agent from such Loan Party, authorized to execute notices, reports and other documents on behalf of such Loan Party required hereunder. Any Loan Party may amend its list of such individuals from time to time by giving written notice of such amendment to the Administrative Agent.

Bankruptcy Code shall mean Title 11 of the United States Code entitled “Bankruptcy,” as now or hereafter in effect, or any successor thereto, as hereafter amended.

Base Rate shall mean, for any day, a fluctuating per annum rate of interest equal to the highest of (i) the Federal Funds Open Rate, plus 0.5%, and (ii) the Prime Rate, and (iii) the Daily LIBOR Rate, plus 100 basis points (1.0%). Any change in the Base Rate (or any component thereof) shall take effect at the opening of business on the day such change occurs.

 

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Base Rate Option shall mean the option of the Borrower to have Loans bear interest at the rate and under the terms set forth in Section 4.1.1.1 [Base Rate Option].

BEF Foods shall mean BEF Foods, Inc., a corporation organized and existing under the laws of the State of Ohio.

Borrower shall have the meaning set forth in the preamble hereto.

Borrowing Date shall mean, with respect to any Loan, the date for the making thereof or the renewal or conversion thereof at or to the same or a different Interest Rate Option, which shall be a Business Day.

Borrowing Tranche shall mean specified portions of Loans outstanding as follows: (i) any Loans to which a LIBOR Rate Option applies which become subject to the same Interest Rate Option under the same Loan Request by the Borrower and which have the same Interest Period shall constitute one Borrowing Tranche, and (ii) all Loans to which a Base Rate Option applies shall constitute one Borrowing Tranche.

Business Day shall mean any day other than a Saturday or Sunday or a legal holiday on which commercial banks are authorized or required to be closed for business in Pittsburgh, Pennsylvania and if the applicable Business Day relates to any Loan to which the LIBOR Rate Option applies, such day must also be a day on which dealings are carried on in the London interbank market.

Cash Management Agreements shall have the meaning specified in Section 2.6.6 [Swing Loans Under Cash Management Agreements].

CEA shall mean the Commodity Exchange Act (7 U.S.C.§1 et seq.), as amended from time to time, and any successor statute.

CFTC shall mean the Commodity Futures Trading Commission.

Change in Control shall mean an event that shall be deemed to have occurred on any of the following:

(a) the existing directors (the “Incumbent Directors”) cease for any reason other than death to constitute at least a majority of the members of the Board of the Parent; provided , however , that any individual becoming a director after the Closing Date whose election, or nomination for election by the Parent’s stockholders, was approved by a vote of at least a majority of the then Incumbent Directors shall also be treated as an Incumbent Director;

(b) the acquisition by any person or group (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than any employee benefit plan (or related trust) sponsored or maintained by the Parent, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 30% or more of the combined voting power of the then outstanding voting securities of the Parent entitled to vote generally in the election of directors of the Parent;

 

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(c) the consummation of a merger, consolidation or other business combination of the Parent with or into another entity, or the acquisition by the Parent of assets or shares or equity interests of another entity, as a result of which the stockholders of the Parent immediately prior to such merger, consolidation, other business combination or acquisition, do not, immediately thereafter, beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the entity resulting from such merger, consolidation or other business combination of the Parent; or

(d) the Parent shall cease to own beneficially and of record one hundred percent (100%) of the Equity Interests of the Borrower.

Change in Law shall mean the occurrence, after the date of this Agreement, of any of the following: (i) the adoption or taking effect of any Law, (ii) any change in any Law or in the administration, interpretation, implementation or application thereof by any Official Body or (iii) the making or issuance of any request, rule, guideline or directive (whether or not having the force of Law) by any Official Body; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, regulations, guidelines, interpretations or directives thereunder or issued in connection therewith (whether or not having the force of Law) and (y) all requests, rules, regulations, guidelines, interpretations or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities (whether or not having the force of Law), in each case pursuant to Basel III, shall in each case be deemed to be a Change in Law regardless of the date enacted, adopted, issued, promulgated or implemented.

CIP Regulations shall have the meaning specified in Section 10.11 [No Reliance on Administrative Agent’s Customer Identification Program].

Closing Date shall mean January 2, 2014.

Code shall mean the Internal Revenue Code of 1986, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect.

Collateral shall mean the “Pledged Collateral” as defined in the Pledge Agreement.

Commercial Letter of Credit shall mean a commercial letter of credit issued in respect of the purchase of goods or services in the ordinary course of business of a Loan Party or another Subsidiary of a Loan Party.

Commitment shall mean as to any Lender the aggregate of its Revolving Credit Commitment and its Incremental Term Loan Commitment (if any), and, in the case of PNC, its Swing Loan Commitment, and Commitments shall mean the aggregate of the Revolving Credit Commitments, the Incremental Term Loan Commitments (if any), and Swing Loan Commitment of all of the Lenders.

 

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Commitment and Acceptance shall have the meaning specified in Section 2.12 [Increase in Revolving Credit Commitments; Incremental Term Loans].

Commitment Fee shall have the meaning specified in Section 2.3 [Commitment Fees].

Commodity Hedge shall mean a commodity swap, commodity hedge, commodity option and any other commodity future contract that provides protection to, or minimizes the impact upon, price fluctuations with respect to commodities.

Commodity Hedge Liabilities shall have the meaning assigned in the definition of Lender Provided Commodity Hedge.

Compliance Certificate shall have the meaning specified in Section 8.3.3 [Compliance Certificate].

Connection Income Taxes shall mean Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

Consolidated EBITDA shall mean, as of the end of any fiscal quarter (i) the sum of net income, depreciation, amortization, all adjustments deducted in determining net income and reflected in the GAAP to Non-GAAP Reconciliation of Operating Income disclosed in the Parent’s earnings releases for such periods (provided cash charges shall not exceed $10,000,000 in any trailing twelve month period), other non-cash charges to net income, interest expense, income and franchise (or similar) Tax expense minus (ii) non-cash credits to net income, in each case of the Parent and its Subsidiaries determined and consolidated in accordance with GAAP for the four (4) fiscal quarters then ending; provided , that notwithstanding any provision in the foregoing definition, if any non-cash charge determined pursuant to the foregoing definition is expected to result in any future cash payment, it shall be deemed to have been paid in cash for purposes of the foregoing calculation but shall be subject to the limitation that cash charges shall not exceed $10,000,000 in any trailing twelve (12) month period.

Consolidated Subsidiary shall mean with respect to any Person at any date any 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.

Consolidated Total Assets shall mean, as of any date of determination, the total amount of all assets of the Parent and its Subsidiaries, determined on a consolidated basis in accordance with GAAP.

Coverage Ratio shall mean, as of the end of any fiscal quarter, the ratio of Consolidated EBITDA to interest expense of the Parent and its Subsidiaries determined and consolidated in accordance with GAAP for the four (4) fiscal quarters then ending.

 

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Covered Entity shall mean (a) the Borrower, each of Borrower’s Subsidiaries, all Guarantors and all pledgors of Collateral, and (b) each Person that, directly or indirectly, is in control of a Person described in clause (a) above. For purposes of this definition, control of a Person shall mean the direct or indirect (x) ownership of, or power to vote, 25% or more of the issued and outstanding equity interests having ordinary voting power for the election of directors of such Person or other Persons performing similar functions for such Person, or (y) power to direct or cause the direction of the management and policies of such Person whether by ownership of equity interests, contract or otherwise.

Daily LIBOR Rate shall mean, for any day, the rate per annum determined by the Administrative Agent by dividing (x) the Published Rate by (y) a number equal to 1.00 minus the LIBOR Reserve Percentage on such day.

Defaulting Lender shall mean any Lender that (a) has failed, within two Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Letters of Credit or Swing Loans or (iii) pay over to the Administrative Agent, the Issuing Lender, PNC (as the Swing Loan Lender) or any Lender any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies the Administrative Agent in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) has notified the Borrower or the Administrative Agent in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a condition precedent (specifically identified and including the particular default, if any) to funding a loan under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within two Business Days after request by the Administrative Agent or the Borrower, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations (and is financially able to meet such obligations) to fund prospective Loans and participations in then outstanding Letters of Credit and Swing Loans under this Agreement, provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon the Administrative Agent’s or the Borrower’s receipt of such certification in form and substance satisfactory to the Administrative Agent or the Borrower, as the case may be, (d) has become the subject of a Bankruptcy Event or (e) has failed at any time to comply with the provisions of Section 5.3 [Sharing of Payments by Lenders] with respect to purchasing participations from the other Lenders, whereby such Lender’s share of any payment received, whether by setoff or otherwise, is in excess of its Ratable Share of such payments due and payable to all of the Lenders.

As used in this definition and in Section 2.10 [Defaulting Lenders], the term “ Bankruptcy Event ” means, with respect to any Person, such Person or such Person’s direct or indirect parent company becoming the subject of a bankruptcy or insolvency proceeding, or having had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such

 

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proceeding or appointment, provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person or such Person’s direct or indirect parent company by an Official Body or instrumentality thereof if, and only if, such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Official Body or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.

Dollar, Dollars, U.S. Dollars and the symbol $ shall mean lawful money of the United States of America.

Drawing Date shall have the meaning specified in Section 2.9.3 [Disbursements, Reimbursement].

Effective Date shall mean the date indicated in a document or agreement to be the date on which such document or agreement becomes effective, or, if there is no such indication, the date of execution of such document or agreement.

Eligible Contract Participant shall mean an “eligible contract participant” as defined in the CEA and regulations thereunder.

Eligibility Date shall mean, with respect to each Loan Party and each Swap, the date on which this Agreement or any other Loan Document becomes effective with respect to such Swap (for the avoidance of doubt, the Eligibility Date shall be the Effective Date of such Swap if this Agreement or any other Loan Document is then in effect with respect to such Loan Party, and otherwise it shall be the Effective Date of this Agreement and/or such other Loan Document(s) to which such Loan Party is a party).

Environmental Laws shall mean all applicable federal, state, local, tribal, territorial and foreign Laws (including common law), constitutions, statutes, treaties, regulations, rules, ordinances and codes and any consent decrees, settlement agreements, judgments, orders, directives, policies or programs issued by or entered into with an Official Body pertaining or relating to: (i) pollution or pollution control; (ii) protection of the environment and/or natural resources; (iii) the presence, use, management, generation, manufacture, processing, extraction, treatment, recycling, refining, reclamation, labeling, packaging, sale, transport, storage, collection, distribution, disposal or release or threat of release of hazardous substances; (iv) the presence of contamination; (v) the protection of endangered or threatened species; and (vi) the protection of environmentally sensitive areas.

Equity Interests shall mean shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.

ERISA shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect.

 

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ERISA Event shall mean (a) with respect to a Pension Plan, a reportable event under Section 4043 of ERISA as to which event (after taking into account notice waivers provided for in the regulations) there is a duty to give notice to the PBGC; (b) a withdrawal by Borrower or any member of the ERISA Group from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by Borrower or any member of the ERISA Group from a Multiemployer Plan, notification that a Multiemployer Plan is in reorganization, or occurrence of an event described in Section 4041A(a) of ERISA that results in the termination of a Multiemployer Plan; (d) the filing of a notice of intent to terminate a Pension Plan, the treatment of a Pension Plan amendment as a termination under Section 4041(e) of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon Borrower or any member of the ERISA Group.

ERISA Group shall mean, at any time, the Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control and all other entities which, together with the Borrower, are treated as a single employer under Section 414 of the Code or Section 4001(b)(1) of ERISA.

Event of Default shall mean any of the events described in Section 9.1 [Events of Default] and referred to therein as an “Event of Default.”

Excluded Hedge Liability or Liabilities shall mean, with respect to each Loan Party, each of its Swap Obligations if, and only to the extent that, all or any portion of this Agreement or any other Loan Document that relates to such Swap Obligation is or becomes illegal under the CEA, or any rule, regulation or order of the CFTC, solely by virtue of such Loan Party’s failure to qualify as an Eligible Contract Participant on the Eligibility Date for such Swap. Notwithstanding anything to the contrary contained in the foregoing or in any other provision of this Agreement or any other Loan Document, the foregoing is subject to the following provisos: (a) if a Swap Obligation arises under a master agreement governing more than one Swap, this definition shall apply only to the portion of such Swap Obligation that is attributable to Swaps for which such guaranty or security interest is or becomes illegal under the CEA, or any rule, regulations or order of the CFTC, solely as a result of the failure by such Loan Party for any reason to qualify as an Eligible Contract Participant on the Eligibility Date for such Swap, (b) if a guarantee of a Swap Obligation would cause such obligation to be an Excluded Hedge Liability but the grant of a security interest would not cause such obligation to be an Excluded Hedge Liability, such Swap Obligation shall constitute an Excluded Hedge Liability for purposes of the guaranty but not for purposes of the grant of the security interest, and (c) if there is more than one Loan Party executing this Agreement or the other Loan Documents and a Swap Obligation would be an Excluded Hedge Liability with respect to one or more of such Persons, but not all of them, the definition of Excluded Hedge Liability or Liabilities with respect to each such Person shall only be deemed applicable to (i) the particular Swap Obligations that constitute Excluded Hedge Liabilities with respect to such Person, and (ii) the particular Person with respect to which such Swap Obligations constitute Excluded Hedge Liabilities.

 

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Excluded Taxes shall mean any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (i) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (a) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (b) that are Other Connection Taxes, (ii) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (a) such Lender acquires such interest in such Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 5.6.2 [Replacement of a Lender]) or (b) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 5.9.7 [Status of Lenders], amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (iii) Taxes attributable to such Recipient’s failure to comply with Section 5.9.7 [Status of Lenders], and (iv) any U.S. federal withholding Taxes imposed under FATCA (except to the extent imposed due to the failure of the Borrower to provide documentation or information to the IRS).

Existing Credit Agreement shall have the meaning set forth in the first recital clause above.

Expiration Date shall mean, with respect to the Revolving Credit Commitments, January 2, 2019.

Fair Market Value means, at any time and with respect to any property, the sale value of such property that would be realized in an arm’s-length sale at such time between an informed and willing buyer and an informed and willing seller (neither being under a compulsion to buy or sell), as reasonably determined in the good faith opinion of a Loan Party’s or any Subsidiary of a Loan Party’s board of directors or one or more officers to whom authority to determine such value has been delegated by such board of directors.

FATCA shall mean Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.

Federal Funds Effective Rate for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed and rounded upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the “Federal Funds Effective Rate” as of the date of this Agreement; provided , if such Federal Reserve Bank (or its successor) does not announce such rate on any day, the “Federal Funds Effective Rate” for such day shall be the Federal Funds Effective Rate for the last day on which such rate was announced.

 

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Federal Funds Open Rate for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed) which is the daily federal funds open rate as quoted by ICAP North America, Inc. (or any successor) as set forth on the Bloomberg Screen BTMM for that day opposite the caption “OPEN” (or on such other substitute Bloomberg Screen that displays such rate), or as set forth on such other recognized electronic source used for the purpose of displaying such rate as selected by the Administrative Agent (for purposes of this definition, an “ Alternate Source ”) (or if such rate for such day does not appear on the Bloomberg Screen BTMM (or any substitute screen) or on any Alternate Source, or if there shall at any time, for any reason, no longer exist a Bloomberg Screen BTMM (or any substitute screen) or any Alternate Source, a comparable replacement rate determined by the Administrative Agent at such time (which determination shall be conclusive absent manifest error); provided , however , that if such day is not a Business Day, the Federal Funds Open Rate for such day shall be the "open" rate on the immediately preceding Business Day. If and when the Federal Funds Open Rate changes, the rate of interest with respect to any advance to which the Federal Funds Open Rate applies will change automatically without notice to the Borrower, effective on the date of any such change.

Foreign Currency Hedge shall mean any foreign exchange transaction, including spot and forward foreign currency purchases and sales, listed or over-the-counter options on foreign currencies, non-deliverable forwards and options, foreign currency swap agreements, currency exchange rate price hedging arrangements, and any other similar transaction providing for the purchase of one currency in exchange for the sale of another currency.

Foreign Currency Hedge Liabilities shall have the meaning assigned in the definition of Lender Provided Foreign Currency Hedge.

Foreign Lender shall mean (i) if the Borrower is a U.S. Person, a Lender that is not a U.S. Person, and (ii) if the Borrower is not a U.S. Person, a Lender that is resident or organized under the Laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.

Foreign Subsidiary shall mean a Subsidiary of a Loan Party organized under the laws of a jurisdiction outside the United States of America, any state thereof or the District of Columbia.

GAAP shall mean generally accepted accounting principles as are in effect from time to time, subject to the provisions of Section 1.3 [Accounting Principles; Changes in GAAP], and applied on a consistent basis both as to classification of items and amounts; provided , however , that if it was permissible to use more than one principle at such time in respect of a particular accounting matter, “GAAP” shall, insofar as it relates to the Parent or any Subsidiary, refer to the principle then employed by the Parent or such Subsidiary with the agreement of its independent public accountants.

Guarantors shall mean, collectively, the Parent, BEF Foods and each other Person which joins this Agreement as a Guarantor after the date hereof, each of which is referred to herein as a Guarantor .

 

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Guarantor Joinder shall mean a joinder by a Person as a Guarantor under the Loan Documents in the form of Exhibit 1.1(G)(1).

Guaranty as to any Person (the “ guarantor ”) means any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “ primary obligor ”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, or (c) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided that the term Guaranty shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Guaranty shall be deemed to be an amount equal to the stated or determinable amount of the primary Indebtedness in respect of which such Guaranty is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith.

Guaranty Agreement shall mean the Amended and Restated Continuing Agreement of Guaranty and Suretyship in substantially the form of Exhibit 1.1(G)(2) executed and delivered by each of the Guarantors to the Administrative Agent for the benefit of the Lenders, any Lender Hedge Affiliate and any Affiliate of any Lender to which an Obligation is owed.

Hedge Liabilities shall mean, collectively, the Foreign Currency Hedge Liabilities, the Interest Rate Hedge Liabilities and the Commodity Hedge Liabilities.

ICC shall have the meaning specified in Section 11.11.1 [Governing Law].

Increase Effective Date shall have the meaning specified in 2.12 [Increase in Revolving Credit Commitments; Incremental Term Loans].

Increasing Lender shall have the meaning specified in 2.12 [Increase in Revolving Credit Commitments; Incremental Term Loans].

Incremental Term Loan Amendment shall have the meaning specified in Section 2.12 [Increase in Revolving Credit Commitments; Incremental Term Loans].

Incremental Term Loan Commitment shall have the meaning specified in Section 2.12 [Increase in Revolving Credit Commitments; Incremental Term Loans].

Incremental Term Loans shall have the meaning specified in Section 2.12 [Increase in Revolving Credit Commitments; Incremental Term Loans].

Indebtedness shall mean, as to any Person at any time, without duplication, any and all indebtedness, obligations or liabilities (whether matured or unmatured, liquidated or unliquidated, direct or indirect, absolute or contingent, or joint or several) of such Person for or in respect of: (i) borrowed money, (ii) amounts raised under or liabilities in respect of any note

 

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purchase or acceptance credit facility, (iii) reimbursement obligations (contingent or otherwise) under any letter of credit agreement, (iv) obligations under any Interest Rate Hedge, Foreign Currency Hedge and Commodity Hedge, (v) the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business and, for the avoidance of doubt, operating leases that are not required to be characterized as capitalized leases under GAAP), (vi) Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (vii) capitalized leases, (viii) obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit, (ix) asset securitization financings, (x) the full outstanding balance of trade receivables, notes or other instruments sold with full recourse (and the portion thereof subject to potential recourse, if sold with limited recourse, other than for breach of representations and/or warranties by the seller or its Affiliate), other than in any such case any thereof sold solely for purposes of collection of delinquent accounts, or (xi) any Guaranty of Indebtedness for borrowed money. The amount of any Indebtedness described in clause (iv) above on any date shall be deemed to be the amount, after taking into account the effect of any legally enforceable netting agreement relating to such Indebtedness, (a) for any date on or after the date such contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such contracts, as determined based upon the average of three (3) or more mid-market or other readily available quotations provided by any recognized dealer in such contracts (which may include a Lender or any Affiliate of a Lender) thereof as of such date.

Indemnified Taxes shall mean (i) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document, and (ii) to the extent not otherwise described in the preceding clause (i), Other Taxes.

Indemnitee shall have the meaning specified in Section 11.3.2 [Indemnification by the Borrower].

Information shall mean all information received from the Loan Parties or any of their Subsidiaries relating to the Loan Parties or any of such Subsidiaries or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the Issuing Lender on a non-confidential basis prior to disclosure by the Loan Parties or any of their Subsidiaries.

Insolvency Event shall mean, with respect to any Person, (i) the commencement of a voluntary case or proceeding by such Person under the Bankruptcy Code, (ii) the commencement of an involuntary case or proceeding against such Person under the Bankruptcy Code and the petition is not dismissed within 60 days after commencement of the case or proceeding, (iii) a custodian (as defined in the Bankruptcy Code) or a receiver, interim receiver, trustee or monitor, or any similar person under any insolvency law is appointed for, or takes charge of, all or substantially all of the property of such Person, (iv) such Person commences (including by way of applying for or consenting to the appointment of, or the taking of possession by, a rehabilitator, receiver, interim receiver, monitor, custodian, trustee, conservator or liquidator

 

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(collectively, a “ conservator ”) of such Person or all or any substantial portion of its property) any other proceeding under any reorganization, arrangement, adjustment or composition of debt, relief of debtors, dissolution, insolvency, liquidation, rehabilitation, conservatorship or similar law of any jurisdiction whether now or hereafter in effect relating to such Person, (v) any such proceeding of the type set forth in clause (iv) above is commenced against such Person to the extent such proceeding is consented to by such Person or remains undismissed for a period of 60 days, (vi) such Person is adjudicated insolvent or bankrupt, (vii) any order of relief or other order approving any such case or proceeding is entered, (viii) such Person suffers any appointment of any conservator or the like for it or any substantial part of its property that continues undischarged or unstayed for a period of 60 days or (ix) such Person makes a general assignment for the benefit of creditors or generally does not pay its debts as such debts become due.

Interest Period shall mean the period of time selected by the Borrower in connection with (and to apply to) any election permitted hereunder by the Borrower to have Revolving Credit Loans or Incremental Term Loans (if any) bear interest under the LIBOR Rate Option. Subject to the last sentence of this definition, such period shall be one, two, three or six Months. Such Interest Period shall commence on the effective date of such Interest Rate Option, which shall be (i) the Borrowing Date if the Borrower is requesting new Loans, or (ii) the date of renewal of or conversion to the LIBOR Rate Option if the Borrower is renewing or converting to the LIBOR Rate Option applicable to outstanding Loans. Notwithstanding the second sentence hereof: (A) any Interest Period which would otherwise end on a date which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (B) the Borrower shall not select, convert to or renew an Interest Period for any portion of the Loans that would end after the Expiration Date.

Interest Rate Hedge shall mean an interest rate exchange, collar, cap, swap, floor, adjustable strike cap, adjustable strike corridor, cross-currency swap or similar agreements entered into by any Loan Party in order to provide protection to, or minimize the impact upon, such Loan Party of increasing floating rates of interest applicable to Indebtedness.

Interest Rate Hedge Liabilities shall have the meaning assigned in the definition of Lender Provided Interest Rate Hedge.

Interest Rate Option shall mean any LIBOR Rate Option or Base Rate Option.

IRS shall mean the United States Internal Revenue Service.

ISP98 shall have the meaning specified in Section 11.11.1 [Governing Law].

Issuing Lender shall mean PNC, in its individual capacity as issuer of Letters of Credit hereunder, and any other Lender that Borrower, Administrative Agent and such other Lender may agree may from time to time issue Letters of Credit hereunder.

Joint Venture shall mean a corporation, partnership, limited liability company or other entity in which any Person other than the Loan Parties and their Subsidiaries holds, directly or indirectly, an equity interest.

 

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Law shall mean any law(s), constitution, statute, treaty, regulation, rule, ordinance or any binding and enforceable issued guidance, release, ruling, order, executive order, injunction, writ, decree, bond, judgment, authorization or approval, lien or award of or any settlement arrangement, by agreement, consent or otherwise, with any Official Body, foreign or domestic.

Lender Hedge Affiliate shall mean any Person who was a Lender or an Affiliate of a Lender at the time of entering any Hedge Liability.

Lender Provided Commodity Hedge shall mean a Commodity Hedge which is provided by any Lender Hedge Affiliate and with respect to which the applicable Lender confirms to the Administrative Agent in writing prior to or promptly after the execution thereof that it: (a) is documented in a standard International Swaps and Derivatives Association Master Agreement or another reasonable and customary manner, (b) provides for the method of calculating the reimbursable amount of the provider's credit exposure in a reasonable and customary manner, and (c) is entered into for hedging (rather than speculative) purposes. Until Payment In Full, the liabilities owing to the provider of any Lender Provided Commodity Hedge (the “ Commodity Hedge Liabilities ”) by any Loan Party that is party to such Lender Provided Commodity Hedge shall, for purposes of this Agreement and all other Loan Documents be “ Obligations ” of such Person and of each other Loan Party, be guaranteed obligations under any Guaranty Agreement and secured obligations under any other Loan Document, as applicable, and otherwise treated as Obligations for purposes of the other Loan Documents, except to the extent constituting Excluded Hedge Liabilities of such Person. Until Payment In Full, the Liens securing the Commodity Hedge Liabilities shall be pari passu with the Liens securing all other Obligations under this Agreement and the other Loan Documents, subject to the express provisions of Section 9.2.4 [Application of Proceeds].

Lender Provided Foreign Currency Hedge shall mean a Foreign Currency Hedge which is provided by any Lender Hedge Affiliate and for which the applicable Lender confirms to the Administrative Agent in writing prior to or promptly after the execution thereof that it: (a) is documented in a standard International Swaps and Derivatives Association Master Agreement or another reasonable and customary manner, (b) provides for the method of calculating the reimbursable amount of the provider’s credit exposure in a reasonable and customary manner, and (c) is entered into for hedging (rather than speculative) purposes. Until Payment In Full, the liabilities owing to the provider of any Lender Provided Foreign Currency Hedge (the “ Foreign Currency Hedge Liabilities ”) by any Loan Party that is party to such Lender Provided Foreign Currency Hedge shall, for purposes of this Agreement all other Loan Documents be “ Obligations ” of such Person and of each other Loan Party, be guaranteed obligations under the Guaranty Agreement and secured obligations under any other Loan Document, as applicable, and otherwise treated as Obligations for purposes of the other Loan Documents, except to the extent constituting Excluded Hedge Liabilities of such Person. Until Payment In Full, the Liens securing the Foreign Currency Hedge Liabilities shall be pari passu with the Liens securing all other Obligations under this Agreement and the other Loan Documents subject to the express provisions of Section 9.2.4 [Application of Proceeds].

 

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Lender Provided Interest Rate Hedge shall mean an Interest Rate Hedge which is provided by any Lender Hedge Affiliate and with respect to which the applicable Lender confirms to Administrative Agent in writing prior to or promptly after the execution thereof that it: (a) is documented in a standard International Swaps and Derivatives Association Master Agreement or another reasonable and customary manner, (b) provides for the method of calculating the reimbursable amount of the provider’s credit exposure in a reasonable and customary manner, and (c) is entered into for hedging (rather than speculative) purposes. Until Payment In Full, the liabilities owing to the provider of any Lender Provided Interest Rate Hedge (the “ Interest Rate Hedge Liabilities ”) by any Loan Party that is party to such Lender Provided Interest Rate Hedge shall, for purposes of this Agreement and all other Loan Documents be "Obligations" of such Person and of each other Loan Party, be guaranteed obligations under any Guaranty Agreement and secured obligations under any other Loan Document, as applicable, and otherwise treated as Obligations for purposes of the other Loan Documents, except to the extent constituting Excluded Hedge Liabilities of such Person. Until Payment In Full, the Liens securing the Interest Rate Hedge Liabilities shall be pari passu with the Liens securing all other Obligations under this Agreement and the other Loan Documents, subject to the express provisions of Section 9.2.4 [Application of Proceeds].

Lenders shall mean the financial institutions named on Schedule 1.1(B) and their respective successors and assigns as permitted hereunder, each of which is referred to herein as a Lender.

Letter of Credit shall have the meaning specified in Section 2.9.1 [Issuance of Letters of Credit].

Letter of Credit Borrowing shall have the meaning specified in Section 2.9.3 [Disbursements, Reimbursement].

Letter of Credit Fee shall have the meaning specified in Section 2.9.2 [Letter of Credit Fees].

Letter of Credit Obligation shall mean, as of any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit on such date (if any Letter of Credit shall increase in amount automatically in the future, such aggregate amount available to be drawn shall currently give effect to any such future increase) plus the aggregate Reimbursement Obligations and, without duplication, Letter of Credit Borrowings on such date.

Letter of Credit Sublimit shall have the meaning specified in Section 2.9.1 [Issuance of Letters of Credit].

Leverage Ratio shall mean, as of the end of any fiscal quarter, the ratio of (A) consolidated Indebtedness, as of the last day of such fiscal quarter, in each case of the Parent and its Subsidiaries, determined and consolidated in accordance within GAAP, to (B) Consolidated EBITDA for the four (4) fiscal quarters then ending.

LIBOR Rate shall mean, with respect to the Loans comprising any Borrowing Tranche to which the LIBOR Rate Option applies for any Interest Period, the interest rate per annum determined by the Administrative Agent by dividing (the resulting quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the rate which appears on the Bloomberg Page BBAM1 (or on such other substitute Bloomberg page that displays rates at which US dollar deposits are offered by leading banks in the London interbank deposit market), or the rate which

 

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is quoted by another source selected by the Administrative Agent which has been approved by the British Bankers’ Association as an authorized information vendor for the purpose of displaying rates at which US dollar deposits are offered by leading banks in the London interbank deposit market (for purposes of this definition, an “ Alternate Source ”), at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period as the London interbank offered rate for U.S. Dollars for an amount comparable to such Borrowing Tranche and having a borrowing date and a maturity comparable to such Interest Period (or if there shall at any time, for any reason, no longer exist a Bloomberg Page BBAM1 (or any substitute page) or any Alternate Source, a comparable replacement rate determined by the Administrative Agent at such time (which determination shall be conclusive absent manifest error)), by (ii) a number equal to 1.00 minus the LIBOR Reserve Percentage. The LIBOR Rate may also be expressed by the following formula:

 

LIBOR Rate  =   

London interbank offered rates quoted by Bloomberg

or appropriate successor as shown on Bloomberg Page BBAM1

                   1.00 - LIBOR Reserve Percentage

The LIBOR Rate shall be adjusted with respect to any Loan to which the LIBOR Rate Option applies that is outstanding on the effective date of any change in the LIBOR Reserve Percentage as of such effective date. The Administrative Agent shall give prompt notice to the Borrower of the LIBOR Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.

LIBOR Rate Option shall mean the option of the Borrower to have Loans bear interest at the rate and under the terms set forth in Section 4.1.1.2 [LIBOR Rate Option].

LIBOR Reserve Percentage shall mean as of any day the maximum percentage in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including supplemental, marginal and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as “ Eurocurrency Liabilities ”).

Lien shall mean any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, whether voluntarily or involuntarily given, including any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security and any filed financing statement or other notice of any of the foregoing (whether or not a lien or other encumbrance is created or exists at the time of the filing).

Loan Documents shall mean this Agreement, the Administrative Agent’s Letter, the Guaranty Agreement, the Notes, the Pledge Agreement and any other instruments, certificates or documents delivered in connection herewith or therewith; provided, that for the avoidance of doubt, “Loan Documents” shall not include any agreement or document evidencing a Lender Provided Interest Rate Hedge, Lender Provided Foreign Currency Hedge, or Lender Provided Commodity Hedge, or any Other Lender Provided Financial Service Product.

Loan Parties shall mean the Borrower and the Guarantors.

 

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Loan Request shall have the meaning specified in Section 2.5 [Revolving Credit Loan Requests; Swing Loan Requests].

Loans shall mean collectively and Loan shall mean separately all Revolving Credit Loans, Incremental Term Loans (if any) and Swing Loans or any Revolving Credit Loan, Incremental Term Loan or Swing Loan, and any other loans made under this Agreement.

Material Adverse Change shall mean (a) a material adverse change in, or a material adverse effect upon, the operations, business, assets, liabilities (actual or contingent), or financial condition of the Parent and its Subsidiaries taken as a whole; (b) a material impairment of the ability of any Loan Party to perform its obligations under any Loan Document, in each case to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party.

Material Indebtedness shall mean, at any date, any Indebtedness (excluding any Indebtedness outstanding hereunder) having an aggregate outstanding principal amount of $20,000,000 or more.

Material Subsidiary shall mean (a) the Borrower, (b) BEF Foods, Inc. and (c) any other Subsidiary (i) the consolidated revenues of which for the most recent fiscal year of the Parent for which audited financial statements have been delivered pursuant to Section 8.3 [Reporting Requirements] were greater than ten percent (10%) of the Parent’s consolidated revenues for such fiscal year or (ii) that as of the end of such fiscal year comprised greater than ten percent (10%) of the Consolidated Total Assets as of such date.

Month , with respect to an Interest Period under the LIBOR Rate Option, shall mean the interval between the days in consecutive calendar months numerically corresponding to the first day of such Interest Period. If any LIBOR Rate Interest Period begins on a day of a calendar month for which there is no numerically corresponding day in the month in which such Interest Period is to end, the final month of such Interest Period shall be deemed to end on the last Business Day of such final month.

Multiemployer Plan shall mean any employee pension benefit plan which is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to which the Borrower or any member of the ERISA Group is then making or accruing an obligation to make contributions or, within the preceding five plan years, has made or had an obligation to make such contributions.

Net Proceeds means with respect to any sale of property by any Person an amount equal to (a) the aggregate amount of the consideration received by such Person in respect of such sale (valued at the Fair Market Value of such consideration at the time of such sale), minus (b) the sum of (i) all out of pocket costs and expenses actually incurred by such Person in connection with such sale, and (ii) all state, federal and foreign Taxes incurred, or to be incurred, by such Person in connection with such sale.

New Lender shall have the meaning specified in 2.12.1.10 [Increase in Revolving Credit Commitments; Incremental Term Loans].

 

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Non-Consenting Lender shall have the meaning specified in Section 11.1 [Modifications, Amendments or Waivers].

Non-Loan Party Subsidiaries shall mean collectively all wholly-owned Subsidiaries of the Loan Parties which are not themselves Loan Parties.

Non-Qualifying Party shall mean any Loan Party that fails for any reason to qualify as an Eligible Contract Participant on the Effective Date of the applicable Swap.

Notes shall mean, collectively, the promissory notes in the form of Exhibit 1.1(N)(1) evidencing the Revolving Credit Loans, in the form of Exhibit 1.1(N)(2) evidencing the Swing Loan, the promissory notes evidencing the Incremental Term Loans (if applicable) and any other promissory note issued in connection with this Agreement at any time.

Obligation shall mean any obligation or liability of any of the Loan Parties, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, under or in connection with (i) this Agreement, the Notes, the Letters of Credit, the Administrative Agent’s Letter or any other Loan Document whether to the Administrative Agent, any of the Lenders or their Affiliates or other persons provided for under such Loan Documents, (ii) any Lender Provided Interest Rate Hedge, (iii) any Lender Provided Foreign Currency Hedge, (iv) any Lender Provided Commodity Hedge and (v) any Other Lender Provided Financial Service Product. Notwithstanding anything to the contrary contained in the foregoing, the Obligations shall not include any Excluded Hedge Liabilities.

Official Body shall mean the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank) and any group or body charged with setting financial accounting or regulatory capital rules or standards (including, without limitation, the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing).

Order shall have the meaning specified in Section 2.9.9 [Liability for Acts and Omissions].

Other Connection Taxes shall mean, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient (or an agent or affiliate thereof) and the jurisdiction imposing such Tax (other than connections arising solely from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

Other Lender Provided Financial Service Product shall mean agreements or other arrangements under which any Lender or Affiliate of a Lender provides any of the following products or services to any of the Loan Parties: (a) credit cards, (b) credit card processing services, (c) debit cards, (d) purchase cards, (e) ACH transactions, or (f) cash management, including controlled disbursement, accounts or services.

 

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Other Taxes shall mean all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 5.6.2 [Replacement of a Lender]).

Parent shall mean Bob Evans Farms, Inc., a Delaware corporation.

Participant has the meaning specified in Section 11.8.4 [Participations].

Participant Register shall have the meaning specified in Section 11.8.4 [Participations].

Participation Advance shall have the meaning specified in Section 2.9.3 [Disbursements, Reimbursement].

Payment Date shall mean the first day of each calendar quarter after the date hereof and on the Expiration Date or upon acceleration of the Notes.

Payment In Full shall mean the indefeasible payment in full in cash of the Loans and other Obligations hereunder (other than contingent indemnification and reimbursement obligations in respect of which no claim for payment has yet been asserted by the Person entitled thereto and any amounts outstanding under any Other Lender Provided Financial Services Product, Lender Provided Interest Rate Hedge, Lender Provided Commodity Hedge or Lender Provided Foreign Currency Hedge), termination of the Commitments and expiration, termination or cash collateralization of all Letters of Credit.

PBGC shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor.

Pension Plan shall mean at any time an “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA) (including a “multiple employer plan” as described in Sections 4063 and 4064 of ERISA, but not a Multiemployer Plan) which is covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 or Section 430 of the Code and either (i) is sponsored, maintained or contributed to by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been sponsored, maintained or contributed to by any entity which was at such time a member of the ERISA Group for employees of any entity which was at such time a member of the ERISA Group, or in the case of a “multiple employer” or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

 

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Permitted Acquisition shall mean a purchase or other acquisition by a Loan Party or a wholly-owned Subsidiary of a Loan Party of all of the capital stock, membership interests, partnership interests or other equity interests in, or all or substantially all of the property of, or any division of, any Person that, upon the consummation thereof, will be wholly-owned directly by a Loan Party or one or more of its wholly-owned Subsidiaries (including as a result of a merger or consolidation) where such purchase or other acquisition shall meet the following requirements:

(i) the board of directors or other equivalent governing body of the target of such purchase or acquisition shall have approved the Permitted Acquisition;

(ii) the target of such purchase or other acquisition is in the same lines of business (including, without limitation, the restaurant industry) as, or lines of business substantially related, complementary (including, without limitation, the supply chain thereof) or incidental to the principal business of, the Parent and its Subsidiaries, considered as an entirety;

(iii) immediately before and after giving effect to such purchase or acquisition on a pro forma basis, (a) no Event of Default or Potential Default shall have occurred and be continuing, and (b) the Loan Parties and their Subsidiaries shall be in compliance on a pro forma basis with the financial covenants set forth in this Agreement based on the most recently delivered Compliance Certificate; and

(iv) the Borrower shall have delivered to the Administrative Agent at least five (5) Business Days prior to the date on which any such proposed purchase or other acquisition involving total cash and non-cash consideration in excess of $100,000,000 is to be consummated, a certificate of an Authorized Officer, in form and substance satisfactory to the Administrative Agent, certifying that all of the requirements set forth in this definition have been satisfied or will be satisfied prior to the consummation of such purchase or other acquisition.

Permitted Investments shall mean:

(i) direct obligations of the United States of America or any agency or instrumentality thereof or obligations backed by the full faith and credit of the United States of America;

(ii) debt securities of United States Federal agencies and United States government sponsored enterprises which carry the explicit or implied guarantee of the United States Government, including the Government National Mortgage Association, the Federal Home Loan Bank, the Federal Farm Credit Bank, the Federal National Mortgage Association, and the Student Loan Marketing Association;

(iii) corporate debt instruments (including Rule 144A debt securities) which are denominated and payable in U.S. dollars and are issued by companies which carry a rating of A1/A+ or better, or in the case of commercial paper are rated A2/P2 or better;

(iv) short-term tax exempt debt obligations of Governmental Authorities consisting of municipal notes, commercial paper, auction rate notes and floating rate notes rated A1/P1 by S&P and Moody’s, municipal notes rated SP1/MIG-1 or better and bonds rated AA or better;

 

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(v) demand deposits, time deposits or certificates of deposit maturing within one year in commercial banks whose obligations are rated A-1, A or the equivalent or better by Standard & Poor's on the date of acquisition;

(vi) United States money market funds that comply with the requirements of Rule 2a-7 under the Investment Company Act of 1940 and are rated as least AA/Aa by S&P and Moody’s;

(vii) investments made under the Cash Management Agreements or under cash management agreements with any other Lenders; and

(viii) any other investments that are made pursuant to any investment policy approved by the Parent’s board of directors and approved by the Administrative Agent in writing as “Permitted Investments” hereunder, such approval not to be unreasonably withheld.

Permitted Liens shall mean:

(i) Liens for Taxes, assessments, or similar charges, incurred in the ordinary course of business and which are not yet due and payable, or for Taxes, assessments or similar charges which are being contested in good faith; provided that the applicable Loan Party maintains such reserves or other appropriate provisions as shall be required by GAAP and pays all such Taxes, assessments or charges forthwith upon the commencement of proceedings to foreclose any such Lien;

(ii) Pledges or deposits made in the ordinary course of business to secure payment of workmen’s compensation, or to participate in any fund in connection with workmen’s compensation, unemployment insurance, old-age pensions or other social security programs;

(iii) Liens of mechanics, materialmen, warehousemen, carriers, or other like Liens, securing obligations incurred in the ordinary course of business and Liens of landlords securing obligations to pay lease payments that are not yet due and payable or in default, or which are due and payable, provided , with respect to those which are due and payable, that the validity or amount thereof is being contested in good faith by appropriate and lawful proceedings diligently conducted so long as levy and execution thereon have been stayed and continue to be stayed or if a final judgment is entered and such judgment is discharged within thirty (30) days of entry, and in either case that they do not, in the aggregate, materially impair the ability of any Loan Party to perform its Obligations hereunder or under the other Loan Documents;

(iv) Good-faith pledges or deposits made in the ordinary course of business to secure performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, not in excess of the aggregate amount due thereunder, or to secure statutory obligations, or surety, appeal, indemnity, performance or other similar bonds required in the ordinary course of business;

(v) (A) Leases or subleases granted to others and encumbrances consisting of zoning restrictions, easements or other restrictions on the use of real property and (B) other claims, Liens or encumbrances upon, and defects of title to, real or personal property, including any attachment of personal or real property or other legal process prior to adjudication of a

 

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dispute on the merits, provided , with respect to clause (B), that the validity or amount thereof is being contested in good faith by appropriate and lawful proceedings diligently conducted so long as levy and execution thereon have been stayed and continue to be stayed or if a final judgment is entered and such judgment is discharged within thirty (30) days of entry, and in either case that they do not, in the aggregate, materially impair the ability of any Loan Party to perform its Obligations hereunder or under the other Loan Documents;

(vi) Final judgments or orders for the payment of money that do not, in the aggregate, constitute an Event of Default under Section 9.1.6 [Final Judgments or Orders];

(vii) Liens on property leased by any Loan Party or Subsidiary of a Loan Party under operating leases securing obligations of such Loan Party or Subsidiary to the lessor under such leases;

(viii) Any Lien existing on the date of this Agreement and described on Schedule 1.1(P) , provided that the principal amount secured thereby is not hereafter increased, and no additional assets become subject to such Lien;

(ix) Purchase Money Security Interests and capitalized leases; provided that the aggregate amount of loans and deferred payments secured by such Purchase Money Security Interests and capitalized leases, together with the aggregate amount of Indebtedness secured by Liens described in clauses (x) and (xi) of this definition, shall not exceed $50,000,000 in the aggregate (excluding for the purpose of this computation any loans or deferred payments secured by Liens described on Schedule 1.1(P)

(x) Liens incurred after the Closing Date given to secure the payment of Indebtedness permitted by Section 8.2.1(viii); provided that the aggregate amount of Indebtedness secured thereby, together with the aggregate amount of Indebtedness secured by Liens described in clauses (ix) and (xi) of this definition, shall not exceed $50,000,000 in the aggregate, including Liens existing on such property at the time of acquisition or construction thereof, provided , that the Lien shall attach solely to the property acquired, purchased, constructed or improved;

(xi) any Lien existing on property of a Person immediately prior to its being consolidated with or merged into the Borrower, a Loan Party or a Subsidiary thereof or its becoming a Subsidiary thereof, or any Lien existing on any property acquired by the Borrower, a Loan Party or a Subsidiary thereof at the time such property is so acquired (whether or not the Indebtedness secured thereby shall have been assumed), provided that (i) no such Lien shall have been created or assumed in contemplation of such consolidation or merger or such Person’s becoming a Subsidiary of a Loan Party or such acquisition of property, (ii) each such Lien shall extend solely to the item or items of property so acquired and, if required by the terms of the instrument originally creating such Lien, other property which is an improvement to or is acquired for specific use in connection with such acquired property, and (iii) at the time of such incurrence and after giving effect thereto, no Event of Default would exist and, provided further , that the aggregate amount of Indebtedness secured thereby, together with the aggregate amount of Indebtedness secured by Liens described in clauses (ix) and (x) of this definition, shall not exceed $50,000,000 in the aggregate;

 

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(xii) any extensions, renewals, refinancings or replacements of any Lien permitted by the preceding clauses (viii), (ix), (x) and (xi), provided that (A) no additional property shall be encumbered by such Liens, (B) the unpaid principal amount of the Indebtedness or other obligations secured thereby shall not be increased, and (C) at such time and immediately after giving effect thereto, no Event of Default shall have occurred and be continuing;

(xiii) Liens securing Indebtedness permitted under Section 8.2.1(ii) (to the extent such Liens are pari passu with the Liens securing the Obligations) and Section 8.2.1(vii);

(xiv) Informational Uniform Commercial Code filings and Liens of sellers of goods to the Parent or its Subsidiaries arising under Article 2 of the Uniform Commercial Code or similar provisions of applicable law in the ordinary course of business, covering only the goods sold and securing only the unpaid purchase price for such goods and related expenses;

(xv) Liens on raw materials and inventory acquired in the ordinary course of business securing obligations in respect of Commercial Letters of Credit issued hereunder;

(xvi) Liens not otherwise permitted by this Section so long as the aggregate amount of Indebtedness or other obligations secured thereby does not exceed $25,000,000 in the aggregate;

(xvii) Liens on cash and securities in an amount not to exceed $25,000,000, used to secure Hedge Liabilities permitted hereunder;

(xviii) Liens securing obligations in connection with Sale and Leaseback Transactions permitted in Section 8.2.14 [Sale and Leaseback Transactions] and, without duplication, Indebtedness permitted under Section 8.2.1(x); and

(xix) Liens, security interests and mortgages in favor of the Administrative Agent for the benefit of the Lenders, any Lender Hedge Affiliate and any Affiliate of any Lender to which an Obligation is owed securing the Obligations (including Lender Provided Interest Rate Hedges, Lender Provided Foreign Currency Hedges, Lender Provided Commodity Hedges and Other Lender Provided Financial Services Obligations).

Person shall mean any individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, joint venture, government or political subdivision or agency thereof, or any other entity.

Pledge Agreement shall mean the Pledge Agreement in substantially the form of Exhibit 1.1(P) executed and delivered by each of the Loan Parties party thereto to the Administrative Agent for the benefit of the Lenders, any Lender Hedge Affiliate and any Affiliate of any Lender to which an Obligation is owed.

PNC shall mean PNC Bank, National Association, its successors and assigns.

Potential Default shall mean any event or condition which with notice or passage of time, or both, would constitute an Event of Default.

 

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Prime Rate shall mean the interest rate per annum announced from time to time by the Administrative Agent at its Principal Office as its then prime rate, which rate may not be the lowest or most favorable rate then being charged commercial borrowers or others by the Administrative Agent. Any change in the Prime Rate shall take effect at the opening of business on the day such change is announced.

Principal Office shall mean the main banking office of the Administrative Agent in Pittsburgh, Pennsylvania.

Prior Security Interest shall mean a valid and enforceable perfected first-priority security interest under the Uniform Commercial Code in the Collateral which is subject only to (a) statutory Liens for taxes not yet due and payable and (b) restrictions (i) applicable to interests in corporations or, as applicable, limited liability companies generally under the applicable country or state of organization general corporation or, as applicable, limited liability company law, (ii) under applicable securities laws, and (iii) under any certificate of incorporation, bylaws, certificate of limited partnership, partnership agreement, certificate of formation, limited liability company agreement or other organizational documents of the applicable Person, and (c) to the extent permitted by the Required Lenders pursuant to Section 8.2.1(ii), pari passu Liens granted with respect any secured Indebtedness issued pursuant to Section 8.2.1(ii).

Public Filing shall mean (i) the Parent’s Annual Report on Form 10-K for the fiscal year ended April 26, 2013, (ii) the Parent’s Quarterly Report on Form 10-Q for the quarters ended July 26, 2013 and October 25, 2013 and (iii) and any Current Reports of the Borrower on Form 8-K filed with the SEC after July 26, 2013 but before the Closing Date.

Published Rate shall mean the rate of interest published each Business Day in The Wall Street Journal Money Rates ” listing under the caption “London Interbank Offered Rates” for a one month period (or, if no such rate is published therein for any reason, then the Published Rate shall be the rate at which U.S. dollar deposits are offered by leading banks in the London interbank deposit market for a one month period as published in another publication selected by the Administrative Agent).

Purchase Money Security Interest shall mean Liens upon tangible personal property securing loans to any Loan Party or Subsidiary of a Loan Party or deferred payments by such Loan Party or Subsidiary for the purchase of such tangible personal property.

Qualified ECP Loan Party shall mean each Loan Party that on the Eligibility Date is (a) a corporation, partnership, proprietorship, organization, trust, or other entity other than a “commodity pool” as defined in Section 1a(10) of the CEA and CFTC regulations thereunder that has total assets exceeding $10,000,000, or (b) an Eligible Contract Participant that can cause another person to qualify as an Eligible Contract Participant on the Eligibility Date under Section 1a(18)(A)(v)(II) of the CEA by entering into or otherwise providing a “letter of credit or keepwell, support, or other agreement” for purposes of Section 1a(18)(A)(v)(II) of the CEA.

 

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Ratable Share shall mean:

(i) with respect to a Lender’s obligation to make Revolving Credit Loans, participate in Letters of Credit and other Letter of Credit Obligations, and receive payments, interest and fees related thereto, the proportion that such Lender’s Revolving Credit Commitment bears to the Revolving Credit Commitments of all of the Lenders, provided however that if the Revolving Credit Commitments have terminated or expired, the Ratable Shares for purposes of this clause shall be determined based upon the Revolving Credit Commitments most recently in effect, giving effect to any assignments.

(ii) with respect to a Lender’s obligation to make Incremental Term Loans (if any) and receive payments, interest and fees related thereto, the proportion that such Lender’s Incremental Term Loans bears to the Incremental Term Loans of all of the Lenders.

(iii) with respect to all other matters as to a particular Lender, the percentage obtained by dividing (i) such Lender’s Revolving Credit Commitment plus Incremental Term Loan (if any), by (ii) the sum of the aggregate amount of the Revolving Credit Commitments plus Incremental Term Loans (if any) of all Lenders; provided however , that if the Revolving Credit Commitments have terminated or expired, the computation in this clause shall be determined based upon the Revolving Credit Commitments most recently in effect, giving effect to any assignments, and not on the current amount of the Revolving Credit Commitments and provided further in the case of Section 2.10 [Defaulting Lenders] when a Defaulting Lender shall exist, “Ratable Share” shall mean the percentage of the aggregate Commitments (disregarding any Defaulting Lender’s Commitment) represented by such Lender’s Commitment.

Recipient shall mean (i) the Administrative Agent, (ii) any Lender and (iii) the Issuing Lender, as applicable.

Reimbursement Obligation shall have the meaning specified in Section 2.9.3 [Disbursements, Reimbursement].

Related Parties shall mean, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

Reportable Compliance Event shall mean that any Covered Entity becomes a Sanctioned Person, or is charged by indictment, criminal complaint or similar charging instrument, arraigned, or custodially detained in connection with any Anti-Terrorism Law, or has knowledge of facts or circumstances to the effect that it is reasonably likely that any aspect of its operations is in actual or probable violation of any Anti-Terrorism Law.

Required Lenders shall mean Lenders (other than any Defaulting Lender) having more than 50% of the sum of (a) the aggregate amount of the Revolving Credit Commitments of the Lenders (excluding any Defaulting Lender) or, after the termination of the Revolving Credit Commitments, the outstanding Revolving Credit Loans and Ratable Share of Letter of Credit Obligations of the Lenders (excluding any Defaulting Lender) and (b) the aggregate outstanding amount of any Incremental Term Loans of the Lenders (excluding any Defaulting Lender), if any.

Required Share shall have the meaning specified in Section 5.11 [Settlement Date Procedures].

 

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Restricted Payment shall mean (a) any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interest of the Parent or any Subsidiary of the Parent or (b) any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of (i) the purchase, redemption, acquisition, cancellation or termination of any Equity Interest of the Parent or any Subsidiary of the Parent or (ii) any option, warrant or other right to acquire any such Equity Interest of the Parent or any Subsidiary of the Parent.

Revolving Commitment Increase shall have the meaning specified in Section 2.12.1 [Incremental Term Loans; Revolving Commitment Increase].

Revolving Credit Commitment shall mean, as to any Lender at any time, the amount initially set forth opposite its name on Schedule 1.1(B) in the column labeled “Amount of Commitment for Revolving Credit Loans,” as such Commitment is thereafter assigned or modified and Revolving Credit Commitments shall mean the aggregate Revolving Credit Commitments of all of the Lenders.

Revolving Credit Loans shall mean collectively and Revolving Credit Loan shall mean separately all Revolving Credit Loans or any Revolving Credit Loan made by the Lenders or one of the Lenders to the Borrower pursuant to Section 2.1 [Revolving Credit Commitments] or Section 2.9.3 [Disbursements, Reimbursement].

Revolving Facility Usage shall mean at any time the sum of the outstanding principal amount of Revolving Credit Loans, the outstanding principal amount of the Swing Loans, and the Letter of Credit Obligations.

Sale and Leaseback Transaction shall mean any arrangement with any Person providing for the leasing by the Parent or any of its Subsidiaries of any property (except for temporary leases for a term, including any renewal thereof, of not more than one year and except for leases between the Parent and a Subsidiary or between Subsidiaries), which property has been or is to be sold or transferred by the Parent or such Subsidiary to such Person.

Sanctioned Country shall mean a country subject to a sanctions program maintained under any Anti-Terrorism Law.

Sanctioned Person shall mean any individual person, group, regime, entity or thing listed or otherwise recognized as a specially designated, prohibited, sanctioned or debarred person, group, regime, entity or thing under any Anti-Terrorism Law.

Settlement Date shall mean the Business Day on which the Administrative Agent elects to effect settlement pursuant Section 5.11 [Settlement Date Procedures].

Solvent shall mean, with respect to any Person on any date of determination, taking into account any right of reimbursement, contribution or similar right available to such Person from other Persons, that on such date (i) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (ii) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute

 

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and matured, (iii) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (iv) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature, and (v) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

Standard & Poor’s shall mean Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.

Standby Letter of Credit shall mean a Letter of Credit issued to support obligations of one or more of the Loan Parties or Subsidiaries of Loan Parties, contingent or otherwise, which finance the working capital and business needs of the Loan Parties and their Subsidiaries incurred in the ordinary course of business.

Statements shall have the meaning specified in Section 6.1.6.1 [Historical Statements].

Subsidiary of any Person at any time shall mean any corporation, trust, partnership, limited liability company or other business entity (i) of which more than 50% of the outstanding voting securities or other interests normally entitled to vote for the election of one or more directors or trustees (regardless of any contingency which does or may suspend or dilute the voting rights) is at such time owned directly or indirectly by such Person or one or more of such Person’s Subsidiaries, or (ii) which is controlled or capable of being controlled by such Person or one or more of such Person’s Subsidiaries. Notwithstanding the foregoing, any Person that is not included as a “Consolidated Subsidiary” under GAAP shall not be a Subsidiary hereunder.

Subsidiary Equity Interests shall have the meaning specified in Section 6.1.2 [Subsidiaries and Owners; Investment Companies].

Swap shall mean any “swap” as defined in Section 1a(47) of the CEA and regulations thereunder, other than (a) a swap entered into on, or subject to the rules of, a board of trade designated as a contract market under Section 5 of the CEA, or (b) a commodity option entered into pursuant to CFTC Regulation 32.3(a).

Swap Obligation shall mean any obligation to pay or perform under any agreement, contract or transaction that constitutes a Swap which is also a Lender Provided Interest Rate Hedge, a Lender Provided Commodity Hedge or a Lender Provided Foreign Currency Hedge.

Swing Loan Commitment shall mean PNC’s commitment to make Swing Loans to the Borrower pursuant to Section 2.1.2 [Swing Loan Commitment] hereof in an aggregate principal amount up to $50,000,000.

Swing Loan Lender shall mean PNC, in its capacity as a lender of Swing Loans.

 

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Swing Loan Note shall mean the Swing Loan Note of the Borrower in the form of Exhibit 1.1(N)(2) evidencing the Swing Loans, together with all amendments, extensions, renewals, replacements, refinancings or refundings thereof in whole or in part.

Swing Loan Request shall mean a request for Swing Loans made in accordance with Section 2.5.2 [Swing Loan Requests] hereof.

Swing Loans shall mean collectively and Swing Loan shall mean separately all Swing Loans or any Swing Loan made by PNC to the Borrower pursuant to Section 2.1.2 [Swing Loan Commitment] hereof.

Taxes shall mean all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Official Body, including any interest, additions to tax or penalties applicable thereto.

UCP shall have the meaning specified in Section 11.11.1 [Governing Law].

USA Patriot Act shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.

U.S. Person shall mean any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.

U.S. Tax Compliance Certificate shall have the meaning specified in Section 5.9.7 [Status of Lenders].

Withholding Agent shall mean any Loan Party and the Administrative Agent.

1.2 Construction. Unless the context of this Agreement otherwise clearly requires, the following rules of construction shall apply to this Agreement and each of the other Loan Documents: (i) references to the plural include the singular, the plural, the part and the whole and the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; (ii) the words “hereof,” “herein,” “hereunder,” “hereto” and similar terms in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document as a whole; (iii) article, section, subsection, clause, schedule and exhibit references are to this Agreement or other Loan Document, as the case may be, unless otherwise specified; (iv) reference to any Person includes such Person’s successors and assigns; (v) reference to any agreement, including this Agreement and any other Loan Document together with the schedules and exhibits hereto or thereto, document or instrument means such agreement, document or instrument as amended, modified, replaced, substituted for, superseded or restated; (vi) relative to the determination of any period of time, “from” means “from and including,” “to” means “to but excluding,” and “through” means “through and including”; (vii) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights, (viii) section headings herein and in each other Loan Document are included for convenience and shall not affect the interpretation of this Agreement or such Loan Document, and (ix) unless otherwise specified, all references herein to times of day shall constitute references to Eastern Time .

 

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1.3 Accounting Principles; Changes in GAAP. Except as otherwise provided in this Agreement, all computations and determinations as to accounting or financial matters and all financial statements to be delivered pursuant to this Agreement shall be made and prepared in accordance with GAAP (including principles of consolidation where appropriate), and all accounting or financial terms shall have the meanings ascribed to such terms by GAAP; provided , however , that all accounting terms used in Section 8.2 [Negative Covenants] (and all defined terms used in the definition of any accounting term used in Section 8.2 shall have the meaning given to such terms (and defined terms) under GAAP as in effect on the date hereof applied on a basis consistent with those used in preparing Statements referred to in Section 6.1.6.1 [Historical Statements]. Notwithstanding the foregoing, if the Borrower notifies the Administrative Agent in writing that the Borrower wishes to amend any financial covenant in Section 8.2 of this Agreement, any related definition and/or the definition of the term Leverage Ratio for purposes of interest, Letter of Credit Fee and Commitment Fee determinations to eliminate the effect of any change in GAAP occurring after the Closing Date on the operation of such financial covenants (including, without limitation, any change in the treatment of capital leases and/or operating leases) and/or interest, Letter of Credit Fee or Commitment Fee determinations (or if the Administrative Agent notifies the Borrower in writing that the Required Lenders wish to amend any financial covenant in Section 8.2, any related definition and/or the definition of the term Leverage Ratio for purposes of interest, Letter of Credit Fee and Commitment Fee determinations to eliminate the effect of any such change in GAAP), then the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratios or requirements to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, the Loan Parties’ compliance with such covenants and/or the definition of the term Leverage Ratio for purposes of interest, Letter of Credit Fee and Commitment Fee determinations shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenants or definitions are amended in a manner satisfactory to the Borrower and the Required Lenders, and the Loan Parties shall provide to the Administrative Agent, when they deliver their financial statements pursuant to Section 8.3.1 [Quarterly Financial Statements] and Section 8.3.2 [Annual Financial Statements] of this Agreement, such reconciliation statements as shall be reasonably requested by the Administrative Agent. In furtherance of the foregoing, any such amendment addressing the impact of changes in GAAP as contemplated by the foregoing sentences shall be documented and effected at no cost to the Borrower other than the reimbursement of the Administrative Agent’s costs and expenses as contemplated by Section 11.3 [Expenses; Indemnity; Damage Waiver]. Further, for purposes of determining compliance with any covenant (including the computation of any financial covenant) contained herein, Indebtedness of the Parent and its Subsidiaries shall be deemed to be carried at 100% of the outstanding principal amount thereof, and the effects of FASB ASC 825 and FASB ASC 470-20 on financial liabilities shall be disregarded.

 

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2. REVOLVING CREDIT AND SWING LOAN FACILITIES; INCREMENTAL

TERM LOANS

2.1 Revolving Credit Commitments.

2.1.1 Revolving Credit Loans. Subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, each Lender severally agrees to make Revolving Credit Loans to the Borrower at any time or from time to time on or after the date hereof to the Expiration Date; provided that after giving effect to each such Loan (i) the aggregate amount of Revolving Credit Loans from such Lender shall not exceed such Lender’s Revolving Credit Commitment minus such Lender’s Ratable Share of the outstanding Swing Loans and the Letter of Credit Obligations and (ii) the Revolving Facility Usage shall not exceed the Revolving Credit Commitments. Within such limits of time and amount and subject to the other provisions of this Agreement, the Borrower may borrow, repay and reborrow pursuant to this Section 2.1.1.

2.1.2 Swing Loan Commitment. Subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, and in order to facilitate loans and repayments between Settlement Dates, the Swing Loan Lender may, at its option, cancelable at any time for any reason whatsoever, make swing loans (the Swing Loans ”) to the Borrower at any time or from time to time after the date hereof to, but not including, the Expiration Date, in an aggregate principal amount up to but not in excess of $50,000,000, provided that after giving effect to such Loan, the Revolving Facility Usage shall not exceed the aggregate Revolving Credit Commitments of the Lenders. Within such limits of time and amount and subject to the other provisions of this Agreement, the Borrower may borrow, repay and reborrow pursuant to this Section 2.1.2.

2.2 Nature of Lenders’ Obligations with Respect to Revolving Credit Loans. Each Lender shall be obligated to participate in each request for Revolving Credit Loans pursuant to Section 2.5 [Revolving Credit Loan Requests; Swing Loan Requests] in accordance with its Ratable Share. The aggregate of each Lender’s Revolving Credit Loans outstanding hereunder to the Borrower at any time shall never exceed its Revolving Credit Commitment minus its Ratable Share of the outstanding Swing Loans and Letter of Credit Obligations. The obligations of each Lender hereunder are several. The failure of any Lender to perform its obligations hereunder shall not affect the Obligations of the Borrower to any other party nor shall any other party be liable for the failure of such Lender to perform its obligations hereunder. The Lenders shall have no obligation to make Revolving Credit Loans hereunder on or after the Expiration Date.

2.3 Commitment Fees. Accruing from the date hereof until the Expiration Date, the Borrower agrees to pay to the Administrative Agent for the account of each Lender according to its Ratable Share, a nonrefundable commitment fee (the Commitment Fee ”) equal to the Applicable Commitment Fee Rate (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) multiplied by the average daily difference between the amount of (i) the Revolving Credit Commitments (for purposes of this computation, the Swing Loan Lender’s Swing Loans shall be deemed to be borrowed amounts under its Revolving Credit Commitment) and (ii) the Revolving Facility Usage; provided , however , that any Commitment Fee accrued with respect to the Revolving Credit Commitment of a Defaulting Lender during the

 

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period prior to the time such Lender became a Defaulting Lender and unpaid at such time shall not be payable by the Borrower so long as such Lender shall be a Defaulting Lender except to the extent that such Commitment Fee shall otherwise have been due and payable by the Borrower prior to such time; and provided further that no Commitment Fee shall accrue with respect to the Revolving Credit Commitment of a Defaulting Lender so long as such Lender shall be a Defaulting Lender. Subject to the proviso in the directly preceding sentence, all Commitment Fees shall be payable in arrears on each Payment Date.

2.4 Reserved.

2.5 Revolving Credit Loan Requests; Swing Loan Requests.

2.5.1 Revolving Credit Loan Requests. Except as otherwise provided herein, the Borrower may from time to time prior to the Expiration Date request the Lenders to make Revolving Credit Loans, or renew or convert the Interest Rate Option applicable to existing Revolving Credit Loans pursuant to Section 4.2 [Interest Periods], by delivering to the Administrative Agent, not later than Noon, (i) three (3) Business Days prior to the proposed Borrowing Date with respect to the making of Revolving Credit Loans to which the LIBOR Rate Option applies or the conversion to or the renewal of the LIBOR Rate Option for any Loans; and (ii) the same Business Day of the proposed Borrowing Date with respect to the making of a Revolving Credit Loan to which the Base Rate Option applies or the last day of the preceding Interest Period with respect to the conversion to the Base Rate Option for any Loan, of a duly completed request therefor substantially in the form of Exhibit 2.5.1 or a request by telephone immediately confirmed in writing by letter, facsimile or telex in such form (each, a Loan Request ”), it being understood that the Administrative Agent may rely on the authority of any individual making such a telephonic request without the necessity of receipt of such written confirmation. Each Loan Request shall be irrevocable and shall specify the aggregate amount of the proposed Loans comprising each Borrowing Tranche, and, if applicable, the Interest Period, which amounts shall be in (x) integral multiples of $500,000 and not less than $1,000,000 for each Borrowing Tranche under the LIBOR Rate Option, and (y) integral multiples of $100,000 and not less than $500,000 for each Borrowing Tranche under the Base Rate Option.

2.5.2 Swing Loan Requests. Except as otherwise provided herein, the Borrower may from time to time prior to the Expiration Date request the Swing Loan Lender to make Swing Loans by delivery to the Swing Loan Lender not later than 12:00 noon on the proposed Borrowing Date of a duly completed request therefor substantially in the form of Exhibit 2.5.2 hereto or a request by telephone immediately confirmed in writing by letter, facsimile or telex (each, a Swing Loan Request ”), it being understood that the Swing Loan Lender may rely on the authority of any individual making such a telephonic request without the necessity of receipt of such written confirmation. Each Swing Loan Request shall be irrevocable and shall specify the proposed Borrowing Date and the principal amount of such Swing Loan, which shall be not less than $100,000.

2.6 Making Revolving Credit Loans and Swing Loans; Presumptions by the Administrative Agent; Repayment of Revolving Credit Loans; Borrowings to Repay Swing Loans.

 

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2.6.1 Making Revolving Credit Loans. The Administrative Agent shall, promptly after receipt by it of a Loan Request pursuant to Section 2.5 [Revolving Credit Loan Requests; Swing Loan Requests], notify the Lenders of its receipt of such Loan Request specifying the information provided by the Borrower and the apportionment among the Lenders of the requested Revolving Credit Loans as determined by the Administrative Agent in accordance with Section 2.2 [Nature of Lenders’ Obligations with Respect to Revolving Credit Loans]. Each Lender shall remit the principal amount of each Revolving Credit Loan to the Administrative Agent such that the Administrative Agent is able to, and the Administrative Agent shall, to the extent the Lenders have made funds available to it for such purpose and subject to Section 7.2 [Each Loan or Letter of Credit], fund such Revolving Credit Loans to the Borrower in U.S. Dollars and immediately available funds at the Principal Office prior to 2:00 p.m., on the applicable Borrowing Date; provided that if any Lender fails to remit such funds to the Administrative Agent in a timely manner, the Administrative Agent may elect in its sole discretion to fund with its own funds the Revolving Credit Loans of such Lender on such Borrowing Date, and such Lender shall be subject to the repayment obligation in Section 2.6.2 [Presumptions by the Administrative Agent].

2.6.2 Presumptions by the Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed time of any Loan that such Lender will not make available to the Administrative Agent such Lender’s share of such Loan, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.6.1 [Making Revolving Credit Loans] and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Loan available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of a payment to be made by such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation and (ii) in the case of a payment to be made by the Borrower, the interest rate applicable to Loans under the Base Rate Option. If such Lender pays its share of the applicable Loan to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.

2.6.3 Making Swing Loans. So long as the Swing Loan Lender elects to make Swing Loans, the Swing Loan Lender shall, after receipt by it of a Swing Loan Request pursuant to Section 2.5.2 [Swing Loan Requests], fund such Swing Loan to the Borrower in U.S. Dollars and immediately available funds at the Principal Office prior to 4:00 p.m. on the Borrowing Date.

2.6.4 Repayment of Revolving Credit Loans. The Borrower shall repay the Revolving Credit Loans together with all outstanding interest thereon on the Expiration Date.

2.6.5 Borrowings to Repay Swing Loans. The Swing Loan Lender may, at its option, exercisable at any time for any reason whatsoever, demand repayment of the Swing Loans, and each Lender shall make a Revolving Credit Loan in an amount equal to such Lender’s

 

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Ratable Share of the aggregate principal amount of the outstanding Swing Loans, plus, if the Swing Loan Lender so requests, accrued interest thereon, provided that no Lender shall be obligated in any event to make Revolving Credit Loans in excess of its Revolving Credit Commitment minus its Ratable Share of Letter of Credit Obligations. Revolving Credit Loans made pursuant to the preceding sentence shall bear interest at the Base Rate Option and shall be deemed to have been properly requested in accordance with Section 2.5.1 [Revolving Credit Loan Requests] without regard to any of the requirements of that provision. The Swing Loan Lender shall provide notice to the Lenders (which may be telephonic or written notice by letter, facsimile or telex) that such Revolving Credit Loans are to be made under this Section 2.6.5 and of the apportionment among the Lenders, and the Lenders shall be unconditionally obligated to fund such Revolving Credit Loans (whether or not the conditions specified in Section 2.5.1 [Revolving Credit Loan Requests] are then satisfied) by the time the Swing Loan Lender so requests, which shall not be earlier than 3:00 p.m. on the Business Day next after the date the Lenders receive such notice from the Swing Loan Lender.

2.6.6 Swing Loans Under Cash Management Agreements. In addition to making Swing Loans pursuant to the foregoing provisions of Section 2.6.3 [Making Swing Loans], without the requirement for a specific request from the Borrower pursuant to Section 2.5.2 [Swing Loan Requests], the Swing Loan Lender may make Swing Loans to the Borrower in accordance with the provisions of the agreements between the Borrower and such Swing Loan Lender relating to the Borrower’s deposit, sweep and other accounts at such Swing Loan Lender and related arrangements and agreements regarding the management and investment of the Borrower’s cash assets as in effect from time to time (the “ Cash Management Agreements ”) to the extent of the daily aggregate net negative balance in the Borrower’s accounts which are subject to the provisions of the Cash Management Agreements. Swing Loans made pursuant to this Section 2.6.6 in accordance with the provisions of the Cash Management Agreements shall (i) be subject to the limitations as to aggregate amount set forth in Section 2.1.2 [Swing Loan Commitment], (ii) not be subject to the limitations as to individual amount set forth in Section 2.5.2 [Swing Loan Requests], (iii) be payable by the Borrower, both as to principal and interest, at the rates and times set forth in the Cash Management Agreements (but in no event later than the Expiration Date), (iv) not be made at any time after such Swing Loan Lender has received written notice of the occurrence of an Event of Default and so long as such shall continue to exist, or, unless consented to by the Required Lenders, a Potential Default and so long as such shall continue to exist, (v) if not repaid by the Borrower in accordance with the provisions of the Cash Management Agreements, be subject to each Lender’s obligation pursuant to Section 2.6.5 [Borrowings to Repay Swing Loans], and (vi) except as provided in the foregoing subsections (i) through (v), be subject to all of the terms and conditions of this Section 2.

2.7 Notes. The Obligation of the Borrower to repay the aggregate unpaid principal amount of the Revolving Credit Loans and Swing Loans made to it by each Lender, together with interest thereon, shall be evidenced by a revolving credit Note and a swing Note, dated the Closing Date payable to the order of such Lender in a face amount equal to the Revolving Credit Commitment or Swing Loan Commitment, as applicable, of such Lender.

 

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2.8 Use of Proceeds. The proceeds of the Revolving Loans and Swing Loans shall be used to refinance existing indebtedness and for working capital and general corporate purposes, including without limitation capital expenditures, joint ventures and acquisitions, and to conduct share repurchases of outstanding common shares of the Parent as permitted by Section 8.2.5(v).

2.9 Letter of Credit Subfacility.

2.9.1 Issuance of Letters of Credit. Borrower may at any time prior to the Expiration Date request the issuance of a Standby Letter of Credit or a Commercial Letter of Credit (each a “ Letter of Credit ”) on behalf of itself, Parent or a Subsidiary of the Parent, or the amendment or extension of an existing Letter of Credit, by delivering or having such other Loan Party deliver to the Issuing Lender (with a copy to the Administrative Agent) a completed application and agreement for letters of credit, or request for such amendment or extension, as applicable, in such form as the Issuing Lender may specify from time to time by no later than 10:00 a.m. at least five (5) Business Days, or such shorter period as may be agreed to by the Issuing Lender, in advance of the proposed date of issuance. The Borrower or any Loan Party shall authorize and direct the Issuing Lender to name the Borrower or any Loan Party as the “Applicant” or “Account Party” of each Letter of Credit. Promptly after receipt of any letter of credit application, the Issuing Lender shall confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit application and if not, such Issuing Lender will provide Administrative Agent with a copy thereof. Unless the Issuing Lender has received notice from any Lender, Administrative Agent or any Loan Party, at least one day prior to the requested date of issuance, amendment or extension of the applicable Letter of Credit, that one or more applicable conditions in Section 7 [Conditions of Lending and Issuance of Letters of Credit] is not satisfied, then, subject to the terms and conditions hereof and in reliance on the agreements of the other Lenders set forth in this Section 2.9, the Issuing Lender or any of the Issuing Lender’s Affiliates will issue a Letter of Credit or agree to such amendment or extension, provided that, subject to the following paragraph in this Section 2.9.1, each Letter of Credit shall (A) have a maximum maturity of twelve (12) months from the date of issuance, and (B) in no event expire later than the Expiration Date and provided further that in no event shall (i) the Letter of Credit Obligations exceed, at any one time, $50,000,000 (the Letter of Credit Sublimit ”) or (ii) the Revolving Facility Usage exceed, at any one time, the Revolving Credit Commitments. Each request by the Borrower for the issuance, amendment or extension of a Letter of Credit shall be deemed to be a representation by the Borrower that it shall be in compliance with the preceding sentence and with Section 7 [Conditions of Lending and Issuance of Letters of Credit] after giving effect to the requested issuance, amendment or extension of such Letter of Credit. Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to the beneficiary thereof, the applicable Issuing Lender will also deliver to Borrower and Administrative Agent a true and complete copy of such Letter of Credit or amendment.

If the Borrower so requests in any Letter of Credit application, each Issuing Lender shall agree to issue a Letter of Credit that has automatic renewal provisions; provided , however , that any Letter of Credit that has automatic renewal provisions must permit such Issuing Lender to prevent any such renewal at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Once any such Letter of Credit that has automatic renewal provisions has been issued, the applicable Lenders shall be deemed to have authorized (but may not require) such Issuing

 

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Lender to permit the renewal of such Letter of Credit at any time prior to an expiry date not later than the Expiration Date; provided , however , that such Issuing Lender shall not permit any such renewal if (i) such Issuing Lender has determined that it would have no obligation at such time to issue such Letter of Credit in its renewed form under the terms hereof, or (ii) it has received notice (which must be in writing) on or before the day that is two (2) Business Days before the date that such Issuing Lender is permitted to send a notice of non-renewal from the Administrative Agent, any Lender or the Borrower that one or more of the applicable conditions specified in Section 7 [Conditions of Lending and Issuance of Letters of Credit] is not then satisfied.

2.9.2 Letter of Credit Fees. The Borrower shall pay (i) to the Administrative Agent for the ratable account of the Lenders a fee (the Letter of Credit Fee ”) equal to the Applicable Letter of Credit Fee Rate on the daily amount available to be drawn under each Letter of Credit, and (ii) to the Issuing Lender for its own account a fronting fee equal to 0.125% per annum on the daily amount available to be drawn under each Letter of Credit. All Letter of Credit Fees and fronting fees shall be computed on the basis of a year of 360 days and actual days elapsed and shall be payable quarterly in arrears on each Payment Date following issuance of each Letter of Credit. The Borrower shall also pay to the Issuing Lender for the Issuing Lender’s sole account the Issuing Lender’s then in effect customary fees and administrative expenses payable with respect to the Letters of Credit as the Issuing Lender may generally charge or incur from time to time in connection with the issuance, maintenance, amendment (if any), assignment or transfer (if any), negotiation, and administration of Letters of Credit.

2.9.3 Disbursements, Reimbursement. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Lender a participation in such Letter of Credit and each drawing thereunder in an amount equal to such Lender’s Ratable Share of the maximum amount available to be drawn under such Letter of Credit and the amount of such drawing, respectively.

2.9.3.1 In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, the Issuing Lender will promptly notify the Borrower and the Administrative Agent thereof. Provided that it shall have received such notice by 11:00 a.m., the Borrower shall reimburse (such obligation to reimburse the Issuing Lender shall sometimes be referred to as a Reimbursement Obligation ”) the Issuing Lender prior to 2:00 p.m. on the date of such notice (each date upon which the Borrower has received notice prior to 11:00 a.m., a Drawing Date ”) by paying to the Administrative Agent for the account of the Issuing Lender an amount equal to the amount so paid by the Issuing Lender. In the event the Borrower fails to reimburse the Issuing Lender (through the Administrative Agent) for the full amount of any drawing under any Letter of Credit by 12:00 noon on the Drawing Date, the Administrative Agent will promptly notify each Lender thereof, and the Borrower shall be deemed to have requested that Revolving Credit Loans be made by the Lenders under the Base Rate Option to be disbursed on the Drawing Date under such Letter of Credit, subject to the amount of the unutilized portion of the Revolving Credit Commitment and subject to the conditions set forth in Section 7.2 [Each Loan or Letter of Credit] other than any notice requirements. Any notice given by the Administrative Agent or Issuing Lender pursuant to this Section 2.9.3.1 may be oral if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

 

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2.9.3.2 Each Lender shall upon any notice pursuant to Section 2.9.3.1 make available to the Administrative Agent for the account of the Issuing Lender an amount in immediately available funds equal to its Ratable Share of the amount of the drawing, whereupon the participating Lenders shall (subject to Section 2.9.3 [Disbursements; Reimbursement]) each be deemed to have made a Revolving Credit Loan under the Base Rate Option to the Borrower in that amount. If any Lender so notified fails to make available to the Administrative Agent for the account of the Issuing Lender the amount of such Lender’s Ratable Share of such amount by no later than 2:00 p.m. on the Drawing Date, then interest shall accrue on such Lender’s obligation to make such payment, from the Drawing Date to the date on which such Lender makes such payment (i) at a rate per annum equal to the Federal Funds Effective Rate during the first three (3) days following the Drawing Date and (ii) at a rate per annum equal to the rate applicable to Loans under the Revolving Credit Base Rate Option on and after the fourth day following the Drawing Date. The Administrative Agent and the Issuing Lender will promptly give notice (as described in Section 2.9.3.1 above) of the occurrence of the Drawing Date, but failure of the Administrative Agent or the Issuing Lender to give any such notice on the Drawing Date or in sufficient time to enable any Lender to effect such payment on such date shall not relieve such Lender from its obligation under this Section 2.9.3.2.

2.9.3.3 With respect to any unreimbursed drawing that is not converted into Revolving Credit Loans under the Base Rate Option to the Borrower in whole or in part as contemplated by Section 2.9.3.1, because of the Borrower’s failure to satisfy the conditions set forth in Section 7.2 [Each Loan or Letter of Credit] other than any notice requirements, or for any other reason, the Borrower shall be deemed to have incurred from the Issuing Lender a borrowing (each a Letter of Credit Borrowing ”) in the amount of such drawing. Such Letter of Credit Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the rate per annum applicable to the Revolving Credit Loans under the Base Rate Option. Each Lender’s payment to the Administrative Agent for the account of the Issuing Lender pursuant to Section 2.9.3 [Disbursements, Reimbursement] shall be deemed to be a payment in respect of its participation in such Letter of Credit Borrowing (each a Participation Advance ”) from such Lender in satisfaction of its participation obligation under this Section 2.9.3.

2.9.4 Repayment of Participation Advances.

2.9.4.1 Upon (and only upon) receipt by the Administrative Agent for the account of the Issuing Lender of immediately available funds from the Borrower (i) in reimbursement of any payment made by the Issuing Lender under the Letter of Credit with respect to which any Lender has made a Participation Advance to the Administrative Agent, or (ii) in payment of interest on such a payment made by the Issuing Lender under such a Letter of Credit, the Administrative Agent on behalf of the Issuing Lender will pay to each Lender, in the same funds as those received by the Administrative Agent, the amount of such Lender’s Ratable Share of such funds, except the Administrative Agent shall retain for the account of the Issuing Lender the amount of the Ratable Share of such funds of any Lender that did not make a Participation Advance in respect of such payment by the Issuing Lender.

 

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2.9.4.2 If the Administrative Agent is required at any time to return to any Loan Party, or to a trustee, receiver, liquidator, custodian, or any official in any Insolvency Event, any portion of any payment made by any Loan Party to the Administrative Agent for the account of the Issuing Lender pursuant to this Section in reimbursement of a payment made under any Letter of Credit or interest or fees thereon, each Lender shall, on demand of the Administrative Agent, forthwith return to the Administrative Agent for the account of the Issuing Lender the amount of its Ratable Share of any amounts so returned by the Administrative Agent plus interest thereon from the date such demand is made to the date such amounts are returned by such Lender to the Administrative Agent, at a rate per annum equal to the Federal Funds Effective Rate in effect from time to time.

2.9.5 Documentation. Each Loan Party agrees to be bound by the terms of the Issuing Lender’s application and agreement for letters of credit and the Issuing Lender’s written regulations and customary practices relating to letters of credit, though such interpretation may be different from such Loan Party’s own. In the event of a conflict between such application or agreement and this Agreement, this Agreement shall govern. For the avoidance of doubt, any Liens or setoff provisions created by, or otherwise provided for in, any such documentation (other than this Agreement or as set forth in clause (xv) of the definition of Permitted Liens) are deemed inoperative. It is understood and agreed that, except in the case of gross negligence, or willful misconduct, the Issuing Lender shall not be liable for any error, negligence and/or mistakes, whether of omission or commission, in following any Loan Party’s instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto.

2.9.6 Determinations to Honor Drawing Requests. In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit.

2.9.7 Nature of Participation and Reimbursement Obligations. Each Lender’s obligation in accordance with this Agreement to make the Revolving Credit Loans or Participation Advances, as contemplated by Section 2.9.3 [Disbursements, Reimbursement], as a result of a drawing under a Letter of Credit, and the Obligations of the Borrower to reimburse the Issuing Lender upon a draw under a Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Section 2.9 under all circumstances, including the following circumstances:

(i) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Issuing Lender or any of its Affiliates, the Borrower or any other Person for any reason whatsoever, or which any Loan Party may have against the Issuing Lender or any of its Affiliates, any Lender or any other Person for any reason whatsoever;

(ii) the failure of any Loan Party or any other Person to comply, in connection with a Letter of Credit Borrowing, with the conditions set forth in Sections 2.1 [Revolving Credit Commitments], 2.5 [Revolving Credit Loan Requests; Swing Loan Requests], 2.6 [Making Revolving Credit Loans and Swing Loans; Etc.] or 7.2 [Each Loan or Letter of Credit] or as

 

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otherwise set forth in this Agreement for the making of a Revolving Credit Loan, it being acknowledged that such conditions are not required for the making of a Letter of Credit Borrowing and the obligation of the Lenders to make Participation Advances under Section 2.9.3 [Disbursements, Reimbursement];

(iii) any lack of validity or enforceability of any Letter of Credit;

(iv) any claim of breach of warranty that might be made by any Loan Party or any Lender against any beneficiary of a Letter of Credit, or the existence of any claim, set-off, recoupment, counterclaim, crossclaim, defense or other right which any Loan Party or any Lender may have at any time against a beneficiary, successor beneficiary any transferee or assignee of any Letter of Credit or the proceeds thereof (or any Persons for whom any such transferee may be acting), the Issuing Lender or its Affiliates or any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between any Loan Party or Subsidiaries of a Loan Party and the beneficiary for which any Letter of Credit was procured);

(v) the lack of power or authority of any signer of (or any defect in or forgery of any signature or endorsement on) or the form of or lack of validity, sufficiency, accuracy, enforceability or genuineness of any draft, demand, instrument, certificate or other document presented under or in connection with any Letter of Credit, or any fraud or alleged fraud in connection with any Letter of Credit, or the transport of any property or provision of services relating to a Letter of Credit, in each case even if the Issuing Lender or any of its Affiliates has been notified thereof;

(vi) payment by the Issuing Lender or any of its Affiliates under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit;

(vii) the solvency of, or any acts or omissions by, any beneficiary of any Letter of Credit, or any other Person having a role in any transaction or obligation relating to a Letter of Credit, or the existence, nature, quality, quantity, condition, value or other characteristic of any property or services relating to a Letter of Credit;

(viii) any failure by the Issuing Lender or any of its Affiliates to issue any Letter of Credit in the form requested by any Loan Party, unless the Issuing Lender has received written notice from such Loan Party of such failure within three Business Days after the Issuing Lender shall have furnished such Loan Party and the Administrative Agent a copy of such Letter of Credit and such error is material and no drawing has been made thereon prior to receipt of such notice;

(ix) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of any Loan Party or Subsidiaries of a Loan Party;

(x) any breach of this Agreement or any other Loan Document by any party thereto;

 

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(xi) the occurrence or continuance of an Insolvency Event with respect to any Loan Party;

(xii) the fact that an Event of Default or a Potential Default shall have occurred and be continuing;

(xiii) the fact that the Expiration Date shall have passed or this Agreement or the Commitments hereunder shall have been terminated; and

(xiv) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.

2.9.8 Indemnity. Except as otherwise provided, and subject to the specific limitations set forth, in this Agreement, the Borrower hereby agrees to protect, indemnify, pay and save harmless the Issuing Lender and any of its Affiliates that has issued a Letter of Credit from and against any and all claims, demands, liabilities, damages, Taxes, penalties, interest, judgments, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which the Issuing Lender or any of its Affiliates may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit, other than as a result of (A) the gross negligence or willful misconduct of the Issuing Lender as determined by a final non-appealable judgment of a court of competent jurisdiction or (B) the wrongful dishonor by the Issuing Lender or any of Issuing Lender’s Affiliates of a proper demand for payment made under any Letter of Credit, except if such dishonor resulted from any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Official Body.

2.9.9 Liability for Acts and Omissions. As between any Loan Party and the Issuing Lender, or the Issuing Lender’s Affiliates, such Loan Party assumes all risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Issuing Lender shall not be responsible for any of the following, including any losses or damages to any Loan Party or other Person or property relating therefrom: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged (even if the Issuing Lender or its Affiliates shall have been notified thereof); (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) the failure of the beneficiary of any such Letter of Credit, or any other party to which such Letter of Credit may be transferred, to comply fully with any conditions required in order to draw upon such Letter of Credit or any other claim of any Loan Party against any beneficiary of such Letter of Credit, or any such transferee, or any dispute between or among any Loan Party and any beneficiary of any Letter of Credit or any such transferee; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit

 

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or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of the Issuing Lender or its Affiliates, as applicable, including any act or omission of any Official Body, and none of the above shall affect or impair, or prevent the vesting of, any of the Issuing Lender’s or its Affiliates rights or powers hereunder. Nothing in the preceding sentence shall relieve the Issuing Lender from liability for the Issuing Lender’s gross negligence or willful misconduct in connection with actions or omissions described in such clauses (i) through (viii) of such sentence. In no event shall the Issuing Lender or its Affiliates be liable to any Loan Party for any indirect, consequential, incidental, punitive, exemplary or special damages or expenses (including without limitation attorneys’ fees), or for any damages resulting from any change in the value of any property relating to a Letter of Credit.

Without limiting the generality of the foregoing, the Issuing Lender and each of its Affiliates (i) may rely on any oral or other communication believed in good faith by the Issuing Lender or such Affiliate to have been authorized or given by or on behalf of the applicant for a Letter of Credit, (ii) may honor any presentation if the documents presented appear on their face substantially to comply with the terms and conditions of the relevant Letter of Credit; (iii) may honor a previously dishonored presentation under a Letter of Credit, whether such dishonor was pursuant to a court order, to settle or compromise any claim of wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the same extent as if such presentation had initially been honored, together with any interest paid by the Issuing Lender or its Affiliate; (iv) may honor any drawing that is payable upon presentation of a statement advising negotiation or payment, upon receipt of such statement (even if such statement indicates that a draft or other document is being delivered separately), and shall not be liable for any failure of any such draft or other document to arrive, or to conform in any way with the relevant Letter of Credit; (v) may pay any paying or negotiating bank claiming that it rightfully honored under the laws or practices of the place where such bank is located; and (vi) may settle or adjust any claim or demand made on the Issuing Lender or its Affiliate in any way related to any order issued at the applicant’s request to an air carrier, a letter of guarantee or of indemnity issued to a carrier or any similar document (each an Order ”) and honor any drawing in connection with any Letter of Credit that is the subject of such Order, notwithstanding that any drafts or other documents presented in connection with such Letter of Credit fail to conform in any way with such Letter of Credit.

In furtherance and extension and not in limitation of the specific provisions set forth above, any action taken or omitted by the Issuing Lender or its Affiliates under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not put the Issuing Lender or its Affiliates under any resulting liability to the Borrower or any Lender.

2.9.10 Issuing Lender Reporting Requirements. Each Issuing Lender shall, on the first Business Day of each month, provide to Administrative Agent and Borrower a schedule of the Letters of Credit issued by it, in form and substance satisfactory to Administrative Agent, showing the date of issuance of each Letter of Credit, the account party, the original face amount (if any), and the expiration date of any Letter of Credit outstanding at any time during the preceding month, and any other information relating to such Letter of Credit that the Administrative Agent may request.

 

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2.9.11 Reserved.

2.10 Defaulting Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:

(i) fees shall cease to accrue on the unfunded portion of the Commitment of such Defaulting Lender pursuant to Section 2.3 [Commitment Fees];

(ii) the Commitment and outstanding Loans of such Defaulting Lender shall not be included in determining whether the Required Lenders have taken or may take any action hereunder (including any consent to any amendment, waiver or other modification pursuant to Section 11.1 [Modifications, Amendments or Waivers]); provided , that this clause (ii) shall not apply to the vote of a Defaulting Lender in the case of an amendment, waiver or other modification requiring the consent of such Lender or each Lender directly affected thereby;

(iii) if any Swing Loans are outstanding or any Letter of Credit Obligations exist at the time such Lender becomes a Defaulting Lender, then:

(a) all or any part of the outstanding Swing Loans and Letter of Credit Obligations of such Defaulting Lender shall be reallocated among the non-Defaulting Lenders in accordance with their respective Ratable Shares but only to the extent that (x) the Revolving Facility Usage does not exceed the total of all non-Defaulting Lenders’ Revolving Credit Commitments, and (y) no Potential Default or Event of Default has occurred and is continuing at such time;

(b) if the reallocation described in clause (a) above cannot, or can only partially, be effected (after giving effect to any reallocation contemplated by clause (a) above), the Borrower shall within one Business Day following notice by the Administrative Agent (x)  first , prepay such outstanding Swing Loans, and (y)  second , cash collateralize for the benefit of the Issuing Lender the Borrower’s obligations corresponding to such Defaulting Lender’s Letter of Credit Obligations (after giving effect to any partial reallocation pursuant to clause (a) above) in an interest-bearing deposit account held at the Administrative Agent for so long as such Letter of Credit Obligations are outstanding;

(c) if the Borrower cash collateralizes any portion of such Defaulting Lender’s Letter of Credit Obligations pursuant to clause (b) above, the Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to Section 2.9.2 [Letter of Credit Fees] with respect to such Defaulting Lender’s Letter of Credit Obligations during the period such Defaulting Lender’s Letter of Credit Obligations are cash collateralized;

(d) if the Letter of Credit Obligations of the non-Defaulting Lenders are reallocated pursuant to clause (a) above, then the fees payable to the Lenders pursuant to Section 2.9.2 shall be adjusted in accordance with such non-Defaulting Lenders’ Ratable Share; and

 

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(e) if all or any portion of such Defaulting Lender’s Letter of Credit Obligations are neither reallocated nor cash collateralized pursuant to clause (a) or (b) above, then, without prejudice to any rights or remedies of the Issuing Lender or any other Lender hereunder, all Letter of Credit Fees payable under Section 2.9.2 with respect to such Defaulting Lender’s Letter of Credit Obligations shall be payable to the Issuing Lender (and not to such Defaulting Lender) until and to the extent that such Letter of Credit Obligations are reallocated and/or cash collateralized; and

(iv) so long as such Lender is a Defaulting Lender, the Swing Loan Lender shall not be required to fund any Swing Loans and the Issuing Lender shall not be required to issue, amend or increase any Letter of Credit, unless the Issuing Lender is satisfied that the related exposure and the Defaulting Lender’s then outstanding Letter of Credit Obligations will be 100% covered by the Revolving Credit Commitments of the non-Defaulting Lenders and/or cash collateral will be provided by the Borrower in accordance with Section 2.10(iii), and participating interests in any newly made Swing Loan or any newly issued or increased Letter of Credit shall be allocated among non-Defaulting Lenders in a manner consistent with Section 2.10(iii)(a) (and such Defaulting Lender shall not participate therein).

If (i) a Bankruptcy Event with respect to a parent company of any Lender shall occur following the date hereof and for so long as such event shall continue, or (ii) the Swing Loan Lender or the Issuing Lender has a good faith belief that any Lender has defaulted in fulfilling its obligations under one or more other agreements in which such Lender commits to extend credit, the Swing Loan Lender shall not be required to fund any Swing Loan and the Issuing Lender shall not be required to issue, amend or increase any Letter of Credit, unless the Swing Loan Lender or the Issuing Lender, as the case may be, shall have entered into arrangements with the Borrower or such Lender, satisfactory to the Swing Loan Lender or the Issuing Lender, as the case may be, to defease any risk to it in respect of such Lender hereunder.

In the event that the Administrative Agent, the Borrower, the Swing Loan Lender and the Issuing Lender agree in writing that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, including the return of all cash collateralization funds to the Borrower, then the Administrative Agent will so notify the parties hereto, and the Ratable Share of the Swing Loans and Letter of Credit Obligations of the Lenders shall be readjusted to reflect the inclusion of such Lender’s Commitment, and on such date such Lender shall purchase at par such of the Loans of the other Lenders (other than Swing Loans) as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Loans in accordance with its Ratable Share, and any cash collateral provided by the Borrower in accordance with this Section 2.10 shall be returned to the Borrower.

2.11 Reduction of Revolving Credit Commitment. The Borrower shall have the right at any time after the Closing Date upon five (5) days’ prior written notice to the Administrative Agent to permanently reduce (ratably among the Lenders in proportion to their Ratable Shares) the Revolving Credit Commitments, in a minimum amount of $5,000,000 and whole multiples of $1,000,000, or to terminate completely the Revolving Credit Commitments, without penalty or premium except as hereinafter set forth; provided that any such reduction or termination shall be accompanied by prepayment of the Notes, together with outstanding Commitment Fees, and the

 

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full amount of interest accrued on the principal sum to be prepaid (and all amounts referred to in Section 5.10 [Indemnity] hereof) to the extent necessary to cause the aggregate Revolving Facility Usage after giving effect to such prepayments to be equal to or less than the Revolving Credit Commitments as so reduced or terminated. Any notice to reduce the Revolving Credit Commitments under this Section 2.11 shall be irrevocable.

2.12 Increase in Revolving Credit Commitments; Incremental Term Loans.

2.12.1 Incremental Term Loans; Revolving Commitment Increase. Subject to the terms and conditions set forth in this Section 2.12, the Borrower may, at any time prior to the Expiration Date, but no more than five (5) times in the aggregate, request (i) one or more tranches of term loans (the Incremental Term Loans ”) and/or (ii) one more increases in the Revolving Credit Commitments (each such increase, a Revolving Commitment Increase ”) without the consent of any Lender not providing such Incremental Term Loans or Revolving Commitment Increases, as the case may be.

2.12.1.1 No Obligation to Increase . No current Lender shall be obligated to provide an Incremental Term Loan or increase its Revolving Credit Commitment and the making of any Incremental Term Loan or increase in the Revolving Credit Commitment by any current Lender shall be in the sole discretion of such current Lender.

2.12.1.2 Defaults . There shall exist no Events of Default or Potential Default on the effective date of such Revolving Commitment Increase or the making of such Incremental Term Loans after giving effect to such Revolving Commitment Increase or the making of such Incremental Term Loans.

2.12.1.3 New Lenders . Any New Lender shall be subject to the approval of the Administrative Agent and, in the case of a Revolving Commitment Increase, any New Lender shall be subject to the approval of the Issuing Lender, in each case not to be unreasonably withheld or delayed.

2.12.1.4 Aggregate Commitments . After giving effect to any such Revolving Commitment Increase or the making of any Incremental Term Loan, the aggregate amount of all Incremental Term Loans and Revolving Commitments Increases shall not exceed $300,000,000 and the aggregate amount of all Incremental Term Loans and the aggregate Revolving Credit Commitments shall not exceed $1,050,000,000.

2.12.1.5 Minimum Commitments . The minimum amount of any Incremental Term Loan or Revolving Commitment Increase provided under this Section shall be $50,000,000.

2.12.1.6 Incremental Term Loans . Any tranche of Incremental Term Loans (A) shall rank pari passu in right of payment and security with the Revolving Credit Loans, (B) shall not mature earlier than the Expiration Date (but may have amortization prior to such date and may permit voluntary prepayments by the Borrower) and (C) except as set forth above, shall be treated substantially the same as (and in any event no more favorably than) the Revolving Credit Loans; provided that (1) the terms and conditions applicable to any tranche of Incremental Term Loans maturing after the Expiration Date may provide for material additional or different financial or other covenants or prepayment requirements applicable only during periods after the Expiration Date and (2) the Incremental Term Loans may be priced differently than the Revolving Credit Loans.

 

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2.12.1.7 Commitments . A commitment to make Incremental Term Loans shall become an “Incremental Term Loan Commitment” under this Agreement, and a commitment to participate in a Revolving Commitment Increase shall become a “Revolving Credit Commitment” (or in the case of a Revolving Commitment Increase to be provided by an existing Lender, an increase in such Lender’s Revolving Commitment) under this Agreement, in any such case, pursuant to a “Commitment and Acceptance” substantially in the form of Exhibit 2.12.1 (a Commitment and Acceptance ”). Any request for a tranche of Incremental Term Loans or a Revolving Commitment Increase shall be made in a written notice given to the Administrative Agent by the Borrower not less than ten Business Days (or such other period agreed to between the Administrative Agent and the Borrower) prior to the proposed effective date therefor, which notice shall specify (i) the amount of the proposed tranche of Incremental Term Loans or the Revolving Commitment Increase, as the case may be, (ii) the proposed effective date thereof and (iii) with respect to Incremental Term Loans only, the proposed interest rate or rates and proposed amortization with respect thereto. Incremental Term Loans may be made, and Revolving Commitment Increases may be provided, by any existing Lender (an Increasing Lender ”) or by any other bank or other financial institution (any such other bank or other financial institution, a New Lender ”) as determined by the Administrative Agent and the Borrower. The Administrative Agent shall notify the Borrower and the Lenders on or before the Business Day immediately prior to the proposed effective date of the tranche of Incremental Term Loan Commitments (and the related Incremental Term Loans) or the Revolving Commitment Increase, of the amount of each Lender's and New Lender’s Incremental Term Loan Commitment or new or increased Revolving Credit Commitment, as applicable, and the resulting aggregate amount of the tranche of Incremental Term Loan Commitments (and the related Incremental Term Loans) or the amount of the aggregate Revolving Credit Commitments, as the case may be, which amount shall be effective on the following Business Day, subject to the satisfaction of the conditions set forth in this Section 2.12. The Borrower, the Administrative Agent and each New Lender or Increasing Lender that shall have agreed to provide a “Commitment” in support of such Incremental Term Loans or Revolving Commitment Increase shall execute and deliver a Commitment and Acceptance on or prior to the Increase Effective Date (defined below).

2.12.1.8 Notes . The Borrower shall execute and deliver (1) to each Increasing Lender a replacement revolving credit Note reflecting the new amount of such Increasing Lender’s Revolving Credit Commitment after giving effect to the increase (and the prior Note issued to such Increasing Lender shall be deemed to be terminated) or a term Note evidencing such Increasing Lender’s Incremental Term Loans, as applicable, and (2) to each New Lender a revolving credit Note reflecting the amount of such New Lender’s Revolving Credit Commitment or a term Note evidencing the amount of such New Lender’s Incremental Term Loans, as applicable.

2.12.1.9 Incremental Term Loan Amendment . In connection with the making of any Incremental Term Loan, the Loan Parties, the Administrative Agent, any Increasing Lender and any New Lenders shall have executed and delivered an amendment to this Agreement to reflect the economic terms of the Incremental Term Loans (an Incremental Term Loan Amendment ”) which shall include an amendment and restatement of Schedule 1.1A and Schedule 1.1B hereto.

 

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2.12.1.10 Opinion . On the effective date of any incurrence of Incremental Term Loans, the Loan Parties shall have provided to the Administrative Agent an opinion of counsel in form and substance satisfactory to the Administrative Agent (or its counsel).

2.12.1.11 Effectiveness . Upon satisfaction of the conditions precedent to any tranche of Incremental Term Loans or Revolving Commitment Increase, the Administrative Agent shall promptly advise the Borrower and each Lender of the effective date thereof (each such effective date, an Increase Effective Date ”). Upon any Increase Effective Date, any New Lender providing an Incremental Term Loan or a Revolving Commitment Increase shall become a party to this Agreement as a Lender and shall have the rights and obligations of a Lender hereunder. Nothing contained herein shall constitute, or otherwise be deemed to be, a commitment or other requirement on the part of any Lender to make Incremental Term Loans or increase its Revolving Credit Commitment at any time.

2.12.2 Treatment of Outstanding Revolving Credit Loans and Letters of Credit.

2.12.2.1 Repayment of Outstanding Loans; Borrowing of New Loans . On the Increase Effective Date of any Revolving Commitment Increase, the Borrower shall repay all Revolving Credit Loans then outstanding, subject to the Borrower’s indemnity obligations under Section 5.10 [Indemnity]; provided that it may borrow new Revolving Credit Loans with a Borrowing Date on such date. Each of the Lenders shall participate in any new Revolving Credit Loans made on or after such date in accordance with their respective Ratable Shares after giving effect to the increase in Revolving Credit Commitments contemplated by this Section 2.12.

2.12.2.2 Outstanding Letters of Credit. Repayment of Outstanding Loans; Borrowing of New Loans . On the effective date of any Revolving Commitment Increase, each Increasing Lender and each New Lender (i) will be deemed to have purchased a participation in each then outstanding Letter of Credit equal to its Ratable Share of such Letter of Credit and the participation of each other Lender in such Letter of Credit shall be adjusted accordingly and (ii) will acquire, (and will pay to the Administrative Agent, for the account of each Lender, in immediately available funds, an amount equal to) its Ratable Share of all outstanding Participation Advances.

2.12.3 Incremental Term Loans. On any Increase Effective Date on which any Incremental Terms Loans are to be made hereunder, subject to the satisfaction of the foregoing terms and conditions, each Lender providing an Incremental Term Loan Commitment (each, an Incremental Term Loan Lender ”) shall make an Incremental Term Loan in an amount equal to such Incremental Term Loan Lender’s Incremental Term Loan Commitment. The proceeds of any Incremental Term Loans shall be used in the manner set forth in the Incremental Term Loan Amendment, which may include, without limitation, any purpose permitted for Revolving Loans and Swing Loans under Section 2.8 [Use of Proceeds].

 

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3. RESERVED

4. INTEREST RATES

4.1 Interest Rate Options. Subject to Section 4.1.3 [Incremental Term Loan Interest Rate Options], the Borrower shall pay interest in respect of the outstanding unpaid principal amount of the Loans as selected by it from the Base Rate Option or the LIBOR Rate Option set forth below applicable to such Loans, it being understood that, subject to the provisions of this Agreement, the Borrower may select different Interest Rate Options and different Interest Periods to apply simultaneously to the Loans comprising different Borrowing Tranches and may convert to or renew one or more Interest Rate Options with respect to all or any portion of the Loans comprising any Borrowing Tranche; provided that there shall not be at any one time outstanding more than seven (7) Borrowing Tranches in the aggregate among all of the Loans and provided further that if an Event of Default or Potential Default exists and is continuing, the Borrower may not request, convert to, or renew the LIBOR Rate Option for any Loans and the Required Lenders may demand that all existing Borrowing Tranches bearing interest under the LIBOR Rate Option shall be converted immediately to the Base Rate Option, subject to the obligation of the Borrower to pay any indemnity under Section 5.10 [Indemnity] in connection with such conversion. If at any time the designated rate applicable to any Loan made by any Lender exceeds such Lender’s highest lawful rate, the rate of interest on such Lender’s Loan shall be limited to such Lender’s highest lawful rate.

4.1.1 Interest Rate Options; Swing Line Interest Rate. The Borrower shall have the right to select from the following Interest Rate Options applicable to the Loans:

4.1.1.1 Base Rate Option : A fluctuating rate per annum (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) equal to the Base Rate plus the Applicable Margin, such interest rate to change automatically from time to time effective as of the effective date of each change in the Base Rate; or

4.1.1.2 LIBOR Rate Option : A rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equal to the LIBOR Rate as determined for each applicable Interest Period plus the Applicable Margin.

Subject to Section 4.3 [Interest After Default], only the Base Rate Option applicable to Revolving Credit Loans shall apply to the Swing Loans.

4.1.2 Rate Quotations. The Borrower may call the Administrative Agent on or before the date on which a Loan Request is to be delivered to receive an indication of the rates then in effect, but it is acknowledged that such projection shall not be binding on the Administrative Agent or the Lenders nor affect the rate of interest which thereafter is actually in effect when the election is made.

4.1.3 Incremental Term Loan Interest Rate Options. To the extent that any Incremental Term Loan bears interest at a fixed rate (as opposed to based upon the Base Rate or the LIBOR Rate permitted above), interest on the principal amount of the Incremental Term Loans, if any, shall accrue at the rate, and in the manner set forth in, the Incremental Term Loan Amendment.

 

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4.2 I nterest Periods. At any time when the Borrower shall select, convert to or renew a LIBOR Rate Option, the Borrower shall notify the Administrative Agent thereof at least three (3) Business Days prior to the effective date of such LIBOR Rate Option by delivering a Loan Request. The notice shall specify an Interest Period during which such Interest Rate Option shall apply. Notwithstanding the preceding sentence, the following provisions shall apply to any selection of, renewal of, or conversion to a LIBOR Rate Option:

4.2.1 Amount of Borrowing Tranche . Each Borrowing Tranche of Loans under the LIBOR Rate Option shall be in integral multiples, and not less than, the respective amounts set forth in Section 2.5.1 [Revolving Credit Loan Requests]; and

4.2.2 Renewals . In the case of the renewal of a LIBOR Rate Option at the end of an Interest Period, the first day of the new Interest Period shall be the last day of the preceding Interest Period, without duplication in payment of interest for such day.

4.3 Interest After Default. To the extent permitted by Law, upon the occurrence of an Event of Default and until such time such Event of Default shall have been cured or waived, at the written direction by the Required Lenders to the Administrative Agent:

4.3.1 Letter of Credit Fees, Interest Rate. The Letter of Credit Fees and the rate of interest for each Loan otherwise applicable pursuant to Section 2.9.2 [Letter of Credit Fees] or Section 4.1 [Interest Rate Options], respectively, shall be increased by 2.0% per annum;

4.3.2 Other Obligations. Each other Obligation hereunder if not paid when due shall bear interest at a rate per annum equal to the sum of the rate of interest applicable under the Revolving Credit Base Rate Option plus an additional 2.0% per annum from the time such Obligation becomes due and payable and until it is paid in full; and

4.3.3 Acknowledgment. The Borrower acknowledges that the increase in rates referred to in this Section 4.3 reflects, among other things, the fact that such Loans or other amounts have become a substantially greater risk given their default status and that the Lenders are entitled to additional compensation for such risk; and all such interest shall be payable by Borrower upon demand by Administrative Agent.

4.4 LIBOR Rate Unascertainable; Illegality; Increased Costs; Deposits Not Available.

4.4.1 Unascertainable . If on any date on which a LIBOR Rate would otherwise be determined, the Administrative Agent shall have determined that:

(i) adequate and reasonable means do not exist for ascertaining such LIBOR Rate, or

(ii) a contingency has occurred which materially and adversely affects the London interbank eurodollar market relating to the LIBOR Rate,

then the Administrative Agent shall have the rights specified in Section 4.4.3 [Administrative Agent’s and Lender’s Rights].

 

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4.4.2 Illegality; Increased Costs; Deposits Not Available . If at any time any Lender shall have determined that:

(i) the making, maintenance or funding of any Loan to which a LIBOR Rate Option applies has been made impracticable or unlawful by compliance by such Lender in good faith with any Law or any interpretation or application thereof by any Official Body or with any request or directive of any such Official Body (whether or not having the force of Law), or

(ii) such LIBOR Rate Option will not adequately and fairly reflect the cost to such Lender of the establishment or maintenance of any such Loan, or

(iii) after making all reasonable efforts, deposits of the relevant amount in Dollars for the relevant Interest Period for a Loan, or to banks generally, to which a LIBOR Rate Option applies, respectively, are not available to such Lender with respect to such Loan, or to banks generally, in the interbank eurodollar market,

then the Administrative Agent shall have the rights specified in Section 4.4.3 [Administrative Agent's and Lender’s Rights].

4.4.3 Administrative Agent’s and Lender’s Rights . In the case of any event specified in Section 4.4.1 [Unascertainable] above, the Administrative Agent shall promptly so notify the Lenders and the Borrower thereof, and in the case of an event specified in Section 4.4.2 [Illegality; Increased Costs; Deposits Not Available] above, such Lender shall promptly so notify the Administrative Agent and endorse a certificate to such notice as to the specific circumstances of such notice, and the Administrative Agent shall promptly send copies of such notice and certificate to the other Lenders and the Borrower. Upon such date as shall be specified in such notice (which shall not be earlier than the date such notice is given), the obligation of (A) the Lenders, in the case of such notice given by the Administrative Agent, or (B) such Lender, in the case of such notice given by such Lender, to allow the Borrower to select, convert to or renew a LIBOR Rate Option shall be suspended until the Administrative Agent shall have later notified the Borrower, or such Lender shall have later notified the Administrative Agent, of the Administrative Agent’s or such Lender’s, as the case may be, determination that the circumstances giving rise to such previous determination no longer exist. If at any time the Administrative Agent makes a determination under Section 4.4.1 [Unascertainable] and the Borrower has previously notified the Administrative Agent of its selection of, conversion to or renewal of a LIBOR Rate Option and such Interest Rate Option has not yet gone into effect, such notification shall be deemed to provide for selection of, conversion to or renewal of the Base Rate Option otherwise available with respect to such Loans. If any Lender notifies the Administrative Agent of a determination under Section 4.4.2 [Illegality; Increased Costs; Deposits Not Available], the Borrower shall, subject to the Borrower’s indemnification Obligations under Section 5.10 [Indemnity], as to any Loan of the Lender to which a LIBOR Rate Option applies, on the date specified in such notice either convert such Loan to the Base Rate Option otherwise available with respect to such Loan or prepay such Loan in accordance with Section 5.6 [Voluntary Prepayments]. Absent due notice from the Borrower of conversion or prepayment, such Loan shall automatically be converted to the Base Rate Option otherwise available with respect to such Loan upon such specified date.

 

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4.5 Selection of Interest Rate Options . If the Borrower fails to select a new Interest Period to apply to any Borrowing Tranche of Loans under the LIBOR Rate Option at the expiration of an existing Interest Period applicable to such Borrowing Tranche in accordance with the provisions of Section 4.2 [Interest Periods], the Borrower shall be deemed to have elected to continue such Borrowing Tranche as a Loan under the LIBOR Rate Option with the same Interest Period as the Borrowing Tranche of Loans that is then expiring so long as such Interest Period would not end after the Expiration Date; if such Interest Period would end after the Expiration Date, the Interest Period shall be reduced to the longest Interest Period which would not end after the Expiration Date and if no such Interest Period is available, the Borrower shall be deemed to have converted such Borrowing Tranche to the Base Rate Option on the last day of the existing Interest Period.

5. PAYMENTS

5.1 Payments . All payments and prepayments to be made in respect of principal, interest, Commitment Fees, Letter of Credit Fees, Administrative Agent’s Fee or other fees or amounts due from the Borrower hereunder shall be payable prior to 1:00 p.m. on the date when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrower, and without set-off, counterclaim or other deduction of any nature, and an action therefor shall immediately accrue. Such payments shall be made to the Administrative Agent at the Principal Office for the account of the Swing Loan Lender with respect to the Swing Loans and for the ratable accounts of the Lenders with respect to the Revolving Credit Loans or the Incremental Term Loans (if any) in U.S. Dollars and in immediately available funds, and the Administrative Agent shall promptly distribute such amounts to the Lenders in immediately available funds; provided that in the event payments are received by 1:00 p.m. by the Administrative Agent with respect to the Loans and such payments are not distributed to the Lenders on the same day received by the Administrative Agent, the Administrative Agent shall pay the Lenders interest at the Federal Funds Effective Rate with respect to the amount of such payments for each day held by the Administrative Agent and not distributed to the Lenders. The Administrative Agent’s and each Lender’s statement of account, ledger or other relevant record shall, in the absence of manifest error, be conclusive as the statement of the amount of principal of and interest on the Loans and other amounts owing under this Agreement.

5.2 Pro Rata Treatment of Lenders . Each borrowing of Revolving Credit Loans shall be allocated to each Lender according to its Ratable Share, and each selection of, conversion to or renewal of any Interest Rate Option and each payment or prepayment by the Borrower with respect to principal, interest, Commitment Fees and Letter of Credit Fees (but excluding the Administrative Agent’s Fee and the Issuing Lender’s fronting fee) shall (except as otherwise may be provided with respect to a Defaulting Lender and except as provided in Section 4.4.3 [Administrative Agent’s and Lender’s Rights] in the case of an event specified in Section 4.4 [LIBOR Rate Unascertainable; Etc.], Section 5.6.2 [Replacement of a Lender] or Section 5.8 [Increased Costs]) be payable ratably among the Lenders entitled to such payment in accordance with the amount of principal, interest, Commitment Fees and Letter of Credit Fees, as set forth in this Agreement. Notwithstanding any of the foregoing, each borrowing or payment or prepayment by the Borrower of principal, interest, fees or other amounts from the Borrower with respect to Swing Loans shall be made by or to the Swing Loan Lender according to Section 2.6.5 [Borrowings to Repay Swing Loans].

 

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5.3 Sharing of Payments by Lenders . If any Lender shall, by exercising any right of setoff, counterclaim or banker’s lien, by receipt of voluntary payment, by realization upon security, or by any other non-pro rata source, obtain payment in respect of any principal of or interest on any of its Loans or other obligations hereunder resulting in such Lender’s receiving payment of a proportion of the aggregate amount of its Loans and accrued interest thereon or other such obligations greater than the pro-rata share of the amount such Lender is entitled thereto, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and such other obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them, provided that:

(i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other amounts, if any, required by Law (including court order) to be paid by the Lender or the holder making such purchase; and

(ii) the provisions of this Section 5.3 shall not be construed to apply to (x) any payment made by the Loan Parties pursuant to and in accordance with the express terms of the Loan Documents or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or Participation Advances to any assignee or participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this Section 5.3 shall apply).

Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against each Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of each Loan Party in the amount of such participation.

5.4 Presumptions by Administrative Agent . Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Lender hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Lender, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Lender, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the Issuing Lender, with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

 

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5.5 Interest Payment Dates . Interest on Loans to which the Base Rate Option applies shall be due and payable in arrears on each Payment Date. Interest on Loans to which the LIBOR Rate Option applies shall be due and payable on the last day of each Interest Period for those Loans and, if such Interest Period is longer than three (3) Months, also on the 90th day of such Interest Period. Interest on the principal amount of each Incremental Term Loan, if any, shall be due and payable as set forth in the Incremental Term Loan Amendment. Interest on the principal amount of each Loan or other monetary Obligation shall be due and payable on demand after such principal amount or other monetary Obligation becomes due and payable (whether on the stated Expiration Date, upon acceleration or otherwise).

5.6 Voluntary Prepayments .

5.6.1 Right to Prepay . The Borrower shall have the right at its option from time to time to prepay the Loans in whole or part without premium or penalty (except as provided in Section 5.6.2 [Replacement of a Lender] below, in Section 5.8 [Increased Costs] and Section 5.10 [Indemnity]). Any such prepayment shall not effect any reduction in the amount of the Revolving Credit Commitments. Whenever the Borrower desires to prepay any part of the Loans, it shall provide a prepayment notice to the Administrative Agent by 1:00 p.m. at least one (1) Business Day prior to the date of prepayment of the Revolving Credit Loans or Incremental Term Loans (if any) or no later than 1:00 p.m. on the date of prepayment of Swing Loans, setting forth the following information:

(a) the date, which shall be a Business Day, on which the proposed prepayment is to be made;

(b) a statement indicating the application of the prepayment between the Revolving Credit Loans, the Incremental Term Loans (if any) and Swing Loans;

(c) a statement indicating the application of the prepayment between Loans to which the Base Rate Option applies and Loans to which the LIBOR Rate Option applies;

(d) the total principal amount of such prepayment, which shall not be less than the lesser of (i) the Revolving Facility Usage or (ii) $50,000 for any Swing Loan or $100,000 for any Revolving Credit Loan or Incremental Term Loan (if any); and

(e) the manner in which such prepayment shall be applied to the Loans.

All prepayment notices shall be irrevocable; provided that notwithstanding the foregoing, during the term of this Agreement, up to three (3) prepayment notices may be revoked provided in all events the Borrower shall make any payments required by Section 5.10 [Indemnity] in connection with such revocation. The principal amount of the Loans for which a prepayment notice is given, together with interest on such principal amount except with respect to Loans to which the Base Rate Option applies, shall be due and payable on the date specified in such prepayment notice as the date on which the proposed prepayment is to be made. All prepayments on Incremental Term Loans permitted pursuant to this Section shall be applied

 

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ratably to all remaining unpaid installments of principal of the Incremental Term Loans. If the Borrower prepays a Loan but fails to specify the applicable Borrowing Tranche which the Borrower is prepaying, the prepayment shall be applied (i) first to Revolving Credit Loans and then to Incremental Term Loans (if any); and (ii) after giving effect to the allocations in clause (i) above in and in the preceding sentence, first to Loans to which the Base Rate Option applies, then to Loans to which the LIBOR Rate Option applies. Any prepayment hereunder shall be subject to the Borrower’s Obligation to indemnify the Lenders under Section 5.10 [Indemnity].

5.6.2 Replacement of a Lender . In the event any Lender (i) gives notice under Section 4.4 [LIBOR Rate Unascertainable, Etc.], (ii) requests compensation under Section 5.8 [Increased Costs], or requires the Borrower to pay any Indemnified Taxes or additional amount to any Lender or any Official Body for the account of any Lender pursuant to Section 5.9 [Taxes], (iii) is a Defaulting Lender, (iv) becomes subject to the control of an Official Body (other than normal and customary supervision), or (v) is a Non-Consenting Lender referred to in Section 11.1 [Modifications, Amendments or Waivers], then in any such event the Borrower may, at its sole expense, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 11.8 [Successors and Assigns]), all of its interests, rights (other than existing rights to payments pursuant to Sections 5.8 [Increased Costs] or 5.9 [Taxes]) and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

(i) the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 11.8 [Successors and Assigns];

(ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and Participation Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 5.10 [Indemnity]) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

(iii) in the case of any such assignment resulting from a claim for compensation under Section 5.8.1 [Increased Costs Generally] or payments required to be made pursuant to Section 5.9 [Taxes], such assignment will result in the elimination or, with the written consent of the Borrower, a reduction, of such compensation or payments thereafter; and

(iv) such assignment does not conflict with applicable Law.

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

 

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5.6.3 Designation of a Different Lending Office . If any Lender requests compensation under Section 5.8 [Increased Costs], or the Borrower is or will be required to pay any Indemnified Taxes or additional amounts to any Lender or any Official Body for the account of any Lender pursuant to Section 5.9 [Taxes], then such Lender shall (at the request of the Borrower) use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 5.8 [Increased Costs] or Section 5.9 [Taxes], as the case may be, in the future, and (ii) would not subject such Lender to any material unreimbursed cost or expense and would not otherwise be materially disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

5.7 Payments on Incremental Term Loans . Payments of principal on the Incremental Term Loans, if any, shall be as set forth in the Incremental Term Loan Amendment.

5.8 I ncreased Costs .

5.8.1 Increased Costs Generally . If any Change in Law shall:

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

(ii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (ii) through (iv) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

(iii) impose on any Lender, the Issuing Lender or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by such Lender or any Letter of Credit or participation therein in excess of the LIBOR Reserve Percentage;

and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making, converting to, continuing or maintaining any Loan or of maintaining its obligation to make any such Loan, or to increase the cost to such Lender, the Issuing Lender or such other Recipient of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender, the Issuing Lender or other Recipient hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, the Issuing Lender or other Recipient, the Borrower will pay to such Lender, the Issuing Lender or other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender, the Issuing Lender or such other Recipient, as the case may be, for such additional costs incurred or reduction suffered; provided that such Lender, the Issuing Lender or other Recipient has requested such payment from similarly situated borrowers in transactions with such Lender, the Issuing Lender or other Recipient similarly affected by the change in circumstances giving rise to such request for payment; provided further no Lender, Issuing Lender or other Recipient shall be required to disclose any confidential or proprietary

 

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information with respect to such other borrowers. Such notice shall set forth in reasonable detail the basis for such Lender’s, the Issuing Lender’s, or such other Recipient’s determination. Such amount shall be due and payable by the Borrower to such Lender, the Issuing Lender or such other Recipient within ten (10) Business Days after the date on which such notice is given.

5.8.2 Capital Requirements . If any Lender or the Issuing Lender determines that any Change in Law affecting such Lender or the Issuing Lender or any lending office of such Lender or such Lender’s or the Issuing Lender’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Lender’s capital or on the capital of such Lender’s or the Issuing Lender’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit or Swing Loans held by, such Lender, or the Letters of Credit issued by the Issuing Lender, to a level below that which such Lender or the Issuing Lender or such Lender’s or the Issuing Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Lender’s policies and the policies of such Lender’s or the Issuing Lender’s holding company with respect to capital adequacy), then from time to time, within ten (10) Business Days after the date on which such Lender or such Issuing Lender gives notice to the Borrower, the Borrower will pay to such Lender or the Issuing Lender, as the case may be, without duplication with respect to any payments made pursuant to Section 5.8.1 [Increased Costs Generally], such additional amount or amounts as will compensate such Lender or the Issuing Lender or such Lender’s or the Issuing Lender’s holding company for any such reduction suffered. Such notice shall set forth in reasonable detail the basis for such Lender’s or such Issuing Lender’s determination.

5.8.3 Certificates for Reimbursement; Repayment of Outstanding Loans; Borrowing of New Loans . A certificate of a Lender or the Issuing Lender setting forth the amount or amounts necessary to compensate such Lender or the Issuing Lender or its holding company, as the case may be, as specified in Section 5.8.1 [Increased Costs Generally] or Section 5.8.2 [Capital Requirements] and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Lender, as the case may be, the amount shown as due on any such certificate within ten (10) Business Days after receipt thereof.

5.8.4 Delay in Requests . Failure or delay on the part of any Lender or the Issuing Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or the Issuing Lender’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or the Issuing Lender pursuant to this Section for any increased costs incurred or reductions suffered more than six (6) months prior to the date that such Lender or the Issuing Lender, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the Issuing Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six (6) month period referred to above shall be extended to include the period of retroactive effect thereof).

 

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5.9 Taxes .

5.9.1 Issuing Lender . For purposes of this Section 5.9, the term “Lender” includes the Issuing Lender and the term “applicable Law” includes FATCA.

5.9.2 Payments Free of Taxes . Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be without deduction or withholding for any Taxes, except as required by applicable Law. If any applicable Law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Official Body in accordance with applicable Law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party under any Loan Document shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 5.9 [Taxes]) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

5.9.3 Payment of Other Taxes by the Loan Parties . The Loan Parties shall timely pay to the relevant Official Body in accordance with applicable Law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.

5.9.4 Indemnification by the Loan Parties . The Loan Parties shall jointly and severally indemnify each Recipient, within ten (10) Business Days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 5.9 [Taxes]) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Official Body. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

5.9.5 Indemnification by the Lenders . Each Lender shall severally indemnify the Administrative Agent, within ten (10) Business Days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that any Loan Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of any of the Loan Parties to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 11.8.4 [Participations] relating to the maintenance of a Participant Register, and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Official Body. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this Section 5.9.5.

 

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5.9.6 Evidence of Payments . As soon as practicable after any payment of Taxes by any Loan Party to an Official Body pursuant to this Section 5.9 [Taxes], such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Official Body evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

5.9.7 Status of Lenders .

(i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding Taxes or at a reduced rate of withholding Taxes. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable Law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 5.9.7(ii)(A) - (D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

(ii) Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Borrower,

(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding Tax;

(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:

(1) in the case of a Foreign Lender claiming the benefits of an income Tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax

 

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pursuant to the “interest” article of such Tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such Tax treaty;

(2) executed originals of IRS Form W-8ECI;

(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit 5.9.7(A) to the effect that such Foreign Lender is not (A) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a U.S. Tax Compliance Certificate ”) and (y) executed originals of IRS Form W-8BEN; or

(4) to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of Exhibit 5.9.7(B) or Exhibit 5.9.7(C) , IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit 5.9.7(D) on behalf of each such direct and indirect partner;

(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of any other form prescribed by applicable Law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable Law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and

(D) if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

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Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.

5.9.8 Treatment of Certain Refunds . If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 5.9 [Taxes] (including by the payment of additional amounts pursuant to this Section 5.9 [Taxes]), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 5.9 [Taxes] with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Official Body with respect to such refund). Such indemnifying party, upon the request of such indemnified party incurred in connection with obtaining such refund, shall repay to such indemnified party the amount paid over pursuant to this Section 5.9.8 [Treatment of Certain Refunds] (plus any penalties, interest or other charges imposed by the relevant Official Body) in the event that such indemnified party is required to repay such refund to such Official Body. Notwithstanding anything to the contrary in this Section 5.9.8 [Treatment of Certain Refunds]), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this Section 5.9.8 [Treatment of Certain Refunds] the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

5.9.9 Survival . Each party’s obligations under this Section 5.9 [Taxes] shall survive the resignation of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all Obligations.

5.10 Indemnity . In addition to the compensation or payments required by Section 5.8 [Increased Costs] or Section 5.9 [Taxes], the Borrower shall indemnify each Lender for any liabilities, losses or expenses incurred by it (including without limitation any loss or cost in liquidating, employing or the redeployment of (i) deposits acquired to fund or maintain such Loan to which a LIBOR Rate Option applies or (ii) funds obtained by it to maintain such Loan and fees payable to terminate the deposits from which such funds were obtained, which such Lender sustains or incurs as a consequence of any:

(i) payment, prepayment, conversion or renewal of any Loan to which a LIBOR Rate Option applies on a day other than the last day of the corresponding Interest Period (whether or not such payment or prepayment is mandatory, voluntary or automatic and whether or not such payment or prepayment is then due), or

 

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(ii) revocation by the Borrower or attempt by the Borrower to revoke (expressly, by later inconsistent notices or otherwise) in whole or part any Loan Requests under Section 2.5 [Revolving Credit Loan Requests; Swing Loan Requests] or Section 4.2 [Interest Periods] or notice relating to prepayments under Section 5.6 [Voluntary Prepayments],

in each case, with respect to a Loan to which a LIBOR Rate Option applies.

If any Lender sustains or incurs any such loss or expense, it shall from time to time notify the Borrower of the amount determined in good faith by such Lender (which determination may include such assumptions, allocations of costs and expenses and averaging or attribution methods as such Lender shall deem reasonable) to be necessary to indemnify such Lender for such loss or expense. Such notice shall set forth in reasonable detail the basis for such determination. Such amount shall be due and payable by the Borrower to such Lender ten (10) Business Days after such notice is given.

5.11 Settlement Date Procedures . In order to minimize the transfer of funds between the Lenders and the Administrative Agent, the Borrower may borrow, repay and reborrow Swing Loans and the Swing Loan Lender may make Swing Loans as provided in Section 2.1.2 [Swing Loan Commitment] hereof during the period between Settlement Dates. The Administrative Agent shall notify each Lender of its Ratable Share of the total of the Revolving Credit Loans and the Swing Loans (each a “Required Share ”). On such Settlement Date, each Lender shall pay to the Administrative Agent the amount equal to the difference between its Required Share and its Revolving Credit Loans, and the Administrative Agent shall pay to each Lender its Ratable Share of all payments made by the Borrower to the Administrative Agent with respect to the Revolving Credit Loans. The Administrative Agent shall also effect settlement in accordance with the foregoing sentence on the proposed Borrowing Dates for Revolving Credit Loans and may at its option effect settlement on any other Business Day. These settlement procedures are established solely as a matter of administrative convenience, and nothing contained in this Section 5.11 shall relieve the Lenders of their obligations to fund Revolving Credit Loans on dates other than a Settlement Date pursuant to Section 2.1.2 [Swing Loan Commitment]. The Administrative Agent may at any time at its option for any reason whatsoever require each Lender to pay immediately to the Administrative Agent such Lender’s Ratable Share of the outstanding Revolving Credit Loans and each Lender may at any time require the Administrative Agent to pay immediately to such Lender its Ratable Share of all payments made by the Borrower to the Administrative Agent with respect to the Revolving Credit Loans.

6. REPRESENTATIONS AND WARRANTIES

6.1 Representations and Warranties . The Loan Parties represent and warrant to the Administrative Agent and each of the Lenders as follows:

6.1.1 Organization and Qualification; Power and Authority; Compliance With Laws; Title to Properties; Event of Default . Each Loan Party and each Subsidiary of each Loan Party (i) is a corporation, partnership or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, (ii) has the lawful power to own or lease its properties and to engage in the business it presently conducts or proposes to conduct, (iii) is duly licensed or qualified and in good standing in each jurisdiction

 

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listed on Schedule 6.1.1 and in all other jurisdictions where the property owned or leased by it or the nature of the business transacted by it or both makes such licensing or qualification necessary, (iv) has full power to enter into, execute, deliver and carry out this Agreement and the other Loan Documents to which it is a party, to incur the Indebtedness contemplated by the Loan Documents and to perform its Obligations under the Loan Documents to which it is a party, and all such actions have been duly authorized by all necessary proceedings on its part, (v) is in compliance with all applicable Laws (other than Environmental Laws which are specifically addressed in Section 6.1.14 [Environmental Matters]) in all jurisdictions in which any Loan Party or Subsidiary of any Party is presently or will be doing business, and (vi) has good and marketable title to or valid leasehold interest in all properties, assets and other rights which it purports to own or lease or which are reflected as owned or leased on its books and records, free and clear of all Liens and encumbrances, except Permitted Liens; except, in each case referred to in clause (i) with respect to any non-Loan Party Subsidiary and clauses (ii), (iii), (v) and (vi), to the extent such failure or non-compliance would not reasonably be expected to result in a Material Adverse Change. No Event of Default exists or is continuing.

6.1.2 Subsidiaries and Owners; Investment Companies. Schedule 6.1.2 states, as of the Closing Date, (i) the name of each of the Borrower’s Subsidiaries, its jurisdiction of organization and the amount, percentage and type of equity interests in such Subsidiary (the Subsidiary Equity Interests ”), (ii) the name of each holder of an equity interest in the Borrower, the amount, percentage and type of such equity interest (the Borrower Equity Interests ”), and (iii) any options, warrants or other rights outstanding to purchase any such equity interests referred to in clause (i) or (iii) (collectively the Equity Interests ”). The Borrower and each Subsidiary of the Borrower has good and marketable title to all of the Subsidiary Equity Interests it purports to own, free and clear in each case of any Lien and all such Subsidiary Equity Interests have been validly issued, fully paid and nonassessable. None of the Loan Parties or Subsidiaries of any Loan Party is an “investment company” registered or required to be registered under the Investment Company Act of 1940 or under the “control” of an “investment company ” as such terms are defined in the Investment Company Act of 1940 and shall not become such an “investment company” or under such “control.”

6.1.3 Validity and Binding Effect . This Agreement and each of the other Loan Documents (i) has been duly and validly executed and delivered by each Loan Party, and (ii) constitutes, or will constitute, legal, valid and binding obligations of each Loan Party which is or will be a party thereto, enforceable against such Loan Party in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity (whether enforcement is sought by proceedings in equity or at law).

6.1.4 No Conflict; Material Agreements; Consents . Neither the execution and delivery of this Agreement or the other Loan Documents by any Loan Party nor the consummation of the transactions herein or therein contemplated or compliance with the terms and provisions hereof or thereof by any of them will conflict with, constitute a default under or result in any breach of (i) the terms and conditions of the certificate of incorporation, bylaws, certificate of limited partnership, partnership agreement, certificate of formation, limited liability company agreement or other organizational documents of any Loan Party or (ii) any material Law or any material agreement or instrument or order, writ, judgment, injunction or decree to

 

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which any Loan Party is a party or by which it or any Loan Party is bound or to which it is subject, or result in the creation or enforcement of any Lien, charge or encumbrance whatsoever upon any property (now or hereafter acquired) of any Loan Party (other than Liens granted under the Loan Documents). There is no default under such material agreement (referred to above) and none of the Loan Parties or their Subsidiaries is bound by any contractual obligation, or subject to any restriction in any organization document, or any requirement of Law, in each case which would reasonably be expected to result in a Material Adverse Change. No consent, approval, exemption, order or authorization of, or a registration or filing with, any Official Body or any other Person is required by any Law or any agreement in connection with the execution, delivery and carrying out of this Agreement and the other Loan Documents.

6.1.5 Litigation . Except as disclosed in the Public Filings, there are no actions, suits, proceedings or investigations pending or, to the knowledge of any Loan Party, threatened against such Loan Party or any Subsidiary of such Loan Party at law or in equity before any Official Body which individually or in the aggregate would reasonably be expected to result in a Material Adverse Change. None of the Loan Parties or any Subsidiaries of any Loan Party is in violation of any order, writ, injunction or any decree of any Official Body which would reasonably be expected to result in a Material Adverse Change.

6.1.6 Financial Statements .

6.1.6.1 Historical Statements . The Parent has delivered to the Administrative Agent copies of its audited consolidated year-end financial statements for and as of the end of the five (5) fiscal years ended the last Friday in April of 2009-2013. In addition, the Parent has delivered to the Administrative Agent copies of its unaudited consolidated interim financial statements for the fiscal year to date and as of the end of the fiscal quarters ended July 26, 2013 and October 25, 2013 (all such annual and interim statements being collectively referred to as the Statements ”). The Statements taken as a whole are correct and complete and fairly represent in all material respects the consolidated financial condition of the Parent and its Subsidiaries as of the respective dates thereof and the results of operations for the fiscal periods then ended and have been prepared in accordance with GAAP consistently applied, subject (in the case of the interim statements) to the absence of footnotes and normal year-end audit adjustments.

6.1.6.2 No Material Adverse Change . Since April 26, 2013 , no Material Adverse Change has occurred.

6.1.7 Margin Stock . None of the Loan Parties or any Subsidiaries of any Loan Party engages or intends to engage principally, or as one of its important activities, in the business of extending credit for the purpose, immediately, incidentally or ultimately, of purchasing or carrying margin stock (within the meaning of Regulation U, T or X as promulgated by the Board of Governors of the Federal Reserve System). No part of the proceeds of any Loan has been or will be used, immediately, incidentally or ultimately, to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock or which is inconsistent with the provisions of the regulations of the Board of Governors of the Federal Reserve System. None of the Loan Parties or any Subsidiary of any Loan Party holds or intends to hold margin stock in such amounts that more than 25% of the reasonable value of the assets of any Loan Party or Subsidiary of any Loan Party are or will be represented by margin stock.

 

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6.1.8 Full Disclosure . Neither this Agreement nor any other Loan Document, nor any written certificate, statement, agreement or other documents, taken as a whole, furnished to the Administrative Agent or any Lender in connection herewith or therewith, contains any material misstatement of fact or omits to state a material fact necessary in order to make the statements contained herein and therein, in light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower only represents only that such information was prepared in good faith based upon reasonable assumptions at the time of delivery thereof (it being understood that such projections are subject to significant uncertainties and contingencies, any of which are beyond the Borrower’s control, and that no assurance can be given that any particular projection will be realized and that actual results during the period or periods covered by the projections may differ significantly from the projected results and such differences may be material).

6.1.9 Taxes . The Parent and its Subsidiaries have filed all United States federal Tax returns and all other material Tax returns which are required to be filed and have paid all Taxes due pursuant to said returns or pursuant to any assessment received by the Parent or any of its Subsidiaries, except such Taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided in accordance with GAAP and as to which no Lien exists. No Tax liens have been filed and no claims are being asserted with respect to any such Taxes. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of any Taxes or other governmental charges are adequate.

6.1.10 Patents, Trademarks, Copyrights, Licenses, Etc . Each Loan Party and each Subsidiary of each Loan Party owns or possesses the right to use all the material patents, trademarks, service marks, trade names, copyrights, licenses, registrations, franchises, permits and rights necessary to own and operate its properties and to carry on its business as presently conducted and planned to be conducted by such Loan Party, without known possible, alleged or actual conflict with the rights of others), except to the extent that failure to do so would not reasonably be expected to result in a Material Adverse Change.

6.1.11 Liens in the Collateral . The Liens in the Collateral granted to the Administrative Agent for the benefit of the Lenders, any Lender Hedge Affiliate and any Affiliate of any Lender to which an Obligation is owed pursuant to the Pledge Agreement constitute and will continue to constitute Prior Security Interests. All filing fees and other expenses in connection with the perfection of such Liens have been or will be paid by the Borrower.

6.1.12 Insurance . The properties of each Loan Party and each of its Subsidiaries are insured pursuant to policies and other bonds which are valid and in full force and effect and which provide adequate coverage from reputable and financially sound insurers in amounts sufficient to insure the assets and risks of each such Loan Party and Subsidiary in accordance with past practices of such Loan Parties and Subsidiaries.

6.1.13 ERISA Compliance .

 

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(i) Each Pension Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state Laws. Each Pension Plan that is intended to qualify under Section 401(a) of the Code has received from the IRS a favorable determination or opinion letter, which has not by its terms expired, that such Pension Plan is so qualified, or such Pension Plan is entitled to rely on an IRS advisory or opinion letter with respect to an IRS-approved master and prototype or volume submitter plan, or a timely application for such a determination or opinion letter is currently being processed by the IRS with respect thereto; and, to the best knowledge of Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification. Borrower and each member of the ERISA Group have made all required contributions to each Pension Plan subject to Sections 412 or 430 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Sections 412 or 430 of the Code has been made with respect to any Pension Plan, in each case except to the extent that failure to do so would not reasonably be expected to result in a Material Adverse Change.

(ii) No ERISA Event has occurred or is reasonably expected to occur; (a) no Pension Plan has any unfunded pension liability (i.e., excess of benefit liabilities over the current value of that Pension Plan’s assets, determined pursuant to the assumptions used for funding the Pension Plan for the applicable plan year in accordance with Section 430 of the Code); (b) neither Borrower nor any member of the ERISA Group has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (c) neither Borrower nor any member of the ERISA Group has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 of ERISA, with respect to a Multiemployer Plan; (d) neither Borrower nor any member of the ERISA Group has received notice pursuant to Section 4242(a)(1)(B) of ERISA that a Multiemployer Plan is in reorganization and that additional contributions are due to the Multiemployer Plan pursuant to Section 4243 of ERISA; and (e) neither Borrower nor any member of the ERISA Group has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA, in each case except to the extent that failure to do so would not reasonably be expected to result in a Material Adverse Change.

6.1.14 Environmental Matters . Each Loan Party and each of its Subsidiaries is and, to the knowledge of each respective Loan Party and each of its Subsidiaries, has been in compliance with applicable Environmental Laws, except to the extent such non-compliance would not reasonably be expected to result in a Material Adverse Change.

6.1.15 Solvency . Before and after giving effect to the initial Loans hereunder, the Parent and its Subsidiaries on a consolidated basis are Solvent.

6.1.16 Senior Debt Status . The Loan Parties will at all times ensure that the Obligations will be equal in priority of payment to the obligations owed by the Loan Parties to the holders of any indebtedness under note issuances permitted under Section 8.2.1(ii), and in no event shall the Loan Parties grant any Liens or security interests in any assets of the Loan Parties to the holders of indebtedness under note issuances permitted under Section 8.2.1(ii) without granting the same Liens or security interests ratably to the Lenders hereunder.

 

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6.1.17 Anti-Terrorism Laws . (i) No Covered Entity is a Sanctioned Person, and (ii) no Covered Entity, either in its own right or through any third party, (a) has any of its assets in a Sanctioned Country or in the possession, custody or control of a Sanctioned Person in violation of any Anti-Terrorism Law or (b) does business in or with, or derives any of its income from investments in or transactions with, any Sanctioned Country or Sanctioned Person in violation of any Anti-Terrorism Law and (iii) the Covered Entities are in compliance, in all material respects, with all Anti-Terrorism Laws.

7. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT

The obligation of each Lender to make Loans and of the Issuing Lender to issue Letters of Credit hereunder is subject to the performance by each of the Loan Parties of its Obligations to be performed hereunder at or prior to the making of any such Loans or issuance of such Letters of Credit and to the satisfaction of the following further conditions:

7.1 First Loans and Letters of Credit .

7.1.1 Deliveries . On the Closing Date, the Administrative Agent shall have received each of the following in form and substance satisfactory to the Administrative Agent:

(i) A certificate of each of the Loan Parties signed by an Authorized Officer, dated the Closing Date stating that (a) all representations and warranties of the Loan Parties set forth in this Agreement are true and correct in all material respects, (b) the Loan Parties are in compliance with each of the covenants and conditions hereunder, (c) no Event of Default or Potential Default exists, and (d) no Material Adverse Change has occurred since the date of the last audited financial statements of the Borrower delivered to the Administrative Agent;

(ii) A certificate dated the Closing Date and signed by the Secretary or an Assistant Secretary of each of the Loan Parties, certifying as appropriate as to: (a) all action taken by each Loan Party in connection with this Agreement and the other Loan Documents; (b) the names of the Authorized Officers authorized to sign the Loan Documents and their true signatures; and (c) copies of its organizational documents as in effect on the Closing Date certified by the appropriate state official where such documents are filed in a state office together with certificates from the appropriate state officials as to the continued existence and good standing of each Loan Party in each state where organized or qualified to do business;

(iii) This Agreement and each of the other Loan Documents signed by an Authorized Officer and all appropriate financing statements and appropriate stock powers and certificates evidencing the pledged Collateral;

(iv) A written opinion of counsel for the Loan Parties, dated the Closing Date and as to the matters set forth in Schedule 7.1.1 ;

(v) Evidence that adequate insurance required to be maintained under this Agreement is in full force and effect;

 

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(vi) A duly completed Compliance Certificate as of the last day of the fiscal quarter of Borrower most recently ended prior to the Closing Date, signed by an Authorized Officer of Borrower;

(vii) All material consents required to effectuate the transactions contemplated hereby;

(viii) A lien search in acceptable scope and with acceptable results;

(ix) No Material Adverse Change since April 26, 2013 shall have occurred;

(x) No material litigation shall exist except as disclosed in the Public Filing;

(xi) The Administrative Agent shall be satisfied with its review of (i) ERISA and labor matters affecting the Loan Parties and their Subsidiaries and (ii) the status of regulatory approvals and licenses of the Loan Parties and their Subsidiaries; and

(xii) Such other documents in connection with such transactions as the Administrative Agent or said counsel may reasonably request.

7.1.2 Payment of Fees. The Borrower shall have paid all fees and expenses payable on or before the Closing Date as required by this Agreement, the Administrative Agent’s Letter or any other Loan Document.

7.2 Each Loan or Letter of Credit. At the time of making any Loans or issuing, extending or increasing any Letters of Credit and after giving effect to the proposed extensions of credit: (i) the representations, warranties of the Loan Parties shall then be true and correct as of such date, except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct on and as of such earlier date, (ii) no Event of Default or Potential Default shall have occurred and be continuing, (iii) the making of the Loans or issuance, extension or increase of such Letter of Credit shall not contravene any Law applicable to any Loan Party or Subsidiary of any Loan Party or any of the Lenders, and (iv) the Borrower shall have delivered to the Administrative Agent a duly executed and completed Loan Request or to the Issuing Lender an application for a Letter of Credit, as the case may be.

8. COVENANTS

The Loan Parties, jointly and severally, covenant and agree that until Payment In Full, the Loan Parties shall comply at all times with the following covenants:

8.1 Affirmative Covenants.

8.1.1 Preservation of Existence, Etc. Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain its legal existence as a corporation, limited partnership or limited liability company and its license or qualification and good standing in each jurisdiction in which its ownership or lease of property or the nature of its business makes such license or qualification necessary, except to the extent such failure or non-compliance with such licensing

 

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or qualification requirement would not reasonably be expected to result in a Material Adverse Change; provided , that this covenant shall not prohibit any transaction permitted by Section 8.2.6 [Liquidations, Mergers, Consolidations, Acquisitions] or Section 8.2.7 [Dispositions of Assets or Subsidiaries].

8.1.2 Payment of Liabilities, Including Taxes, Etc. Each Loan Party shall, and shall cause each of its Subsidiaries to, duly pay and discharge all liabilities to which it is subject or which are asserted against it, promptly as and when the same shall become due and payable, including all Taxes, assessments and governmental charges upon it or any of its properties, assets, income or profits, that, if not paid, would reasonably be expected to result in a Material Adverse Change, prior to the date on which penalties attach thereto, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Parent, the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest would not reasonably be expected to result in a Material Adverse Change.

8.1.3 Maintenance of Properties, Insurance. Each Loan Party shall, and shall cause each of its Subsidiaries to, (a) maintain in good repair, working order and condition (ordinary wear and tear excepted) in accordance with the general practice of other businesses of similar character and size, all of those properties material to the conduct of its business taken as a whole, and from time to time, such Loan Party will make or cause to be made all appropriate repairs, renewals or replacements thereof, and (b) insure its properties and assets against loss or damage by fire and such other insurable hazards as such assets are commonly insured (including fire, extended coverage, property damage, workers’ compensation, public liability and business interruption insurance) and against other risks (including errors and omissions) in such amounts as similar properties and assets are insured by prudent companies in similar circumstances carrying on similar businesses, and with reputable and financially sound insurers, including self-insurance to the extent customary.

8.1.4 Reserved.

8.1.5 Visitation Rights. Each Loan Party shall, and shall cause each of its Subsidiaries to, permit any of the officers or authorized employees or representatives of the Administrative Agent or any of the Lenders to visit and inspect any of its properties and to examine and make excerpts from its books and records and discuss its business affairs, finances and accounts with its officers, all in such detail and at such times as any of the Lenders may reasonably request, provided that each Lender shall provide the Borrower and the Administrative Agent with reasonable notice prior to any visit or inspection and such inspection shall not unreasonably interfere with the conduct of business at such site. Such visits and inspections shall be arranged through the Administrative Agent and shall not occur more than twice in any fiscal year unless an Event of Default shall have occurred and be continuing.

8.1.6 Keeping of Records and Books of Account. The Borrower shall, and shall cause each Subsidiary of the Borrower to, maintain and keep proper books of record and account which enable the Borrower and its Subsidiaries to issue consolidated financial statements in accordance with GAAP and as otherwise required by applicable Laws of any Official Body having jurisdiction over the Borrower or any Subsidiary of the Borrower, and in which full, true and correct entries shall be made in all material respects of all its dealings and business and financial affairs.

 

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8.1.7 Compliance with Laws; Use of Proceeds. Each Loan Party shall, and shall cause each of its Subsidiaries to, comply with all applicable Laws, including all Environmental Laws, in all respects, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Change. The Loan Parties will use the Letters of Credit and the proceeds of the Loans only in accordance with Section 2.8 [Use of Proceeds] and as permitted by applicable Law.

8.1.8 Further Assurances. Each Loan Party shall, from time to time, at its expense, faithfully preserve and protect the Administrative Agent’s Lien on and Prior Security Interest in the Collateral whether now owned or hereafter acquired as a continuing first priority perfected Lien, subject only to Permitted Liens, and shall do such other acts and things as the Administrative Agent in its reasonable discretion may deem necessary or advisable from time to time in order to preserve, perfect and protect the Liens granted under the Loan Documents and to exercise and enforce its rights and remedies thereunder with respect to the Collateral.

8.1.9 Anti-Terrorism Laws. (a) No Covered Entity will become a Sanctioned Person, (b) no Covered Entity, either in its own right or through any third party, will (A) have any of its assets in a Sanctioned Country or in the possession, custody or control of a Sanctioned Person in violation of any Anti-Terrorism Law; (B) do business in or with, or derive any of its income from investments in or transactions with, any Sanctioned Country or Sanctioned Person in violation of any Anti-Terrorism Law; (C) engage in any dealings or transactions prohibited by any Anti-Terrorism Law or (D) use the Loans to fund any operations in, finance any investments or activities in, or, make any payments to, a Sanctioned Country or Sanctioned Person in violation of any Anti-Terrorism Law, (c) the funds used to repay the Obligations will not be derived from any unlawful activity in violation of any Anti-Terrorism Law, (d) each Covered Entity shall comply in all material respects with all Anti-Terrorism Laws, and (e) the Borrower shall promptly notify the Administrative Agent in writing upon the occurrence of a Reportable Compliance Event.

8.1.10 Keepwell. Each Qualified ECP Loan Party jointly and severally (together with each other Qualified ECP Loan Party) hereby absolutely unconditionally and irrevocably (a) guarantees the prompt payment and performance of all Swap Obligations owing by each Non-Qualifying Party (it being understood and agreed that this guarantee is a guaranty of payment and not of collection), and (b) undertakes to provide such funds or other support as may be needed from time to time by any Non-Qualifying Party to honor all of such Non Qualifying Party’s obligations under this Agreement or any other Loan Document in respect of Swap Obligations (provided, however, that each Qualified ECP Loan Party shall only be liable under this Section 8.1.10 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 8.1.10, or otherwise under this Agreement or any other Loan Document, voidable under applicable law, including applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of each Qualified ECP Loan Party under this Section 8.1.10 shall remain in full force and effect until Payment In Full. Each Qualified ECP Loan Party intends that this Section 8.1.10 constitute, and this Section 8.1.10 shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support, or other agreement” for the benefit of each other Loan Party for all purposes of Section 1a(18(A)(v)(II) of the CEA.

 

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8.2 Negative Covenants.

8.2.1 Indebtedness. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Indebtedness, except:

(i) Indebtedness under the Loan Documents;

(ii) Unsecured note issuances, or secured note issuances with the prior written consent of the Required Lenders, which consent shall not be unreasonably withheld, (in each case, including any extensions, renewals, refinancings and replacements thereof) having covenants no more restrictive than those under this Agreement and having a final maturity date after the Expiration Date; provided the aggregate principal amount of all Indebtedness permitted under this clause (ii) shall not exceed $300,000,000; and provided further , any Liens securing such note issuances (to the extent consented to by the Required Lenders) shall be pari passu with the Liens securing the Obligations;

(iii) Existing Indebtedness, which in the case of existing Indebtedness in a principal amount in excess of $10,000,000 in the aggregate is set forth on Schedule 8.2.1 , and any extensions, renewals, refinancings and replacements thereof; provided there is no increase in the amount thereof or other significant change in the terms thereof unless otherwise specified on Schedule 8.2.1;

(iv) Indebtedness incurred with respect to Purchase Money Security Interests and capitalized leases (including any extensions, renewals, refinancings and replacements thereof); provided that such Indebtedness, together with Indebtedness permitted under clauses (viii) and (ix) below, shall not exceed in the aggregate at any time outstanding $50,000,000;

(v) Indebtedness owed by (i) a Loan Party to another Loan Party or a Non-Loan Party Subsidiary or (ii) by a Non-Loan Party Subsidiary to a Loan Party or another Non-Loan Party Subsidiary;

(vi) Any (i) Lender Provided Interest Rate Hedge, Lender Provided Foreign Currency Hedge or Lender Provided Commodity Hedge, (ii) other Interest Rate Hedge or Foreign Currency Hedge or Commodity Hedge approved by the Administrative Agent, such approval not to be unreasonably withheld or delayed or (iii) Indebtedness under any Other Lender Provided Financial Services Product; provided , however , the Loan Parties and their Subsidiaries shall enter into a Lender Provided Interest Rate Hedge, Lender Provided Foreign Currency Hedge, Lender Provided Commodity Hedge or another Interest Rate Hedge, Foreign Currency Hedge or Commodity Hedge only for hedging (rather than speculative) purposes;

(vii) Indebtedness of the Parent or any of its Subsidiaries incurred in connection with Sale and Leaseback Transactions of assets with a value not in excess of $100,000,000 in the aggregate;

 

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(viii) Indebtedness of the Parent or any of its Subsidiaries incurred to finance the acquisition, construction or improvement of any fixed or capital assets or real estate, and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals, refinancings and replacements of any such Indebtedness; provided such Indebtedness, together with Indebtedness permitted under clause (iv) above and clause (ix) below, shall not exceed in the aggregate at any time outstanding $50,000,000;

(ix) Indebtedness of any Person that becomes a Subsidiary of the Parent after the Closing Date, provided , that such Indebtedness exists at the time such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary; provided , further , such Indebtedness, together with Indebtedness permitted under clauses (iv) and (viii) above, shall not exceed in the aggregate at any time outstanding $50,000,000;

(x) Indebtedness (including any extensions, renewals, refinancing and replacements thereof) in an amount not to exceed $50,000,000 secured by certain parcels of real property located in Franklin County, Ohio and Licking County, Ohio owned or to be acquired by the Borrower or a Subsidiary of the Borrower, upon which the Borrower will be constructing its new corporate headquarters; and

(xi) other Indebtedness of the Loan Parties and their Subsidiaries in an aggregate amount at any time outstanding not to exceed $75,000,000.

8.2.2 Liens; Negative Pledge .

8.2.2.1 Liens . Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien on any of its property or assets, tangible or intangible, now owned or hereafter acquired, or agree or become liable to do so, except Permitted Liens.

8.2.2.2 Negative Pledge . Each of the Loan Parties covenant and agree that they shall not, and shall not permit any if their Subsidiaries to, enter into any agreement with any Person which, in any manner, whether directly or contingently, prohibits, restricts or limits the right to create, incur, assume or suffer to exist any Lien on its property or assets generally, tangible or intangible, now owned or hereafter acquired, except for such prohibitions, restrictions or limitations existing under or by reason of (i) applicable law, (ii) this Agreement and the other Loan Documents, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest, (iv) customary provisions restricting assignment of any licensing agreement entered into in the ordinary course of business, (v) customary provisions restricting the transfer or further encumbering of assets subject to Liens permitted under clause (xi) of the definition of “Permitted Liens”, (vi) customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (vii) any document relating to Indebtedness secured by a Lien permitted by clause (x) of the definition of “Permitted Liens”, insofar as the provisions thereof limit grants of other liens on the assets securing such Indebtedness, (viii) any operating lease or

 

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capital lease, insofar as the provisions thereof limit grants of a security interest in, or other assignments of, the related leasehold interest to any other Person, (ix) restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness, and (x) customary provisions in leases and other contracts restricting the assignment thereof.

8.2.3 Guaranties. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time, directly or indirectly, become or be liable in respect of any Guaranty, or assume, guarantee, become surety for, endorse or otherwise agree, become or remain directly or contingently liable upon or with respect to any obligation or liability of any other Person, except for Guaranties of Indebtedness or other obligations of the Parent and any Subsidiary of the Parent not prohibited hereunder.

8.2.4 Loans and Investments. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time make or suffer to remain outstanding any loan or advance to, or purchase, acquire or own any stock, bonds, notes or securities of, or any partnership interest (whether general or limited) or limited liability company interest in, or any other investment or interest in, or make any capital contribution to, any other Person, or agree, become or remain liable to do any of the foregoing, except:

(i) trade credit extended on usual and customary terms in the ordinary course of business;

(ii) loans and advances to officers and directors of the Parent or any of its Subsidiaries (or employees thereof provided such loans and advances are approved by an officer of such party) for travel, entertainment and relocation expenses in the ordinary course of business in an aggregate principal amount outstanding at any time that shall not exceed $5,000,000;

(iii) Permitted Investments;

(iv) loans or advances to, and investments in, Loan Parties and Non-Loan Party Subsidiaries, including, without limitation, new Non-Loan Party Subsidiaries;

(v) loans or advances to, and investments in, Joint Ventures; provided that in no event shall any Loan Party or Subsidiary of any Loan Party be liable, or agree to become liable, for any liabilities of the Joint Venture beyond the sum of (A) such Loan Party’s or Subsidiary’s equity interest in such Joint Venture and (B) $20,000,000 in the aggregate;

(vi) Permitted Acquisitions;

(vii) investments of funds intended to fund deferred compensation liabilities, provided , that such investments are made pursuant to The Bob Evans Amended and Restated Grantor Trust Agreement, dated April 4, 2011, Wells Fargo Bank, National Association, Trustee, or any additional or successor agreements, plans or policies, and continue at all times to be assets of the Parent or one of its Subsidiaries subject to the claims of its general creditors; and

 

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(viii) other loans to, and investments in, a Person or Persons from time to time in amounts not to exceed $25,000,000 in the aggregate at any time.

8.2.5 Restricted Payments. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except:

(i) the Parent and any of its Subsidiaries may declare and pay dividends with respect to its equity interests payable solely in additional shares of its common stock;

(ii) so long as no Potential Default or Event of Default has occurred and is continuing, the Parent may declare, and if declared when no Potential Default or Event of Default exists, the Parent may pay, dividends in cash so long as the Parent would be in pro forma compliance with the financial covenants set forth in Section 8.2.15 [Financial Covenants] after giving effect thereto;

(iii) Subsidiaries of the Parent may (i) declare and pay dividends or make distributions ratably with respect to their Equity Interests and (ii) may make Restricted Payments to the Parent and other Subsidiaries of the Parent, in amounts necessary to enable the Parent to pay the dividends described in clause (ii) above, along with standard costs associated with payment of such dividends or distributions, and to pay income and franchise taxes and operating and professional expenses;

(iv) so long as no Potential Default or Event of Default has occurred and is continuing, the Parent and its Subsidiaries may make Restricted Payments pursuant to and in accordance with employment contracts, stock option plans or other benefit plans or similar arrangements for consultants, management (including directors and officers) or employees of the Parent and its Subsidiaries; and

(v) so long as no Potential Default or Event of Default has occurred and is continuing, the Parent may (i) repurchase fractional shares of common stock of the Parent and (ii) repurchase shares of common stock of the Parent for cash, so long as the Parent would be in pro forma compliance with the financial covenants set forth in Section 8.2.15 [Financial Covenants] after giving effect thereto.

8.2.6 Liquidations, Mergers, Consolidations, Acquisitions. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, dissolve, liquidate or wind-up its affairs, or become a party to any merger or consolidation, or acquire by purchase, lease or otherwise all or substantially all of the assets or capital stock of any other Person; provided that, (i) any Loan Party (other than the Borrower) may merge into any other Loan Party, and any Person may merge into a Loan Party in a transaction in which such Loan Party is the surviving entity in connection with a Permitted Acquisition, (ii) any Non-Loan Party Subsidiary may consolidate or merge into another Non-Loan Party Subsidiary or into a Loan Party, so long as in any merger or consolidation involving any Loan Party, such Loan Party shall be the surviving or continuing entity, (iii) a Loan Party or a wholly-owned Subsidiary of a Loan Party may make a Permitted Acquisition, (iv) any Subsidiary of the Parent (other than a Loan Party) may liquidate or dissolve if the Borrower or the Parent (as the case may be) determines in good faith that such

 

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liquidation or dissolution is in the best interests of the Borrower or the Parent (as the case may be) and is not materially disadvantageous to the Lenders; (v) any restructuring, regardless of whether accomplished by liquidation, contribution, distribution, merger, amalgamation or any other technique, whereby the ownership of Subsidiaries of the Parent is changed, so long as each such Subsidiary that is a Subsidiary of the Parent prior to such restructuring remains, directly or indirectly, a Subsidiary of the Parent after such restructuring so long as in any restructuring involving the Borrower, the Borrower is the surviving entity; and (vi) any transaction, regardless of whether accomplished by liquidation, contribution, distribution, merger, amalgamation or any other technique, and including without limitation reincorporations, whereby the only substantive effect is that the Parent or any of its Subsidiaries changes its state of incorporation or formation, so long as the Borrower provides prompt written notice to the Administrative Agent of such change.

8.2.7 Dispositions of Assets or Subsidiaries. Except as provided in Section 8.2.6 [Liquidations, Mergers, Consolidations, Acquisitions], each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or dispose of, voluntarily or involuntarily (collectively, Transfer ”), any substantial part of its properties or assets, tangible or intangible (including sale, assignment, discount or other disposition of accounts, contract rights, chattel paper, equipment or general intangibles with or without recourse or of capital stock, shares of beneficial interest, partnership interests or limited liability company interests of a Subsidiary of such Loan Party), provided , however , that notwithstanding the foregoing any Loan Party or Subsidiary of a Loan Party may Transfer assets (including equity interests in Subsidiaries) constituting a substantial part of the assets of the Loan Parties and their Subsidiaries if such assets are sold in an arms length transaction and, at such time and after giving effect thereto, no Potential Default or Event of Default shall have occurred and be continuing and an amount equal to the Net Proceeds received from such Transfer shall be used within 365 days of such sale, lease or disposition, in any combination:

(i) to acquire productive assets used or useful in carrying on the business of the Loan Parties and their Subsidiaries and having a value and revenue generating capacity at least equal to the Net Proceeds received from such sale, lease or disposition; or

(ii) to prepay or retire the Obligations or obligations outstanding under any Indebtedness permitted under Section 8.2.1(ii).

As used in this Section 8.2.7, a Transfer of assets shall be deemed to be a “substantial part” of the assets of the Loan Parties and their Subsidiaries if the book value of such assets, when added to the book value of all other assets sold, leased or otherwise disposed of by the Loan Parties and their Subsidiaries during the period beginning with the Closing Date (excluding (A)   Transfers of up to $2,000,000 in Net Proceeds in any single transaction or $20,000,000 in the aggregate and (B) an aggregate $50,000,000 in Net Proceeds from Transfers of real estate) to and including the date on which such Transfer occurs, exceeds 30% of Consolidated Total Assets, determined as of the end of the fiscal year immediately preceding such Transfer; provided that there shall be excluded from any determination of a “substantial part” (a) any Transfer of assets in the ordinary course of business of the Loan Parties and their Subsidiaries, and (b) so long as no Potential Default or Event of Default shall exist, any transfer of assets

 

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(i) from a Loan Party to another Loan Party or any wholly owned Non-Loan Party Subsidiary, or (ii) from any Non-Loan Party Subsidiary to a Loan Party or to another wholly owned Non-Loan Party Subsidiary or any other Subsidiary with the same percentage ownership by the Parent as the transferor. Notwithstanding the foregoing, this Section 8.2.7 shall not apply to or restrict Sale and Leaseback Transactions; provided the Borrower shall comply with Section 8.2.1(vii), to the extent applicable, and Section 8.2.14 [Sale and Leaseback Transactions].

8.2.8 Affiliate Transactions. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, enter into or carry out any transaction with any Affiliate of any Loan Party (including purchasing property or services from or selling property or services to any Affiliate of any Loan Party or other Person) unless such transaction is not otherwise prohibited by this Agreement, is entered into in the ordinary course of business upon fair and reasonable arm’s-length terms and conditions and is in accordance with all applicable Law. This covenant shall not prohibit agreements or transactions with and payments to officers, directors, employees and shareholders that are either (a) entered into in the ordinary course of business and not prohibited by any of the provisions of this Agreement, or (b) entered into outside the ordinary course of business, approved by the directors (or a committee thereof, or pursuant to a policy approved by the directors or a committee thereof) or shareholders of the Parent or the Borrower, as applicable, and not prohibited by any of the provisions of this Agreement.

8.2.9 Subsidiaries and Equity Pledges. Subject to the limitations set forth in Section 8.2.4 [Loans and Investments] and Section 8.2.6 [Liquidations, Mergers, Consolidations, Acquisitions], the Loan Parties may from time to time create or acquire or invest in Subsidiaries or Joint Ventures; provided each of the Loan Parties shall not permit any of its Subsidiaries to guaranty the obligations of any of the Loan Parties under any other indebtedness under note issuances permitted under Section 8.2.1(ii) unless such Subsidiary joins this Agreement as a Guarantor by delivering to the Administrative Agent (A) a signed Guarantor Joinder; and (B) documents in the forms described in Section 7.1 [First Loans and Letters of Credit] modified as appropriate; provided , further , each Loan Party shall deliver documents necessary to grant and perfect Prior Security Interests to the Administrative Agent for the benefit of the Lenders, any Lender Hedge Affiliate and any Affiliate of any Lender to which an Obligation is owed in the equity interests of any direct Subsidiary of such Loan Party (1) created or acquired after the Closing Date other than a Subsidiary which is not a Material Subsidiary and (2) which is a direct Subsidiary of a Loan Party which is not a Material Subsidiary on the Closing Date but which subsequently becomes a Material Subsidiary; and provided , further , that such Prior Security Interest shall be limited to 65% of the equity interests in any Material Subsidiary which is a Foreign Subsidiary.

8.2.10 Continuation of or Change in Business. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, engage in any material line of business other than those lines of business conducted by the Borrower and its Subsidiaries on the date hereof (including, without limitation, the restaurant and food products industries) and any business that, in the good faith judgment of the Board of Directors of the Company, is reasonably related, incidental, ancillary, supplementary or complementary (including, without limitation, supply chain) thereto, or reasonable extensions thereof.

 

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8.2.11 Fiscal Year. The Borrower shall not, and shall not permit any Subsidiary of the Borrower to, change its fiscal year from the twelve-month period beginning the day after the last Friday in April and ending the last Friday in April.

8.2.12 Restriction on Subsidiaries. Except as set forth in this Agreement, the Loan Parties shall not, and will not permit any Subsidiary of any Loan Party to, enter into any agreement which would restrict the ability of any Loan Party or any Subsidiary of any Loan Party to pay any dividends to, or make advances, loans or distributions to, or other instruments in any Loan Party or any Subsidiary of any Loan Party, except for such restrictions existing under or by reason of items listed in clauses (i)-(x) of Section 8.2.2.2 [Negative Pledge] and which are not materially disadvantageous to the Lenders.

8.2.13 Changes in Organizational Documents. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, amend in any respect that would reasonably be expected to be materially disadvantageous to the Lenders, its certificate of incorporation (including any provisions or resolutions relating to capital stock), by-laws, certificate of limited partnership, partnership agreement, certificate of formation, limited liability company agreement or other organizational documents without obtaining the prior written consent of the Required Lenders.

8.2.14 Sale and Leaseback Transactions. The Loan Parties shall not, and shall not permit any Subsidiary of any Loan Party to, enter into any one or more Sale and Leaseback Transactions of assets with a value in excess of $100,000,000 in the aggregate.

8.2.15 Financial Covenants.

8.2.15.1 Minimum Coverage Ratio . The Loan Parties shall not permit the Coverage Ratio, calculated as of the end of each fiscal quarter for the four (4) fiscal quarters then ended, to be less than 3.00 to 1.00.

8.2.15.2 Maximum Leverage Ratio . The Loan Parties shall not at any time permit the Leverage Ratio, calculated as of the end of each fiscal quarter for the four (4) quarters then ended, to exceed 3.75 to 1.00; provided , however , the Borrower may request, no more than two (2) times during the term of this Agreement, an increase in the Leverage Ratio set forth above of 0.50 to 1.00 (but in no event in excess of 4.25 to 1.00) for three (3) fiscal quarters following delivery of written notification from the Borrower of a Permitted Acquisition involving total cash or non-cash consideration in excess of $50,000,000 and subject to the consummation of such Permitted Acquisition, together with a revised forecast evidencing pro forma compliance with this Section (both during and after the expiration of such three (3) fiscal quarters). The revised forecast shall provide in reasonable detail an income statement, balance sheet, and cash flow statement and outline the impact on the revised forecast resulting from this request. For example, if the Borrower has requested an increase in the Leverage Ratio in connection with a Permitted Acquisition which closes in the first fiscal quarter, the Borrower shall have until the end of the fourth fiscal quarter to bring the Leverage Ratio back to 3.75 to 1.00.

 

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8.3 Reporting Requirements. The Loan Parties will furnish or cause to be furnished to the Administrative Agent and each of the Lenders:

8.3.1 Quarterly Financial Statements. As soon as available and in any event within forty-five (45) days after the end of each of the first three fiscal quarters in each fiscal year, financial statements of the Parent, consisting of a consolidated balance sheet as of the end of such fiscal quarter and related consolidated statements of income, stockholders’ equity and cash flows for the fiscal quarter then ended and the fiscal year through that date, all in reasonable detail and certified (subject to normal year-end audit adjustments) by an Authorized Officer of the Parent as having been prepared in accordance with GAAP, consistently applied, and setting forth in comparative form the respective financial statements for the corresponding date and period in the previous fiscal year.

8.3.2 Annual Financial Statements. As soon as available and in any event within ninety (90) days after the end of each fiscal year of the Parent, financial statements of the Parent consisting of a consolidated balance sheet as of the end of such fiscal year, and related consolidated statements of income, stockholders’ equity and cash flows for the fiscal year then ended, all in reasonable detail and setting forth in comparative form the financial statements as of the end of and for the preceding fiscal year, and certified by independent certified public accountants of nationally recognized standing satisfactory to the Administrative Agent. The certificate or report of accountants shall be free of qualifications (other than any consistency qualification that may result from a change in the method used to prepare the financial statements as to which such accountants concur) and shall not indicate the occurrence or existence of any event, condition or contingency which would materially impair the prospect of payment or performance of any covenant, agreement or duty of any Loan Party under any of the Loan Documents. The Loan Parties shall deliver with such financial statements and certification by their accountants a letter of such accountants to the Administrative Agent and the Lenders substantially to the effect that, based upon their ordinary and customary examination of the affairs of the Parent, performed in connection with the preparation of such consolidated financial statements, and in accordance with GAAP, they are not aware of the existence of any condition or event which constitutes an Event of Default or Potential Default or, if they are aware of such condition or event, stating the nature thereof.

8.3.3 Compliance Certificate. Concurrently with the financial statements of the Parent furnished to the Administrative Agent and to the Lenders pursuant to Sections 8.3.1 [Quarterly Financial Statements] and 8.3.2 [Annual Financial Statements], a certificate (each a Compliance Certificate ”) of the Parent signed by an Authorized Officer of the Parent, in the form of Exhibit 8.3.3 .

8.3.4 Notices .

8.3.4.1 Default . Promptly after any officer of any Loan Party has learned of the occurrence of an Event of Default or Potential Default, a certificate signed by an Authorized Officer setting forth the details of such Event of Default or Potential Default and the action which such Loan Party proposes to take with respect thereto.

8.3.4.2 Litigation . Promptly after receiving notice thereof, notice of all actions, suits, proceedings or investigations before or by any Official Body or any other Person against any Loan Party or Subsidiary of any Loan Party which involve a claim or series of claims that, if adversely determined, would reasonably be expected to constitute a Material Adverse Change.

 

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8.3.4.3 Reserved .

8.3.4.4 Erroneous Financial Information . Promptly in the event that any Loan Party or its accountants conclude or advise that any previously issued financial statement, audit report or interim review should no longer be relied upon or that disclosure should be made or action should be taken to prevent future reliance.

8.3.4.5 ERISA Event . Promptly upon the occurrence of any ERISA Event.

8.3.4.6 Other Reports . Promptly upon their becoming available to the Borrower:

(i) Annual Budget . The annual budget and any forecasts or projections of the Loan Parties, to be supplied not later than ninety (90) days after the commencement of the fiscal year to which any of the foregoing may be applicable,

(ii) Auditors’ Internal Final Reports . Any final reports submitted to any Loan Party by independent accountants in connection with any annual, interim or special audit,

(iii) SEC Reports; Shareholder Communications . Reports, including Forms 10-K, 10-Q and 8-K, registration statements and prospectuses and other shareholder communications, filed by the Parent with the United States Securities and Exchange Commission,

(iv) Other Information . Such other reports and information as any of the Lenders may from time to time reasonably request.

9. DEFAULT

9.1 Events of Default. An Event of Default shall mean the occurrence and continuance of any one or more of the following events or conditions:

9.1.1 Payments Under Loan Documents. The Borrower shall (i) fail to pay any principal of any Loan (including the payment due at maturity) or Reimbursement Obligation on the date on which such principal becomes due in accordance with the terms hereof or (ii) fail to pay any interest or any other amount owing hereunder or under the other Loan Documents on the date such interest or other amount becomes due and such default shall continue unremedied for a period of three (3) days after written notice thereof has been given to the Borrower by the Administrative Agent;

9.1.2 Breach of Warranty. (i) Any representation or warranty contained in Section 6.1.17 [Anti-Terrorism Laws] is or becomes false or misleading at any time or (ii) any representation or warranty (other than a representation or warranty contained in Section 6.1.17 [Anti-Terrorism Laws]) made in writing by any of the Loan Parties in any Loan Document or in any certificate or statement furnished in connection therewith shall prove to have been false in any material respect as of the date made;

 

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9.1.3 Breach of Negative Covenants or Visitation Rights. Any of the Loan Parties shall default in the observance or performance of any covenant contained in Section 8.1.5 [Visitation Rights], Section 8.1.9 [Anti-Terrorism Laws] or Section 8.2 [Negative Covenants] other than Section 8.2.12 [Restrictions on Subsidiaries] and Section 8.2.13 [Changes in Organizational Documents];

9.1.4 Breach of Other Covenants. Any of the Loan Parties shall default in the observance or performance of any other covenant, condition or provision hereof or of any other Loan Document and such default shall continue unremedied for a period of thirty (30) days after the earlier of (i) a Loan Party has knowledge of such default or (ii) written notice of such default has been given to the Borrower by the Administrative Agent;

9.1.5 Defaults in Other Material Indebtedness. Any Loan Party or any Material Subsidiary (i) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Material Indebtedness, or (ii) fails to observe or perform any other agreement or condition relating to any Material Indebtedness, or any other event occurs, the effect of which default or other event is to cause or to permit the holder or holders of such Material Indebtedness to cause, with the giving of notice if required, such Material Indebtedness to become due prior to its stated maturity; provided , however , that an Event of Default under this Section 9.1.5 caused by the occurrence of a default with respect to such Material Indebtedness shall be cured for purposes of this Agreement (a) upon the party asserting such default waiving such default, (b) upon the Loan Party or such Material Subsidiary curing such default prior to such party exercising any remedies with respect thereto if, at the time of such waiver or such cure the Administrative Agent has not exercised any rights or remedies with respect to an Event of Default under this Section 9.1.5 or (iii) upon the Loan Party’s or such Material Subsidiary’s otherwise making adequate provision for the payment of such Material Indebtedness in form and substance satisfactory to the Administrative Agent and the Required Lenders in their sole discretion prior to such party exercising any remedies with respect thereto if, at the time of such adequate provision the Administrative Agent has not exercised any rights or remedies with respect to an Event of Default under this Section 9.1.5;

9.1.6 Final Judgments or Orders. Any final judgments or orders for the payment of money (to the extent not covered by independent third party insurance as to which the insurer does not dispute coverage and is not subject to an Insolvency Event) in excess of $25,000,000 in the aggregate shall be entered against any Loan Party by a court having jurisdiction in the premises, which judgment is not discharged, vacated, bonded or stayed pending appeal within a period of forty five (45) days from the date of entry;

9.1.7 Loan Document Unenforceable. Any of the Loan Documents shall cease to be legal, valid and binding agreements enforceable in any material respect against the party executing the same or such party’s successors and assigns (as permitted under the Loan Documents) in accordance with the respective terms thereof or shall in any way be terminated (except in accordance with its terms) or become or be declared ineffective or inoperative or shall in any way be challenged or contested or cease to give or provide the respective rights, titles, interests, remedies, powers or privileges intended to be created thereby;

 

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9.1.8 Proceedings Against Assets. Any material portion of the Loan Parties’ assets in excess of an aggregate amount of $25,000,000 are attached, seized, levied upon or subjected to a writ or distress warrant; or such come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors and the same is not cured within thirty (30) days thereafter;

9.1.9 Events Relating to Pension Plans or Multiemployer Plans. (i) (i) An ERISA Event occurs with respect to a Pension Plan which has resulted or could reasonably be expected to result in liability of Borrower under Title IV of ERISA to the Pension Plan or the PBGC in an aggregate amount in excess of $25,000,000 or (ii) Borrower or any member of the ERISA Group fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan, where the aggregate amount of unamortized withdrawal liability is in excess of $25,000,000.

9.1.10 Change in Control. The occurrence of a Change in Control; or

9.1.11 Insolvency Event. Any Insolvency Event shall occur with respect to any Loan Party or any other Material Subsidiary.

9.2 Consequences of Event of Default.

9.2.1 Events of Default Other Than Bankruptcy, Insolvency or Reorganization Proceedings. If an Event of Default specified under Sections 9.1.1 through 9.1.10 shall occur and be continuing, the Lenders and the Administrative Agent shall be under no further obligation to make Loans and the Issuing Lender shall be under no obligation to issue Letters of Credit and the Administrative Agent may, and upon the request of the Required Lenders, shall (i) by written notice to the Borrower, declare the unpaid principal amount of the Notes then outstanding and all interest accrued thereon, any unpaid fees and all other Indebtedness of the Borrower to the Lenders hereunder and thereunder to be forthwith due and payable, and the same shall thereupon become and be immediately due and payable to the Administrative Agent for the benefit of each Lender without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, and (ii) require the Borrower to, and the Borrower shall thereupon, deposit in a non-interest-bearing account with the Administrative Agent, as cash collateral for its Obligations under the Loan Documents, an amount equal to the maximum amount currently or at any time thereafter available to be drawn on all outstanding Letters of Credit, and the Borrower hereby pledges to the Administrative Agent and the Lenders, and grants to the Administrative Agent and the Lenders a security interest in, all such cash as security for such Obligations with such pledge effective at such time as such cash collateral is deposited with the Administrative Agent; the foregoing provision shall not be deemed to create a current charge or security interest; and

 

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9.2.2 Bankruptcy, Insolvency or Reorganization Proceedings. If an Event of Default specified under Section 9.1.11 [Insolvency Event] shall occur and be continuing, the Lenders shall be under no further obligations to make Loans hereunder and the Issuing Lender shall be under no obligation to issue Letters of Credit and the unpaid principal amount of the Loans then outstanding and all interest accrued thereon, any unpaid fees and all other Indebtedness of the Borrower to the Lenders hereunder and thereunder shall be immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived; and

9.2.3 Set-off. If an Event of Default shall have occurred and be continuing, each Lender, the Issuing Lender, and each of their respective Affiliates and any participant of such Lender or Affiliate which has agreed in writing to be bound by the provisions of Section 5.3 [Sharing of Payments by Lenders] is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the Issuing Lender or any such Affiliate or participant to or for the credit or the account of any Loan Party against any and all of the Obligations of such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender, the Issuing Lender, Affiliate or participant, irrespective of whether or not such Lender, Issuing Lender, Affiliate or participant shall have made any demand under this Agreement or any other Loan Document and although such Obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender or the Issuing Lender different from the branch or office holding such deposit or obligated on such Indebtedness. The rights of each Lender, the Issuing Lender and their respective Affiliates and participants under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the Issuing Lender or their respective Affiliates and participants may have. The rights set forth in this Section 9.2.3 shall only be effective during the existence of an Event of Default and shall not be deemed to create a current charge or security interest. Each Lender and the Issuing Lender agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application; and

9.2.4 Application of Proceeds. During any time in which the Administrative Agent may take any action pursuant to this Section 9.2 and until Payment In Full, any and all proceeds received by the Administrative Agent from any sale or other disposition of the Collateral, or any part thereof, or the exercise of any other remedy by the Administrative Agent, shall be applied as follows:

(i) First , to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts, including attorney fees, payable to the Administrative Agent in its capacity as such, the Issuing Lender in its capacity as such and the Swing Loan Lender in its capacity as such, ratably among the Administrative Agent, the Issuing Lender and Swing Loan Lender in proportion to the respective amounts described in this clause First payable to them;

(ii) Second , to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders under the Loan Documents, including attorney fees, ratably among the Lenders in proportion to the respective amounts described in this clause Second payable to them;

 

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(iii) Third , to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and Reimbursement Obligations, ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them;

(iv) Fourth , to payment of that portion of the Obligations constituting unpaid principal of the Loans, Reimbursement Obligations and payment obligations then owing under Lender Provided Interest Rate Hedges, Lender Provided Foreign Currency Hedges, Lender Provided Commodity Hedges and Other Lender Provided Financial Service Products, ratably among the Lenders, the Issuing Lender, and the Lenders, Lender Hedge Affiliates or Affiliates of Lenders which provide Lender Provided Interest Rate Hedges, Lender Provided Foreign Currency Hedges, Lender Provided Commodity Hedges and Other Lender Provided Financial Service Products, in proportion to the respective amounts described in this clause Fourth held by them;

(v) Fifth , to the Administrative Agent for the account of the Issuing Lender, to cash collateralize any undrawn amounts under outstanding Letters of Credit; and

(vi) Last , the balance, if any, to the Loan Parties or as required by Law.

Notwithstanding anything to the contrary in this Section 9.2.4, no Swap Obligations of any Non-Qualifying Party shall be paid with amounts received from such Non-Qualifying Party under its Guaranty Agreement (including sums received as a result of the exercise of remedies with respect to such Guaranty Agreement) or from the proceeds of such Non-Qualifying Party’s Collateral if such Swap Obligations would constitute Excluded Hedge Liabilities; provided, however, that to the extent possible appropriate adjustments shall be made with respect to payments and/or the proceeds of Collateral from other Loan Parties that are Eligible Contract Participants with respect to such Swap Obligations to preserve the allocation to Obligations otherwise set forth above in this Section 9.2.4.

10. THE ADMINISTRATIVE AGENT

10.1 Appointment and Authority. Each of the Lenders and the Issuing Lender hereby irrevocably appoints PNC to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Section 10 are solely for the benefit of the Administrative Agent, the Lenders and the Issuing Lender, and neither the Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions.

10.2 Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

 

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10.3 Exculpatory Provisions. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Administrative Agent:

(a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Potential Default or Event of Default has occurred and is continuing;

(b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents); provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable Law; and

(c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 11.1 [Modifications, Amendments or Waivers] and 9.2 [Consequences of Event of Default]) or (ii) in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Potential Default or Event of Default unless and until notice describing such Potential Default or Event of Default is given to the Administrative Agent by the Borrower, a Lender or the Issuing Lender.

The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Potential Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Section 7 [Conditions of Lending and Issuance of Letters of Credit] or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

 

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10.4 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the Issuing Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender or the Issuing Lender unless the Administrative Agent shall have received notice to the contrary from such Lender or the Issuing Lender prior to the making of such Loan or the issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

10.5 Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Section 10 shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

10.6 Resignation of Administrative Agent. The Administrative Agent may at any time give notice of its resignation to the Lenders, the Issuing Lender and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, with approval from the Borrower (so long as no Event of Default has occurred and is continuing), to appoint a successor, such approval not to be unreasonably withheld or delayed. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders and the Issuing Lender, appoint a successor Administrative Agent; provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (i) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the Issuing Lender under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (ii) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the Issuing Lender directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section 10.6. Upon the acceptance of a successor’s appointment as Administrative Agent

 

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hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Section 10 and Section 11.3 [Expenses; Indemnity; Damage Waiver] shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.

If PNC resigns as Administrative Agent under this Section 10.6, PNC shall also resign as an Issuing Lender and the Swing Loan Lender. Upon the appointment of a successor Administrative Agent hereunder, such successor shall (i) succeed to all of the rights, powers, privileges and duties of PNC as the retiring Issuing Lender, Swing Loan Lender and Administrative Agent and PNC shall be discharged from all of its respective duties and obligations as Issuing Lender, Swing Loan Lender and Administrative Agent under the Loan Documents, and (ii) issue letters of credit in substitution for the Letters of Credit issued by PNC, if any, outstanding at the time of such succession or make other arrangement satisfactory to PNC to effectively assume the obligations of PNC with respect to such Letters of Credit.

10.7 Non-Reliance on Administrative Agent and Other Lenders. Each Lender and the Issuing Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and the Issuing Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

10.8 No Other Duties, etc. Anything herein to the contrary notwithstanding, none of the Joint Lead Arrangers, Sole Bookrunner, Syndication Agents and Documentation Agents listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or the Issuing Lender hereunder.

10.9 Administrative Agent’s Fee. The Borrower shall pay to the Administrative Agent a nonrefundable fee (the Administrative Agent’s Fee ”) under the terms of a letter (the Administrative Agent’s Letter ”) between the Borrower and Administrative Agent, as amended from time to time.

 

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10.10 Authorization to Release Collateral and Guarantors. The Lenders and Issuing Lenders authorize the Administrative Agent to release (i) any Collateral consisting of equity interests sold or otherwise disposed of in a sale or other disposition or transfer permitted under Section 8.2.7 [Dispositions of Assets or Subsidiaries] or Section 8.2.6 [Liquidations, Mergers, Consolidations, Acquisitions], and (ii) any Guarantor from its obligations under the Guaranty Agreement if the ownership interests in such Guarantor are sold or otherwise disposed of or transferred to persons other than Loan Parties or Subsidiaries of the Loan Parties in a transaction permitted under Section 8.2.7 [Disposition of Assets or Subsidiaries] or Section 8.2.6 [Liquidations, Mergers, Consolidations, Acquisitions].

10.11 No Reliance on Administrative Agent’s Customer Identification Program. Each Lender acknowledges and agrees that neither such Lender, nor any of its Affiliates, participants or assignees, may rely on the Administrative Agent to carry out such Lender’s, Affiliate’s, participant’s or assignee’s customer identification program, or other obligations required or imposed under or pursuant to the USA Patriot Act or the regulations thereunder, including the regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the CIP Regulations ”), or any other Anti-Terrorism Law, including any programs involving any of the following items relating to or in connection with any of the Loan Parties, their Affiliates or their agents, the Loan Documents or the transactions hereunder or contemplated hereby: (i) any identity verification procedures, (ii) any recordkeeping, (iii) comparisons with government lists, (iv) customer notices or (v) other procedures required under the CIP Regulations or such other Laws.

11. MISCELLANEOUS

11.1 Modifications, Amendments or Waivers. With the written consent of the Required Lenders, the Administrative Agent, acting on behalf of all the Lenders, and the Borrower, on behalf of the Loan Parties, may from time to time enter into written agreements amending or changing any provision of this Agreement or any other Loan Document or the rights of the Lenders or the Loan Parties hereunder or thereunder, or may grant written waivers or consents hereunder or thereunder. Any such agreement, waiver or consent made with such written consent shall be effective to bind all the Lenders and the Loan Parties; provided , that no such agreement, waiver or consent may be made which will:

11.1.1 Increase of Commitment. Increase the amount of the Revolving Credit Commitment or, if applicable, any Incremental Term Loan of any Lender hereunder without the consent of such Lender;

11.1.2 Extension of Payment; Reduction of Principal Interest or Fees; Modification of Terms of Payment. Whether or not any Loans are outstanding, extend the Expiration Date or the time for payment of principal or interest of any Loan, the Commitment Fee or any other fee payable to any Lender, or reduce the principal amount of or the rate of interest borne by any Loan or reduce the Commitment Fee or any other fee payable to any Lender, without the consent of each Lender directly affected thereby;

11.1.3 Release of Collateral or Guarantor. Except in connection with sales of assets (including ownership interests in such Guarantor) permitted by Section 8.2.7 [Dispositions of Assets or Subsidiaries] or Section 8.2.6 [Liquidations, Mergers, Consolidations, Acquisitions], release all or substantially all of the Collateral or any Guarantor from its Obligations under the Guaranty Agreement without the consent of all Lenders (other than Defaulting Lenders); or

 

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11.1.4 Miscellaneous. Amend Section 5.2 [Pro Rata Treatment of Lenders], Section 10.3 [Exculpatory Provisions] or Section 5.3 [Sharing of Payments by Lenders] or this Section 11.1, alter any provision regarding the pro rata treatment of the Lenders or requiring all Lenders to authorize the taking of any action or reduce any percentage specified in the definition of Required Lenders, in each case without the consent of all of the Lenders (other than Defaulting Lenders);

provided that no agreement, waiver or consent which would modify the interests, rights or obligations of the Administrative Agent, the Issuing Lender or the Swing Loan Lender may be made without the written consent of the Administrative Agent, the Issuing Lender or the Swing Loan Lender, as applicable, and provided , further , that this Section 11.1 shall not be construed as prohibiting any amendment or other modification permitted under Section 2.12 [Increase in Revolving Credit Commitments; Incremental Term Loans]; and provided , further that, if in connection with any proposed waiver, amendment or modification referred to in Sections 11.1.1 through 11.1.4 above, the consent of the Required Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained (each a Non-Consenting Lender ”), then the Borrower shall have the right to replace any such Non-Consenting Lender with one or more replacement Lenders pursuant to Section 5.6.2 [Replacement of a Lender]. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender, and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender disproportionately adversely relative to other affected Lenders shall require the consent of such Defaulting Lender.

11.2 No Implied Waivers; Cumulative Remedies. No course of dealing and no delay or failure of the Administrative Agent or any Lender in exercising any right, power, remedy or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any further exercise thereof or of any other right, power, remedy or privilege. The rights and remedies of the Administrative Agent and the Lenders under this Agreement and any other Loan Documents are cumulative and not exclusive of any rights or remedies which they would otherwise have.

11.3 Expenses; Indemnity; Damage Waiver.

11.3.1 Costs and Expenses. The Borrower shall pay (i) all reasonable out of pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, but specifically excluding all fees and time charges and disbursements for attorneys who may be employees of the Administrative Agent), in connection with the syndication of the credit

 

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facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out of pocket expenses incurred by the Issuing Lender in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (iii) all reasonable out of pocket expenses incurred by the Administrative Agent, any Lender or the Issuing Lender (including the reasonable fees, charges and disbursements of any counsel for the Administrative Agent, any Lender or the Issuing Lender, but specifically excluding all fees and time charges for attorneys who may be employees of the Administrative Agent, any Lender or the Issuing Lender), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such reasonable out of pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit, and (iv) all reasonable out-of-pocket expenses of the Administrative Agent’s regular employees and agents engaged periodically to perform audits of the Loan Parties’ books, records and business properties during the continuance of an Event of Default; provided , that, notwithstanding the foregoing, the Borrower’s obligation to pay for fees, charges and disbursements of counsel to the Lenders under this Section 11.3.1 shall be limited to a single counsel and, to the extent applicable, a single specialist counsel (for each relevant jurisdiction and specialization), together with, in the case of a conflict of interest, one (1) additional counsel for similarly situated parties and, to the extent applicable, one (1) additional specialist counsel for each relevant jurisdiction and specialization.

11.3.2 Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender and the Issuing Lender, and each Related Party of any of the foregoing Persons (each such Person being called an Indemnitee ”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related reasonable expenses (including the reasonable fees, charges and disbursements of any outside counsel for any Indemnitee, but specifically excluding all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance or nonperformance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the Issuing Lender to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) breach of representations, warranties or covenants of the Borrower under the Loan Documents, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, including any such items or losses relating to or arising under Environmental Laws or pertaining to environmental matters, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto (it being agreed that the Administrative Agent shall make a good faith effort to advise such Indemnitee of any such litigation); provided that such indemnity shall not, as to any Indemnitee, be available to

 

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the extent that such losses, claims, damages, liabilities or related expenses (A) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (B) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee's obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction. This Section 11.3.2 shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.

11.3.3 Reimbursement by Lenders. To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under Sections 11.3.1 [Costs and Expenses] or 11.3.2 [Indemnification by the Borrower] to be paid by it to the Administrative Agent (or any sub-agent thereof), the Issuing Lender or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the Issuing Lender or such Related Party, as the case may be, such Lender’s Ratable Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) or the Issuing Lender in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) or Issuing Lender in connection with such capacity.

11.3.4 Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable Law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof. No Indemnitee referred to in Section 11.3.2 [Indemnification by Borrower] shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

11.3.5 Payments. All amounts due under this Section shall be payable not later than ten (10) days after demand therefor.

11.4 Holidays. Whenever payment of a Loan to be made or taken hereunder shall be due on a day which is not a Business Day such payment shall be due on the next Business Day (except as provided in Section 4.2 [Interest Periods]) and such extension of time shall be included in computing interest and fees, except that the Loans shall be due on the Business Day preceding the Expiration Date if the Expiration Date is not a Business Day. Whenever any payment or action to be made or taken hereunder (other than payment of the Loans) shall be stated to be due on a day which is not a Business Day, such payment or action shall be made or taken on the next following Business Day, and such extension of time shall not be included in computing interest or fees, if any, in connection with such payment or action.

 

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11.5 Notices; Effectiveness; Electronic Communication.

11.5.1 Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in Section 11.5.2 [Electronic Communications]), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier (i) if to a Lender, to it at its address set forth in its administrative questionnaire, or (ii) if to any other Person, to it at its address set forth on Schedule 1.1(B) .

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications to the extent provided in Section 11.5.2 [Electronic Communications], shall be effective as provided in such Section.

11.5.2 Electronic Communications. Notices and other communications to the Lenders and the Issuing Lender hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices to any Lender or the Issuing Lender if such Lender or the Issuing Lender, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications. Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender's receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement); provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

11.5.3 Change of Address, Etc . Any party hereto may change its address, e-mail address or telecopier number for notices and other communications hereunder by notice to the other parties hereto.

11.6 Severability. The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction.

 

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11.7 Duration; Survival . All representations and warranties of the Loan Parties contained herein or made in connection herewith shall survive the execution and delivery of this Agreement, the completion of the transactions hereunder and Payment In Full. All covenants and agreements of the Borrower contained herein relating to the payment of principal, interest, premiums, additional compensation or expenses and indemnification, including those set forth in the Notes, Section 5 [Payments] and Section 11.3 [Expenses; Indemnity; Damage Waiver], shall survive Payment In Full; provided , however , notwithstanding the foregoing, the provisions of Section 5.8 [Increased Costs] and Section 5.9 [Taxes] shall only survive for a period of six (6) months following Payment In Full. All other covenants and agreements of the Loan Parties shall continue in full force and effect from and after the date hereof and until Payment In Full.

11.8 Successors and Assigns.

11.8.1 Successors and Assigns Generally . The provisions of this Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor any other Loan Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of Section 11.8.2 [Assignments by Lenders], (ii) by way of participation in accordance with the provisions of Section 11.8.4 [Participations], or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 11.8.5 [Certain Pledges; Successors and Assigns Generally] (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in Section 11.8.4 [Participations] and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

11.8.2 Assignments by Lenders. Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that any such assignment shall be subject to the following conditions:

11.8.2.1 Minimum Amounts .

(A) in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and

(B) in any case not described in clause (i)(A) of this Section 11.8.2, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption Agreement with respect to such assignment is delivered

 

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to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption Agreement, as of the Trade Date) shall not be less than $5,000,000, in the case of any assignment in respect of any Commitment of the assigning Lender, unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).

11.8.2.2 Proportionate Amounts . Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loan or the Commitment assigned.

11.8.2.3 Required Consents . No consent shall be required for any assignment except for the consent of the Administrative Agent (which shall not be unreasonably withheld or delayed) and:

(A) the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (x) an Event of Default has occurred and is continuing at the time of such assignment or (y) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within ten (10) Business Days after having received notice thereof; and

(B) the consent of the Issuing Lender (such consent not to be unreasonably withheld or delayed) shall be required for any assignment that increases the obligation of the assignee to participate in exposure under one or more Letters of Credit (whether or not then outstanding).

11.8.2.4 Assignment and Assumption Agreement . The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption Agreement, together with a processing and recordation fee of $3,500, and the assignee, if it is not a Lender, shall deliver to the Administrative Agent an administrative questionnaire provided by the Administrative Agent.

11.8.2.5 No Assignment to Borrower . No such assignment shall be made to the Borrower or any of the Borrower’s Affiliates or Subsidiaries.

11.8.2.6 No Assignment to Natural Persons . No such assignment shall be made to a natural person.

Subject to acceptance and recording thereof by the Administrative Agent pursuant to Section 11.8.3 [Register], from and after the effective date specified in each Assignment and Assumption Agreement, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption Agreement, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption Agreement, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption Agreement covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 4.4 [LIBOR Rate Unascertainable; Etc.], 5.8 [Increased Costs], and 11.3 [Expenses,

 

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Indemnity; Damage Waiver] with respect to facts and circumstances occurring prior to the effective date of such assignment. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 11.8.2 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 11.8.4 [Participations].

11.8.3 Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain a record of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time. Such register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is in such register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. Such register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

11.8.4 Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a Participant ”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Lenders, and the Issuing Lender shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.

Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree (other than as is already provided for herein) to any amendment, modification or waiver with respect to Sections 11.1.1 [Increase of Commitment], 11.1.2 [Extension of Payment, Etc.], or 11.1.3 [Release of Collateral or Guarantor]) that affects such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 4.4 [Libor Rate Unascertainable, Etc.], 5.8 [Increased Costs], 5.10 [Indemnity] and 5.9 [Taxes] (subject to the requirements and limitations therein, including the requirements under Section 5.9.7 [Status of Lenders] (it being understood that the documentation required under Section 5.9.7 [Status of Lenders] shall be delivered to the participating Lender, and such participating Lender shall be required to forward such documentation to the Administrative Agent and the Borrower)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 11.8.2 [Assignments by Lenders]; provided that such Participant (A) agrees to be subject to the provisions of Section 5.6.2 [Replacement of a Lender] and Section 5.6.3 [Designation of a Different Lending Office] as if it were an assignee under Section 11.8.2 [Assignments by Lenders]; and (B) shall not be entitled to receive any greater payment under Sections 5.8 [Increased Costs] or 5.9 [Taxes], with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such

 

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entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the Borrower's request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 5.6.2 [Replacement of a Lender] and Section 5.6.3 [Designation of a Different Lending Office] with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.2.3 [Set-off] as though it were a Lender; provided that such Participant agrees to be subject to Section 5.3 [Sharing of Payments by Lenders] as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “ Participant Register ”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

11.8.5 Certain Pledges; Successors and Assigns Generally . Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

11.9 Confidentiality.

11.9.1 General. Each of the Administrative Agent, the Lenders and the Issuing Lender agrees to maintain the confidentiality of the Information, except that Information may be disclosed (i) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, advisors and other representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (ii) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (iii) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process, (iv) to any other party hereto, (v) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (vi) subject to an agreement containing provisions substantially the same as those of this Section, to (A) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (B) any actual or prospective counterparty (or its advisors)

 

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to any swap or derivative transaction relating to the Borrower and its obligations, (vii) with the consent of the Borrower or (viii) to the extent such Information (Y) becomes publicly available other than as a result of a breach of this Section 11.9.1 or (Z) becomes available to the Administrative Agent, any Lender, the Issuing Lender or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower or the other Loan Parties and not otherwise in violation of this Section 11.9.1, provided such source does not, to the knowledge of the Administrative Agent, a Lender, the Issuing Lender or any of their respective Affiliates, as applicable, have an obligation of confidentiality to the Borrower or the other Loan Parties. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

11.9.2 Sharing Information With Affiliates of the Lenders. Each Loan Party acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to the Borrower or one or more of its Affiliates (in connection with this Agreement or otherwise) by any Lender or by one or more Subsidiaries or Affiliates of such Lender and each of the Loan Parties hereby authorizes each Lender to share any information delivered to such Lender by such Loan Party and its Subsidiaries pursuant to this Agreement with any such Subsidiary or Affiliate, it being understood that any such Subsidiary or Affiliate of any Lender receiving such information shall be bound by the provisions of Section 11.9.1 [General] as if it were a Lender hereunder.

11.10 Counterparts; Integration; Effectiveness.

11.10.1 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents, and any separate letter agreements with respect to fees payable to the Administrative Agent, constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof including any prior confidentiality agreements and commitments. Except as provided in Section 7 [Conditions Of Lending And Issuance Of Letters Of Credit], this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or e-mail shall be effective as delivery of a manually executed counterpart of this Agreement.

11.11 CHOICE OF LAW; SUBMISSION TO JURISDICTION; WAIVER OF VENUE; SERVICE OF PROCESS; WAIVER OF JURY TRIAL.

11.11.1 Governing Law. This Agreement shall be deemed to be a contract under the Laws of the State of Ohio without regard to its conflict of laws principles. Each Standby Letter of Credit issued under this Agreement shall be subject either to the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the

 

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International Chamber of Commerce (the ICC ”) at the time of issuance ( UCP ”) or the rules of the International Standby Practices (ICC Publication Number 590) ( ISP98 ”), as determined by the Issuing Lender, and each Commercial Letter of Credit shall be subject to UCP, and in each case to the extent not inconsistent therewith, the Laws of the State of Ohio without regard to is conflict of laws principles.

11.11.2 SUBMISSION TO JURISDICTION . THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF OHIO SITTING IN CUYAHOGA COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE NORTHERN DISTRICT OF OHIO, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH OHIO STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE ISSUING LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

11.11.3 WAIVER OF VENUE . THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN THIS SECTION 11.11. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AND AGREES NOT ASSERT ANY SUCH DEFENSE.

11.11.4 SERVICE OF PROCESS . EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 11.5 [NOTICES; EFFECTIVENESS; ELECTRONIC COMMUNICATION]. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

 

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11.11.5 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, ADMINISTRATIVE AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

11.12 USA Patriot Act Notice. Each Lender that is subject to the USA Patriot Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies Loan Parties that pursuant to the requirements of the USA Patriot Act, it is required to obtain, verify and record information that identifies the Loan Parties, which information includes the name and address of Loan Parties and other information that will allow such Lender or Administrative Agent, as applicable, to identify the Loan Parties in accordance with the USA Patriot Act.

11.13 Amendment and Restatement; No Novation. This Agreement amends and restates in its entirety the Existing Credit Agreement, and each of the Borrower and the Parent confirms that the Existing Credit Agreement and the other Loan Documents (as defined in the Existing Credit Agreement) have at all times, since the date of the execution and delivery of such documents, remained in full force and effect. The Loans hereunder are a continuation of the Loans under (and as such term is defined in) the Existing Credit Agreement. The Borrower, the Guarantors, the Administrative Agent, and the Lenders acknowledge and agree that the amendment and restatement of the Existing Credit Agreement and any Loan Documents (as defined in the Existing Credit Agreement) expressly amended by this Agreement is not intended to constitute, nor does it constitute, a novation, interruption, suspension of continuity, satisfaction, discharge or termination of the obligations, loans, liabilities, or indebtedness under the Existing Credit Agreement and other Loan Documents thereunder, and this Agreement and the other Loan Documents are entitled to all rights and benefits originally pertaining to the Existing Credit Agreement and the other Loan Documents (as such term is defined therein).

[SIGNATURE PAGES FOLLOW]

 

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[SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT]

IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed this Amended and Restated Credit Agreement as of the day and year first above written.

 

BOB EVANS FARMS, LLC, an Ohio limited liability company
By:   /s/ Paul F. DeSantis
  Paul F. DeSantis
  Chief Financial Officer, Treasurer
BOB EVANS FARMS, INC. , a Delaware corporation
By:   /s/ Paul F. DeSantis
  Paul F. DeSantis
  Chief Financial Officer, Treasurer
BEF FOODS, INC. , an Ohio corporation
By:   /s/ Paul F. DeSantis
  Paul F. DeSantis
  Chief Financial Officer, Treasurer


[SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT]

 

PNC BANK, NATIONAL ASSOCIATION, individually and as Administrative Agent
By:   /s/ George M. Gevas
Name:   George M. Gevas
Title:   Senior Vice President

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) CERTIFICATION

I, Steven A. Davis, certify that:

  1. I have reviewed this Quarterly Report on Form 10-Q of Bob Evans Farms, Inc.;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors:

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 4, 2014

 

/s/ Steven A. Davis

Steven A. Davis

Chairman and Chief Executive Officer

(Principal Executive Officer)

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) CERTIFICATION

I, Paul F. DeSantis, certify that:

 

  1. I have reviewed this Quarterly Report on Form 10-Q of Bob Evans Farms, Inc.;

 

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors:

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,